Executive Branch Ethics and Financial Conflicts of Interest: Disclosure

Executive Branch Ethics and Financial Conflicts of Interest: Disclosure

Legal Sidebari

Executive Branch Ethics and Financial
Conflicts of Interest: Disclosure
January 2, 2019
Recent media reports indicate that the 116th Congress may address government ethics reform, including
conflicts of interest among executive branch officials. Federal officials have a basic duty not to allow
private gain to influence their government service, which includes “not hold[ing] financial interests that
conflict with the conscientious performance of duty.” Federal statutes, as well as a code of conduct for
executive branch employees, make this principle part of a federal regulatory scheme intended to prevent
officials from benefitting personally from their offices. The current federal statutory scheme regulating
conflicts between an official’s personal financial interests and his or her official duties has three prongs:
disclosure, disqualification, and divestiture (i.e., a “3-D system”). This sidebar is the first in a three-part
series examining conflicts of interest in the executive branch.
Current Scope of Disclosure Requirements
To make conflicts of interest between officials’ public duties and private financial interests transparent,
Congress enacted mandatory disclosure requirements to “promote the integrity of public officials and
institutions.” The Ethics in Government Act requires high-level elected and appointed officials to disclose
a range of personal interests at various times, including upon entering public service, annually during
such service, and upon departing their position. In 2012, Congress enacted the STOCK Act, which
amended the Ethics in Government Act to increase transparency, in part, through more frequent reporting
requirements and broader availability of disclosure reports.
Under these statutes, financial disclosure reports must be filed at various stages of a covered official’s
government service. An initial report, which must be filed upon entering government service, discloses
information about that individual’s (1) income; (2) financial assets, (3) liabilities; (4) outside positions;
and (5) agreements and continuing relationships with other employers. Following an individual’s
appointment or election, he must file an annual report that includes three additional categories of
information: gifts, financial transactions, and the cash value of any interest in a blind trust. In addition to
annual reports, covered officials must file periodic transaction reports when they engage in certain
financial transactions. Finally, officials must provide final reports covering all eight information
categories when they leave a covered position.
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Prior to passage of the STOCK Act and its subsequent amendments, mandatory financial disclosures were
available for public inspection only by request to the official’s employing agency. Although the STOCK
Act originally required all disclosures to be posted to the internet for public inspection, the current
provisions require internet disclosure for only the most senior officials in the executive branch—the
President, Vice President, and appointees and nominees to positions classified at Level 1 and Level 2 of
the Executive Service. Disclosures by officials in those positions are available on the Office of
Government Ethics’ website for immediate public access. Financial disclosure forms filed by other high-
ranking employees who are subject to these rules are available by request.
Constitutionality of Financial Disclosure Requirements
Generally
In addition to upholding the constitutionality of disclosure requirements in other contexts (e.g., campaign
finance), the Supreme Court has let stand a lower court decision recognizing the constitutionality of
financial disclosures by officials under ethics laws. In that case, the U.S. Court of Appeals for the Fifth
Circuit considered a challenge brought by federal judges who alleged that their disclosure requirements
violated several constitutional principles, including separation of powers and privacy. The court upheld
the law, rejecting each claim challenging Congress’s authority to require them to disclose their financial
interests. Although that challenge concerned members of the judicial branch, the court’s opinion appears
to address the constitutional issues broadly.
Noting that Congress intended the disclosure requirements “to increase public confidence in all three
branches of the federal government,” the court’s opinion indicates that public officials, regardless of
whether they are elected or appointed, can be subject to transparency standards. The court rejected the
judges’ assertion that Congress lacked authority to impose disclosure requirements because they were
unelected officials in the judicial branch. Instead, it upheld the statute as “justified by the promotion of
important objectives within the constitutional authority of Congress.” To that end, the court explained
that even unelected officials like judges “are important governmental officers in whom the public at large
has a substantial interest.”
Likewise, the court rejected the argument that mandatory disclosure would interfere with officials’
personal right to privacy, citing its previous agreement with “the majority of courts considering the
matter” when it held that disclosure requirements for elected officials was constitutional. It cited
precedent acknowledging that disclosure of personal information, like any government action, may have
some influence on the official’s personal life but concluded that “any influence does not rise to the level
of a constitutional problem.” The Fifth Circuit relied upon a balancing test, “weigh[ing] the injuries
imposed by a legislative act against the governmental interests furthered by the act,” to conclude that the
government’s interest in deterring public officials from misusing their influence outweighed the burdens
of disclosure on individual officials. The court expressly stated again in the context of the privacy claim
that the governmental interests prevailed regardless of whether the officials subject to the disclosure
requirements were elected or appointed to their posts.
More recently, a federal district court in Maryland recognized some limits to federal disclosure
requirements based on employee rights to privacy. In a challenge to public posting requirements initially
enacted under the STOCK Act, the court recognized that the governmental interest in disclosure, though
compelling, “is not insurmountable.” The STOCK Act, in part, requires public posting of financial
disclosures on the internet, as well as creation of an online database to allow the public to search, sort, and
download the posted information. Considering a challenge brought by senior executive employees
(excluding the President, Vice President, cabinet secretaries, and other presidentially appointed positions
requiring Senate confirmation), the district court held that the government’s compelling interests in

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deterring corruption and conflicts of interests “fail to outweigh [the claimant officials’] privacy and
security interests.” The court contrasted making the disclosure forms publicly available via the internet
with the traditional method by which the public could request disclosures from the employing agency.
The court described a “unique confluence of circumstances” in the case, including the degree of
disclosure because of “unfettered Internet access” to the disclosed information and the security concerns
associated with posting “complete personal financial information of all senior officials on the internet.”
Consistent with the court’s decision, Congress amended the STOCK Act to require posting for public
access of only the most senior government officials’ disclosures on the internet (i.e., the President, Vice
President, and positions classified at Level 1 and Level 2 of the Executive Service).
Applicability of Disclosure Requirements to Senior
Executive Officials
Disclosure is the only prong of the 3-D system governing conflicts of interest that applies to the President
and Vice President. Congress expressly exempted both positions from disqualification requirements and
neither position is subject to agency specific divestiture rules, which may apply to other executive branch
officials. Thus, disclosure is the principal mechanism regulating potential conflicts between a President or
Vice President’s financial interests and public office. Accordingly, the current regulatory scheme appears
to rely on the electorate addressing any potential conflicts through the ballot box.
To that end, candidates for President and Vice President must file initial financial disclosure forms after
declaring their candidacy and annually thereafter for “each successive year an individual continues to be a
candidate,” as well as reports that are required if the candidate is elected. Additionally, federal campaign
finance law requires disclosure of campaign contributions received and spent. Under the Federal Election
Campaign Act (FECA), candidate campaign committees must register with the Federal Election
Commission (FEC) and comply with periodic disclosure requirements. Thus, candidates must file reports
that show the total amount of all contributions received, including those from individuals, political action
committees (PACs), and parties, and the identity of any person who contributes more than $200 during a
calendar year. There are no additional requirements for disclosure of other financial information, e.g., tax
returns, by candidates, although candidates may release their returns or related data voluntarily.
Similarly, the Ethics in Government Act also requires nominees for appointment to positions that require
Senate confirmation to file an initial financial disclosure report within five days of the President’s
transmittal of the nomination to the Senate. The nominee must provide updated information no later than
the date of the first hearing to consider the nomination, and the statute expressly allows the committee
considering the nomination to request “as a condition of confirmation, any additional financial
information from any Presidential nominee.” Because these officials are not elected, authority to request
additional information to identify potential conflicts of interest before exercising the constitutional power
to consent to the nomination provides an additional safeguard against conflicts of interest in the highest
executive branch positions.
While disclosure requirements’ applicability to the most senior executive branch officials has not been
subject to a direct legal challenge, the judicial opinions discussed suggest that such a challenge likely
would not be successful. The Fifth Circuit emphasized the significance of the government’s interest in
accountability of government officials across all branches of government and particularly those whose
official actions “have dramatic impact upon the lives of every citizen in this country.” The federal district
court in Maryland expressly noted that it was not ruling the internet publication requirements as facially
unconstitutional, specifically citing their continued applicability to these most senior government
officials. Furthermore, disclosure requirements do not appear to interfere with the President’s or Vice

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President’s constitutional duties because they do not bar the President or Vice President from carrying
out any executive actions, but instead only require the individual to report financial interests.
Conclusion
Should Congress consider legislation addressing financial conflicts of interests for executive branch
officials, it may revisit disclosure requirements. Disclosure requirements provide transparency so that the
electorate, the Senate, and employing agencies are aware of potential conflicts of interest that presidential
candidates, executive branch nominees, and other high-ranking executive officials may have. Existing
precedent has consistently upheld disclosure requirements, although public access to such information
over the internet may be limited in some instances.

Author Information

Cynthia Brown

Legislative Attorney

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