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Financial Interest

18 U.S.C. § 208 - Acts Affecting a Personal Financial Interest

Whether full-time, part-time, or even volunteer, working for the U.S. government is a solemn trust. Those who work in these capacities have an obligation to make decisions only in the best interests of the constituents the government serves.

To that end, Title 18 U.S. Code § 208 is a federal law prohibiting certain government officials from participating in judicial or other government matters that could impact their financial interests.

Acts Affecting a Personal Financial Interest - 18 U.S.C. § 208
18 U.S.C. 208 prohibits government officials from getting involved in matters of their financial interests.

It is designed to prevent conflicts of interest and ensure public trust in the impartiality and integrity of government decision-making.

18 U.S.C. 208 says, “(a) Except as permitted, whoever, being an officer or employee of the executive branch of the United States Government, or of any independent agency, a Federal Reserve bank director, officer, or employee, or an officer or employee of the District of Columbia, including a special employee, participates personally and substantially as an  officer or employee, through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, in judicial or other proceedings, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter in which, to his knowledge, he, his spouse, minor child, general partner, an organization in which he is serving as an 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 a financial interest….”

Subsection (c) says “that in the case of class A and B directors of Federal Reserve banks, the Board of Governors of the Federal Reserve System shall be deemed to be the Government official responsible for appointment.”

If you are charged and convicted for violating this law, you could face up to five years in prison, depending on the circumstances. Let's review this federal law in more detail below.

Overview of 18 U.S.C. 208

Under Section 208, it is unlawful for many federal employees to participate personally and substantially in any official government matter that would directly and predictably affect their financial interests or those of others they may be connected with.

The government employees barred from these conflicts of interest under the law include:

  • Employees of the Executive Branch;
  • Independent agencies serving the U.S.;
  • Directors, officers, and employees of the Federal Reserve Bank;
  • Officers and employees of the District of Columbia; and
  • Special government employees (SGE) who work temporarily or intermittently, with or without compensation.

Not only are these employees prohibited from government activities that affect their personal financial interests, but they're also barred from activities that would have a similar financial benefit for certain family or business relationships. The list of relationships covered by this law includes:

  • Spouses;
  • Minor children;
  • General partners;
  • An organization in which they serve as an officer or employee; or
  • Any person or organization with whom they negotiate or have an arrangement for future employment.

The last two points often apply to SGEs as they typically have other employment outside the U.S. government.

It should be noted that 18 U.S.C. 208 is one of several laws for which prosecutors do not have to prove willful intent.

Although willful participation may result in higher penalties, you can still be convicted of a conflict of interest violation if the connection was unintentional, especially if you reasonably should have known that a conflict of interest existed.

What Are the Exceptions?

There are several exceptions to the general prohibition outlined in Section 208. First, this law does not apply if:

  • The employee's financial interest is considered too remote or inconsequential to affect the integrity of their services, as determined by the Director of the Office of Government Ethics.
  • The employee fully discloses any financial interest and obtains a waiver, which the government agency may grant if they determine that the employee's financial interest is not substantial and that their participation in the matter would not create a conflict of interest.
  • The financial interest is directly and solely related to legal Native American birthrights.
  • In cases of SGEs serving in an advisory capacity, the official responsible for appointing the SGE certifies that “the need for the individual's services outweighs the potential for a conflict of interest created by the financial interest involved.”

What Are the Related Federal Offenses?

18 U.S. Code Chapter 11, bribery, graft, and conflicts of interest has several federal laws that are related to 18 U.S. Code 208 acts affecting a personal financial interest, including the following:

  • 18 U.S.C. 201 - bribery of public officials and witnesses;
  • 18 U.S.C. 202 - definitions;
  • 18 U.S.C. 203 - compensation to members of Congress;
  • 18 U.S.C. 204 - practice in United States Court of federal claims;
  • 18 U.S.C. 205 - activities of officers and employees in claims;
  • 18 U.S.C. 206 - exemption of retired officers of the services;
  • 18 U.S.C. 207 - restrictions on former officers, elected officials;
  • 18 U.S.C. 209 - salary of government officials and employees;
  • 18 U.S.C. 210 - offer to procure appointive public office;
  • 18 U.S.C. 211 - solicitation to obtain appointive public office;
  • 18 U.S.C. 212 - offer of gratuity to financial institution examiner;
  • 18 U.S.C. 213 - acceptance of gratuity by the financial examiner;
  • 18 U.S.C. 214 - offer for procurement of federal reserve bank loan;
  • 18 U.S.C. 215 - receipt of commissions or gifts for procuring loans;
  • 18 U.S.C. 216 - penalties and injunctions;
  • 18 U.S.C. 217 - acceptance of consideration for farm indebtedness;
  • 18 U.S.C. 218 - voiding transactions in violation of chapter;
  • 18 U.S.C. 219 - officers acting as agents of foreign principals;
  • 18 U.S.C. 220 - eliminating kickbacks in recovery act;
  • 18 U.S.C. 224 - bribery in sporting contests;
  • 18 U.S.C. 225 - continuing financial crimes enterprise;
  • 18 U.S.C. 226 - bribery affecting port security;
  • 18 U.S.C. 227 - influencing a private entity's employment decisions.

Penalties for Violating 18 U.S.C. 208

If you're a federal employee prohibited from acts affecting a personal financial interest and are charged with such under 18 U.S.C. 208, you could face significant penalties if convicted.

The penalties largely depend on whether you violated the law willfully or incidentally and if you should have reasonably known about the conflict of interest.

  • For general financial interest violations (i.e., with or without willful intent): the penalty is up to 1 year in prison and fines of up to $100,000.
  • For willful financial interest violations: the penalty is up to 5 years in prison and fines of up to $250,000.

In addition to the criminal penalties mentioned above, you may also be subject to civil penalties amounting to $50,000 per violation, or restitution of the financial gain you received, whichever is greater.

What Are the Common Defenses?

If you're a government employee or SGE accused of violating U.S.C. 208, a skilled federal criminal defense attorney may be able to implement several defense strategies to combat the charges. The most common are discussed below.

Defenses for Federal Financial Crimes
Contact our law firm for legal advice.

Perhaps we can argue that you qualify for one of the exceptions under the law. For example, your attorney may produce a waiver you received from your agency stating that your interest was not substantial or otherwise show that your financial interest in the matter needed to be more remote or inconsequential to affect the integrity of your services.

Perhaps we can argue that there was a lack of knowledge. For example, your attorney may argue that you were unaware of the financial interest that would be affected by your participation in the matter.

However, this defense may not be successful if it can be proven that the employee should have reasonably known about the potential conflict of interest. This defense may also be used to reduce the conviction penalty.

To review the details of your case, contact us by phone or through the contact form. Eisner Gorin LLP is located in Los Angeles, CA.

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