Executive Branch Ethics and Financial Conflicts of Interest: Disqualification

Executive Branch Ethics and Financial Conflicts of Interest: Disqualification

Legal Sidebari

Executive Branch Ethics and Financial
Conflicts of Interest: Disqualification
January 31, 2019
Newly proposed legislation in the 116th Congress concerns 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 benefiting 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 discussion of the disqualification
requirement, also known as recusal, is the second in a three-part series examining conflicts of interest in
the executive branch.
Disqualification Requirements in the Executive Branch
The principal disqualification statute for executive branch officials—18 U.S.C. § 208 (section 208)—
imposes criminal penalties for executive branch officials who fail to recuse themselves when their official
role would conflict with their financial interests. Section 208 broadly applies to “officers and employees”
within executive branch agencies regardless of the officials’ seniority or rate of pay. It also expressly
applies to special government employees (SGE) who serve in temporary or intermittent government roles.
Although the statute was originally silent regarding its applicability to the President and Vice President,
Congress later amended it to exclude those officials by definition.
The Office of Government Ethics (OGE) has promulgated regulations interpreting section 208 and
adopting its prohibition as part of the executive branch’s code of conduct. According to those regulations,
section 208 prohibits officials from “participating personally and substantially in an official capacity in
any particular matter in which, to his knowledge, he or any person whose interests are imputed to him …
has a financial interest, if the particular matter will have a direct and predictable effect on that interest.”
An official’s participation is personal when he or she has a direct and active role and is substantial when
the official’s “involvement is of significance to the matter.” Particular matters include a decision,
approval, disapproval, recommendation, advice or investigation when such an action is taken in the
context of a proceeding, application, ruling, contract, claim, controversy, charge, accusation, or arrest.
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OGE summarizes these examples as “encompass[ing] only matters that involve deliberation, decision, or
action that is focused upon the interests of specific persons, or a discrete and identifiable class of
persons.” Disqualification is not necessary, however, when the official considers or adopts a broad policy
position relating to interests of a large, diverse group of individuals.
Section 208 requires disqualification for financial interests held by the official individually as well as by
persons or entities who are close enough to the official that their interests may be “imputed” to the
official. Imputed interests include those held by spouses, minor children, general partners, organizations
in which the official serves or is employed, and organizations with whom the official has or is arranging
future employment. According to OGE regulations, such interests disqualify an official’s involvement
only when the involvement has a “direct and predictable effect on that interest.” In other words, there
must be “a close causal link between any decision or action to be taken in the matter and any expected
effect of the matter on the financial interest” as well as “a real, as opposed to a speculative possibility that
the matter will affect the financial interest.”
Separately, the STOCK Act requires certain senior executive branch officials (i.e., those who file public
financial disclosure reports, which includes the President and Vice President) who negotiate for or agree
to any future employment or compensation while still in office to recuse “whenever there is a conflict of
interest, or appearance of a conflict of interest, for such individual with respect to the subject matter [of
the negotiations or agreement].” OGE guidance has affirmed that this recusal requirement applies to the
President and Vice President as officials who are required to file financial disclosure reports under the
Ethics in Government Act, including.
Additional OGE regulations adopted as part of the executive branch’s code of conduct require officials to
disqualify themselves “to avoid an appearance of loss of impartiality in the performance of … official
duties.” This disqualification requirement applies to involvement in “a particular matter involving specific
parties” that either is “likely to affect the financial interest of a member of [the official’s] household” or
involves a person, with whom the official has a covered relationship, who is also a party or represents a
party in the matter. Thus, this regulatory disqualification requirement applies to a narrower set of matters
than section 208, but imputes the interests of a broader range of interests to the official. The impartiality
disqualification requirement applies generally to executive branch officers and employees, including
special government employees, but, like section 208, excludes the President and Vice President.
Constitutionality of Disqualifying the President
The constitutionality of applying disqualification requirements to the President and Vice President has
never been litigated. Some Members of Congress questioned whether section 208 applied to the President
and Vice President when considering Nelson Rockefeller’s confirmation as Vice President in 1974. In
response, then-Acting Attorney General Laurence H. Silberman concluded that “serious doubt as to
constitutionality urges against an interpretation which would render Section 208 applicable to the
President; and it seems almost certain that the President and Vice President were intended to be treated
alike.” OGE reiterated the Department of Justice’s (DOJ’s) opinion in a 1983 advisory letter, agreeing
that “the President and Vice President are not legally subject” to conflict of interest laws including section
208, but simultaneously stated that “as a matter of policy, the President and Vice President should conduct
themselves as if they are so bound.” Consistent with DOJ’s interpretation, in 1989 Congress excluded the
President and Vice President from section 208 by expressly limiting the definition of covered officials.
Thus, although the Constitution may afford Congress some authority to impose certain ethics rules on the
President (e.g., Ethics in Government Act’s disclosure requirements, STOCK Act), the differing
approaches Congress has adopted reflect the lack of clear constitutional limits on Congress’s authority.
Should Congress revisit disqualification requirements, DOJ’s analysis of section 208’s legislative history
and potential constitutional questions may inform its consideration. That analysis, and the underlying

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legislative history of section 208 upon which it relied, cited an outside report assessing federal conflict of
interest laws that acknowledged the President’s central role in the executive branch, but viewed the
President and Vice President’s potential conflicts of interest as distinct from those of other executive
branch officials. That report stated that “the conflict of interest problems of the President and the Vice
President as individual persons must inevitably be treated separately from the rest of the executive
branch,” citing the President’s unique position as an official who regularly receives symbolic gifts and
characterizing disqualification of the President from policy decisions as “inconceivable.” Relying upon
this legislative history, DOJ concluded that the disqualification requirement could be applied only to
officials appointed by the President and “those subordinate officials who are employed by departments
and agencies in the executive branch.”
Noting the canon of statutory construction requiring avoidance of interpretations that would raise
constitutional questions, DOJ’s analysis identified two possible grounds upon which potential application
of the disqualification requirement to the President and Vice President could be unconstitutional. First,
applying a disqualification requirement to the President (or Vice President), according to DOJ, could
“disable him from performing some of the functions prescribed by the Constitution.” For example, among
other constitutional duties falling exclusively within the purview of the Presidency, the President is the
sole official vested with constitutional authority to sign legislation, which is required for it to take effect.
The President’s disqualification on particular matters would preclude the President from fulfilling these
executive branch functions for which he has the sole authority to act. Second, according to DOJ, applying
a disqualification requirement to the President could “establish a qualification for his serving as President
… beyond those contained in the Constitution.” Article II, section 1, clause 5 of the U.S. Constitution sets
three qualifications for the Presidency: age, residency, and citizenship. Although the Supreme Court has
not ruled specifically on this clause, it has indicated in related cases involving the qualifications for
Members of Congress that the Constitution provides the “exclusive source of qualifications.” It is unclear,
however, whether the Court would necessarily agree with either of the DOJ’s arguments.
Methods of Compliance and Options for Congress
Although current law generally requires officials to recuse when their financial interests conflict with
their official duties, some officials may retain those financial interests if the official qualifies for an
exemption or seeks a waiver. In addition to an exemption for certain interests involving American Indian
birthrights, Section 208 authorizes OGE to issue regulations to exempt certain categories of interests from
disqualification that are “too remote or too inconsequential to affect the integrity of the [official’s
service].” Alternatively, an appointing official may waive certain conflicts on an individual basis if, after
full disclosure of the financial interest and the nature of the particular matter, he or she determines that
“the interest is not so substantial as to be deemed likely to affect the integrity of the [official’s service].”
Similarly, officials who appoint SGEs to advisory committees may issue waivers allowing the SGE to
retain financial interests if the appointing official “certifies in writing that the need for the individual’s
services outweighs the potential for a conflict of interest created by the financial interest involved.” If an
official does not recuse and does not qualify for an exemption or receive a waiver, civil and criminal
penalties, including fines of up to $50,000 per violation or up to five years’ imprisonment, may apply.
OGE has issued guidance regarding the availability and issuance of waivers. Section 208 and OGE
regulations respectively provide for public availability of copies of exemptions granted and waivers
issued by agencies upon request, but neither provides an enforcement mechanism to compel public
disclosure. Toward that end, OGE has solicited information from executive agencies about their issuance
of waivers and authorizations under several authorities including section 208. Following reports of a
dispute regarding OGE’s authority to request such information, some Members of Congress and
commentators have called for greater disclosure of the use of these methods of compliance.

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Conclusion
Generally, Congress has applied disqualification—or recusal—requirements to nearly all executive
officials, regardless of seniority or pay. Consistent with a DOJ legal analysis that raised constitutional
questions about potential interference of disqualification requirements with the President’s constitutional
duties and qualifications, however, Congress has not applied the primary disqualification requirement—
section 208—to the President and Vice President. The constitutionality of applying such requirements to
the President and Vice President has not been litigated, leaving the parameters of Congress’ constitutional
authority in this area unclear. Alternatively, as discussed in a separate Sidebar, Congress has applied
ethics rules requiring transparency through disclosure requirements. Should Congress revisit
disqualification requirements for executive officials, the exact parameters of such requirements and
exemptions will inform the constitutional analysis.

Author Information

Cynthia Brown

Legislative Attorney

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