              Financial Interests of Nonprofit Organizations
                     for Purposes of 18 U.S.C. § 208
Under 18 U.S.C. § 208, a nonprofit organization does not have a “financial interest” in a particular
  matter solely by virtue of the fact that the organization spends money to advocate a position on the
  policy at issue in the matter.

                                                                                   January 11, 2006

                  MEMORANDUM OPINION FOR THE GENERAL COUNSEL
                         OFFICE OF GOVERNMENT ETHICS

   The primary criminal statute dealing with financial conflicts of interest, 18
U.S.C. § 208 (2000), prohibits a federal employee from participating in certain
governmental matters if he or she is an officer or director of an organization that
has a “financial interest” in the “particular matter.” You have asked whether a
nonprofit organization has a financial interest in a particular matter solely by
virtue of the fact that the organization spends money to advocate a position on the
policy at issue in the matter. 1 We conclude that a nonprofit organization does not
have such a “financial interest” merely because it spends money on advocacy.

                                                 I.

   Section 208(a) forbids an officer or employee in his official capacity from
participating “personally and substantially” in (among other things) any “particular
matter in which, to his knowledge, . . . [an] organization in which he is serving as
officer [or] director . . . has a financial interest.” If the organization has a “finan-
cial interest,” a federal employee serving on the board of the organization must
recuse himself from any involvement in that particular matter, unless he can take
advantage of a waiver or exemption issued under 18 U.S.C. § 208(b). Your
question concerns employees who serve on the boards of nonprofit organizations
that engage in advocacy with respect to particular matters pending before the
employees’ agencies. The question recently has arisen in two contexts.
   In the first context, an official is considering service on the board of the Senior
Executives Association (“SEA”). SEA describes itself as “a nonprofit professional
association that promotes ethical and dynamic public service by fostering an
outstanding career executive corps, advocates the interests of career federal
executives (both active and retired), and provides information and services to SEA
members.” See Senior Executives Association, About SEA, http://seniorexecs.org


   1
     Letter for Daniel Levin, Acting Assistant Attorney General, Office of Legal Counsel, from
Marilyn L. Glynn, Acting Director, Office of Government Ethics (Sept. 20, 2004) (“OGE Letter”).




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       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


(last visited June 2, 2005). In “advocat[ing] the interests of career federal execu-
tives,” id., “SEA has taken and continues to take and advance positions” on certain
issues involving the pay of federal employees in the senior executive service,
Letter for Marilyn L. Glynn, Acting Director, Office of Government Ethics
(“OGE”), from William L. Bransford, General Counsel, SEA, Re: Membership on
a Professional Association’s Board by an Executive Branch Official at 1 (Aug. 9,
2004) (“SEA Letter”). The official contemplating service on the SEA board
already serves on “his Department’s Executive Resources Board, which has,
among other functions, responsibility for formulating or contributing to the
formulation of the Department’s recommendation” to the Office of Personnel
Management (“OPM”) regarding the senior executive service pay system. SEA
Letter at 1. If, therefore, the official joins the SEA board, and if SEA has a
“financial interest” in a matter involving senior executive pay (e.g., the establish-
ment of a new system of pay), the official (absent a waiver) would have a criminal
conflict of interest if he participated in the Executive Resources Board’s consid-
eration of the issue.
   In the second context, employees of the National Oceanic and Atmospheric
Administration (“NOAA”) are serving in their private capacities as Councilors of
the American Meteorological Society (“AMS”). Letter for Marilyn L. Glynn,
Acting Director, Office of Government Ethics, from Barbara S. Fredericks,
Assistant General Counsel for Administration, Department of Commerce, Re:
Request for Guidance on the Application of 18 U.S.C. § 208 (Sept. 10, 2004)
(“Commerce Letter”). “AMS is a . . . nonprofit organization that promotes the
development and dissemination of information and education on atmospheric and
related oceanic sciences.” Id. at 1. A Councilor of AMS “serv[es] on the governing
body of the organization, which is the equivalent to service as a member of a
board of directors,” and, therefore, we assume (without deciding) that a Councilor
would be a “director” or “officer” within the meaning of section 208(a). AMS
issues “policy statements . . . on issues in which NOAA has an interest, such as
meteorological drought, atmospheric ozone, and hurricane research and forecast-
ing.” Id. The NOAA employees serving as Councilors of AMS “likely will
participate in [the] consideration of these issues on a policy level in the course of
performing their official duties at NOAA.” Id. at 1–2. Once again, absent a waiver,
they would be disqualified under the criminal conflict of interest statute from such
participation if AMS has a financial interest in these matters. 2


    2
      In analyzing these issues, we have obtained the views of the Department of the Interior, the
Department of Agriculture, the Department of Health and Human Services, the Environmental
Protection Agency, the National Science Foundation, and the National Aeronautics and Space
Administration, in addition to the views of OGE and the Department of Commerce. See Letter for
Steven G. Bradbury, Acting Assistant Attorney General, Office of Legal Counsel, from Sue Ellen
Wooldridge, Solicitor, Department of the Interior, Re: Financial Interests Under 18 U.S.C. § 208 (Mar.




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                      Opinions in the Office of Legal Counsel in Volume 30


                                                   II.

   We conclude that nonprofit organizations such as SEA and AMS do not have a
financial interest in a particular matter solely by virtue of spending money to
advocate a position on the policy under consideration in that matter. 3

                                                   A.

   Section 208(a), in essentially its present form, was enacted in 1962 as part of a
general revision of criminal laws on conflicts of interest. Pub. L. No. 87-849, 76
Stat. 1119, 1124 (1962). The earlier version of the law provided criminal penalties
for any federal official who was “directly or indirectly interested in the pecuniary
profits or contracts of any corporation, joint-stock company, or association, or of
any firm or partnership or other business entity,” and who was “employed or
act[ed] as an officer or agent of the United States for the transaction of business
with such business entity.” 18 U.S.C. § 434 (1958). The revision of 1962 extended
the reach of the statute in several respects. Nevertheless, the current text of section
208(a), under the most natural interpretation, indicates that the prohibition does
not apply to the policy interest that a nonprofit organization has in a government
decision. Section 208(a) provides that, absent a waiver under section 208(b),

        whoever, being an officer or employee of the executive branch of the
        United States Government, . . . participates personally and substan-
        tially as a Government officer or employee, through decision, ap-
        proval, disapproval, recommendation, the rendering of advice, inves-
        tigation, or otherwise, in a judicial or other proceeding, application,


10, 2005); Letter for Steven G. Bradbury, Acting Assistant Attorney General, Office of Legal Counsel,
from Nancy S. Bryson, General Counsel, Department of Agriculture, Re: Advocacy of Non-Profit
Organizations and 18 U.S.C. 208(a) (Mar. 16, 2005); Letter for Steven G. Bradbury, Acting Assistant
Attorney General, Office of Legal Counsel, from Ann R. Klee, General Counsel, Environmental
Protection Agency (Mar. 16, 2005); Letter for Steven G. Bradbury, Acting Assistant Attorney General,
Office of Legal Counsel, from Lawrence Rudolph, General Counsel, and Charles S. Brown, Assistant
General Counsel and Designated Agency Ethics Official, National Science Foundation (Mar. 16, 2005);
Letter for Steven G. Bradbury, Acting Assistant Attorney General, Office of Legal Counsel, from R.
Andrew Falcon, Acting Associate General Counsel for General Law, With the approval of Michael C.
Wholley, General Counsel, National Aeronautics and Space Administration (Mar. 22, 2005); Letter for
Steven G. Bradbury, Acting Assistant Attorney General, Office of Legal Counsel, from Edgar M.
Swindell, Associate General Counsel for Ethics and Designated Agency Ethics Official, Department of
Health and Human Services (May 19, 2005).
    3
      We do not address here the interest that a for-profit entity, owing a duty to promote the financial
interests of its owners, might have in a matter on which it engages in advocacy on behalf of itself or its
clients or that might arise if an entity (whether for-profit or nonprofit) receives, or expects to receive,
payment specifically for its advocacy. Thus, the possible interest of a lobbying firm or law firm is
beyond the scope of this opinion.




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      Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


        request for a ruling or other determination, contract, claim, contro-
        versy, charge, accusation, arrest, or other particular matter in which,
        to his knowledge, he, . . . [or] [an] organization in which he is serv-
        ing as officer, director, trustee, general partner or employee, . . . has
        a financial interest[,]

has committed a crime punishable by fine and imprisonment. 18 U.S.C. § 208(a).
A disqualifying interest under the statute, therefore, is a “financial interest” “in” a
“particular matter.” See Ethics Issues Raised by the Retention and Use of Flight
Privileges by FAA Employees, 28 Op. O.L.C. 237, 239 (2004) (“FAA Opinion”).
   As ordinarily understood, the interests that AMS and SEA as organizations
have in the matters you describe are policy interests in the questions being
addressed by the government, not financial interests in the resolution of those
questions. An “interest” in the sense of a “conflict of interest” is an “advantage or
profit of a financial nature.” Black’s Law Dictionary 828 (8th ed. 2004). For
example, an individual has an interest “[i]n a suit or action” when he has “[a]
relation to the matter in controversy, or to the issue of the suit, in the nature of a
prospective gain or loss, which actually does, or presumably might, create a bias
or prejudice in the mind inclining the person to favor one side or the other.” 33
C.J. Interest 262 (1924) (footnotes omitted). And an interest is a financial one
when it is pecuniary—when it “pertain[s] to monetary receipts and expenditures.”
Random House Dictionary of the English Language 719 (2d ed. 1987) (emphasis
added). However, AMS and SEA care about these matters, and spend money to
advocate in favor of their preferred outcome, because they support or oppose
certain policies, not because the policies at issue will have a financial or pecuniary
impact on AMS and SEA as organizations. An organization that has no financial
reason to prefer one outcome over another would not commonly be referred to as
having a “financial interest” in the particular matter.
   OGE’s regulatory interpretation of section 208 reinforces this view. OGE’s
regulations interpret the words “financial interest” “in” “a particular matter” to
require a link between a governmental matter and a pecuniary gain or loss to the
employee or specified entity. A disqualifying financial interest is “the potential for
gain or loss to the employee, or other person specified in section 208, as a result of
governmental action on the particular matter.” 5 C.F.R. § 2640.103(b) (2005). 4 See
FAA Opinion, 28 Op. O.L.C. at 239–40; OGE, Letter to Designated Agency Ethics
Official, Informal Advisory Ltr. 85x10, 1985 WL 57309, at *2 (July 15). Thus, for
example, section 208 does not require an employee of the Department of Interior
who owns transportation bonds issued by the State of Minnesota to recuse himself


   4
     Our Office concurred in OGE’s regulatory definition. See 61 Fed. Reg. 66,830, 66,830 (Dec. 18,
1996); 28 C.F.R. § 0.25(i) (2004).




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                      Opinions in the Office of Legal Counsel in Volume 30


from all matters involving the State of Minnesota, only matters that hold the
potential for pecuniary gain or loss to the employee. See 5 C.F.R. § 2640.103(b)
(example 1).
   This Office’s opinions have drawn a distinction between a “financial interest”
and interests that do not involve a pecuniary gain or loss from the resolution of a
question. For example, a 1970 opinion by then-Assistant Attorney General
Rehnquist distinguished between the policy interest that an association represent-
ing coal producers had in various Federal Power Commission natural gas proceed-
ings—“an interest of a non-financial kind in the outcome of . . . [the] proceedings”
that implicated the coal association’s “major purpose”—and a financial interest in
those proceedings, which the coal association did not have. Memorandum for John
W. Dean, III, Counsel to the President, from William H. Rehnquist, Assistant
Attorney General, Office of Legal Counsel, Re: Commissioner Carl E. Bagge’s
Continued Service as Commissioner of the Federal Power Commission Until
February 1, 1971 at 4 (Dec. 10, 1970) (“Rehnquist Opinion”).
   Against this interpretive backdrop, we cannot conclude that SEA or AMS has a
financial interest in the particular matters that are the focus of advocacy by the
organizations, as opposed to a mere policy interest in the questions being ad-
dressed by the government. The organizations’ advocacy expenditures do not
constitute a gain or a loss. They do not arise from the pursuit of any financial or
economic interests, but only from the pursuit of certain policy goals. 5
   Nor is there any other apparent basis on which to conclude that either organiza-
tion has a financial interest. In particular, while SEA’s members may reap a gain or
suffer a loss as a result of a new pay system, the potential for a gain or loss to SEA
members as individuals does not disqualify SEA as an organization. Furthermore,
whether or not a federal employee’s interest in his own federal compensation
generally constitutes a disqualifying financial interest under section 208, OGE has
issued an exemption, in most circumstances, for the “financial interest aris[ing] from
Federal Government . . . salary or benefits.” See 5 C.F.R. § 2640.203(d) (2005).6


     5
       This conclusion is bolstered by the several examples in OGE’s regulations of situations where a
“financial interest” might arise, none of which resembles expenses for mere advocacy. The regulation
states that a “disqualifying financial interest might arise from ownership of certain financial instruments or
investments such as stock, bonds, mutual funds, or real estate,” or “might derive from a salary, indebted-
ness, job offer, or any similar interest.” 5 C.F.R. § 2640.103(b) (2005). OGE’s regulations also provide
illustrations that give other examples of “financial interests,” such as land ownership, the “volume and
profitability of [a] doctor’s private practice,” and a grant of funds, id. §§ 2635.402(b)(2) (example 1),
2640.103(b) (examples 2, 3), and none of these interests, too, resembles a mere expenditure on advocacy.
See also Roswell B. Perkins, The New Federal Conflict-of-Interest Law, 76 Harv. L. Rev. 1113, 1133
(1963) (a research grant to a nonprofit organization is a “financial interest”).
     6
       In issuing this exemption, OGE noted the “somewhat differing interpretations” of section 208 that
have been advanced regarding a federal employee’s interest in his own compensation. See 60 Fed. Reg.
44,706, 44,707 (Aug. 28, 1995).




                                                     68
       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


Because an SEA member may participate in matters involving the pay system for
senior executives (so long as he does not make determinations that individually or
specially affect his own salary and benefits, or determinations that individually or
specially affect the salary and benefits of another person specified in section 208, see
5 C.F.R. § 2640.203(d)), we cannot say that SEA has a financial interest by virtue of
its members’ interests.
    Any other financial consequences for SEA or AMS that may flow from these
matters are speculative. If OPM reached a decision regarding pay for senior
executives that accorded with SEA’s proposals and arguments, the possibility that
SEA had influenced that outcome might attract potential members to join SEA,
thus possibly increasing its resources, but OPM’s rejection of the proposals and
arguments might have the same effect, since potential members who agree with
SEA’s position might then believe that they should do more to support an
organization advancing that position. In either case, SEA might gain members.
Conversely, while the failure of SEA’s position might lead some members to drop
their membership, success might also lead some members to believe that the main
purpose of their membership had been achieved and that they could leave the
organization. In either case, SEA might lose members. Or perhaps the success or
failure of SEA’s positions would have no effect at all on membership. The same
reasoning could be applied to AMS’s advocacy of scientific or research-related
policies that government agencies might adopt or reject. 7

    7
      We previously considered somewhat similar issues in the Rehnquist Opinion. There, a commis-
sioner of the Federal Power Commission (“FPC”) had accepted future employment with the National
Coal Association (“NCA”), a trade association of coal producers. NCA “engage[d] in typical trade
association activity—lobbying, research, gathering of statistical data.” Id. at 1. The Rehnquist Opinion
stated that the Commissioner
        has not accepted a position with a coal producer, but with NCA, which neither mar-
        kets nor produces coal. It is the financial interest of NCA which determines disqualifi-
        cation under section 208. Certainly NCA has an interest of a non-financial kind in the
        outcome of various FPC natural gas proceedings: the outcome of these proceedings
        may have an impact on coal production, and the stimulation of such production is
        NCA’s major purpose. We do not believe, however, that NCA’s interest in any given
        rate or certification proceeding can fairly be characterized as a “financial interest,”
        within the meaning of section 208.
Id. at 4. The Rehnquist Opinion went on to consider the argument that NCA would have a “financial
interest” in gas proceedings because “NCA’s assessments against members are based upon their coal
production, and NCA’s total income will therefore vary as coal production varies.” Id. at 5. It
concluded, however, “that this relationship is too tenuous and speculative to be regarded as a ‘financial
interest’ of the type prohibited by section 208.” Id. Even if the Commissioner were going to work for a
coal producer, “the impact of any particular natural gas proceedings on the coal producer would vary
from case to case, and would depend on the competitive relationships between the producers involved,”
and “[t]he interest of NCA in such proceedings is even more remote.” Lower gas rates might mean
lower coal prices rather than greater coal production, and in any event there would be no “necessary
correlation between natural gas rates in a particular area and the total membership production upon
which NCA’s income rests.” Id. (emphasis in original). There, as here, any effect on the financial




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                      Opinions in the Office of Legal Counsel in Volume 30


    The Executive Branch has long taken the position, however, that an employee
or other person covered by section 208 has a financial interest in a particular
matter only when government action in the particular matter will have a “direct
and predictable effect” on the employee’s financial interest. See, e.g., 5 C.F.R.
§ 2640.103(a) (2005); Advisory Committees—Food and Drug Administration—
Conflicts of Interest (18 U.S.C. § 208), 2 Op. O.L.C. 151, 155 (1978). A 1963
memorandum from the President to the heads of the executive departments and
agencies, issued just a few months after section 208 took effect, stated that a
special government employee “should in general be disqualified from participating
as such in a matter of any type the outcome of which will have a direct and
predictable effect upon the financial interests covered by the section.” Memoran-
dum to the Heads of Executive Departments and Agencies from the President, 28
Fed. Reg. 4539, 4543 (May 7, 1963) (emphasis added). This same interpretation
was incorporated in the Federal Personnel Manual shortly thereafter. See id. ch.
735, app. C, at 4 (1988 ed.; added 1965).
    The direct-and-predictable effect test also finds support in the traditional legal
understanding of what it means to have an “interest” in a proceeding. For example,
a financial interest in a proceeding for purposes of judicial disqualification
traditionally has required a proximate link between the proceeding and the
financial interest. “[A] judge is disqualified,” one court explained, “in any
litigation where he has any certain, definable, pecuniary, or proprietary interest
which will be directly affected by the judgment that may be rendered.” In re
Honolulu Consol. Oil Co., 243 F. 348, 352 (9th Cir. 1917) (emphasis added). “The
term ‘interested in the case’ means a direct interest in the case or matter to be
adjudicated so that the result must, necessarily, affect his personal or pecuniary
loss or gain.” Ex parte Largent, 162 S.W.2d 419, 426 (Tex. Crim. App. 1942)
(emphasis added); see also Goodspeed v. Great W. Power Co. of Cal., 65 P.2d
1342, 1345 (Cal. Dist. Ct. App. 1937) (“It means an interest direct, proximate,
inherent in the instant event.”) (emphasis added). 8 Thus, while it has been
suggested that the direct-and-predictable effect test is a gloss on the statutory text,
the test reflects a fair construction of the statute’s terms in light of their established
meaning at the time Congress enacted section 208. 9


interests of an organization’s members would not necessarily affect the finances of the organization
itself.
     8
       In Part II.B.1, we further discuss both the traditional understanding of “interest,” as it bears on
judicial disqualification and other matters relating to litigation, and the application in those contexts of
a test similar to the “direct and predictable” effect test.
     9
       OGE relies “on what appears to be a plain reading of 18 U.S.C. § 208.” “In cases where an outside
organization stipulates that it is spending money to advocate its interests before the Government,” OGE
explains, “it is difficult to conclude that the organization does not have a financial interest that would
be affected directly and predictably by the Government matter.” OGE Letter at 3. Furthermore, in
OGE’s “‘long-standing view,’” “the outcome of a ‘particular matter,’ such as a rulemaking proceeding




                                                    70
       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


   OGE’s regulations define a “direct effect” as “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.” 5 C.F.R. § 2635.402(b)(1)(i) (2005). While “[a]n effect
may be direct even though it does not occur immediately,” it is not direct “if the
chain of causation is attenuated or is contingent upon the occurrence of events that
are speculative or that are independent of, and unrelated to, the matter.” Id. A
matter will have a “predictable effect,” according to OGE’s regulations, if “there is
a real, as opposed to a speculative possibility that the matter will affect the
financial interest,” id. § 2635.402(b)(1)(ii), though the regulations do not require
that “the magnitude of the gain or loss” be known or that the dollar amount be
substantial, id. Here, we do not believe that a nonprofit organization’s expenditure
of money to advocate a policy position establishes that the government’s action
will have a “direct effect” on a financial interest of the organization.

                                                   B.

   Two other considerations support the conclusion that organizations do not have
a financial interest in a matter simply because they expend money on advocacy.
First, no pecuniary gain or loss to the organization will flow from a particular
action or outcome in the matters, rather than from the process by which the
government considers the matters. Second, neither organization at issue here falls
within the class of persons upon which these matters are focused, even though
such a connection is typical where an organization has a financial interest. These
two considerations, while not essential to an analysis under section 208 or
dispositive of the issues under that provision, offer additional support for our
conclusion.

                                                   1.

   The significance of whether financial consequences will flow from a particular
action or outcome in the matter is reflected in the 1963 presidential memorandum
that gave rise to the direct-and-predictable effect test. The presidential memoran-
dum references matters “the outcome of which will have a direct and predictable
effect upon the financial interests covered by the section.” 28 Fed. Reg. at 4543
(emphasis added); see also Federal Personnel Manual ch. 735, app. C, at 4.




affecting the members of an industry, ‘can have a direct and predictable effect on the financial interests
of an industry trade association’ because it prompts the association ‘to expend resources to undertake a
lobbying effort.’” Id. (quoting OGE, Letter to an Alternate Designated Agency Ethics Official, Informal
Advisory Ltr. 98x2, 1987 WL 1007766, at *2 (Mar. 5). For the reasons set out above, we cannot agree
that these expenditures alone constitute a “financial interest” of the organization or association.




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                  Opinions in the Office of Legal Counsel in Volume 30


    Several of our opinions have described the test in terms of the outcome. For
example, the Rehnquist Opinion concluded that a trade association representing coal
producers had “an interest of a non-financial kind in the outcome of various [Federal
Power Commission] natural gas proceedings” because “the outcome of these
proceedings may have an impact on coal production, and the stimulation of such
production is [the National Coal Association’s] major purpose,” but that the interest
in these proceedings did not qualify as a financial interest. Id. at 4 (emphases added).
A 1976 opinion issued by this Office explained that “we have taken the position in
the past that a Federal employee does not have a ‘financial interest’ in a particular
matter coming before him unless there is a reasonable possibility that the resolution
of the particular matter would have a ‘direct and predictable effect’ on an organiza-
tion in which he owns an interest or holds or is seeking a position.” Memorandum
for Kenneth A. Lazarus from Leon Ulman, Deputy Assistant Attorney General,
Office of Legal Counsel, Re: Proposed Appointment of Chairman of the President’s
Committee on Science and Technology at 3 (July 12, 1976) (emphasis added). A
1977 opinion determined whether an employee had a financial interest in a matter
involving real property by asking whether the employee had “a financial interest in
the outcome of the quiet title action.” Conflict of Interest—Litigation Involving a
Corporation Owned by Government Attorney, 1 Op. O.L.C. 7, 7 (1977) (emphasis
added). And an opinion issued two years later concluded that an Assistant Secretary
of Agriculture was unlikely to have a financial interest in matters involving the union
that employed her husband, but explained that, “if a situation did arise in which the
outcome of a matter might have a direct and predictable effect on his income from
the union or on any other personal financial interest, then [the Assistant Secretary]
would have to refrain from participating in it.” Conflict of Interest—Financial
Interest (18 U.S.C. § 208)—Husband and Wife, 3 Op. O.L.C. 236, 238 (1979)
(emphasis added).
    Similarly, OGE’s regulations define “financial interest” as “the potential for
gain or loss to the employee, or other person specified in section 208, as a result of
governmental action on the particular matter,” 5 C.F.R. § 2640.103(b) (emphasis
added), and describe the necessary “direct effect” as “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,” id. § 2640.103(a)(3)(i) (emphasis added). See
FAA Opinion at 240; OGE, Informal Advisory Letter 85x10, 1985 WL 57309,
at *2. In each of the examples of a disqualifying financial interest described in the
regulations, the employee stood to gain or lose depending on the outcome of the
matter or some particular action to be taken. For instance, an employee’s owner-
ship of transportation bonds issued by the State of Minnesota does not create a
disqualifying interest in Minnesota’s application for wildlife funds because
“approval or disapproval of the grant”—i.e., the outcome of the particular
matter—“will not in any way affect the current value of the bonds or have a direct
and predictable effect on the State’s ability or willingness to honor its obligation to




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       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


pay the bonds when they mature.” 5 C.F.R. § 2640.103(b) (example 1) (emphasis
added).
   A focus on particular actions or outcomes, moreover, reflects the traditional
legal understanding of the terms “interest in a matter,” “interest in a proceeding,”
and similar terms (e.g., “interest in a case” or “interest in an action”), which
provided the background against which Congress legislated when it enacted
section 208 in 1962. See Morissette v. United States, 342 U.S. 246, 263 (1952). In
particular, the law governing the analogous issue of mandatory judicial recusal
historically focused on whether the judge or similar officer had an interest in the
case or proceeding, which was understood to mean “a financial . . . interest that
could be affected by the outcome of the case.” Jeffrey M. Shaman et al., Judicial
Conduct and Ethics § 4.20, at 148–49 (3d ed. 2000) (emphasis added). It required
“a definite, material, financial stake in the direct outcome of the particular case.”
Goodspeed, 65 P.2d at 1345; see also Worth v. Benton Cnty. Cir. Ct., 89 S.W.3d
891, 896 (Ark. 2002) (“[T]o be a disqualifying interest, the prospective liability,
gain, or relief to the judge must turn on the outcome of the suit.”); Williams v.
Viswanathan, 65 S.W.3d 685, 689–90 (Tex. App. 2001) (citing cases dating back
more than a century to support this rule). 10
   The same meaning attached in other contexts, as well. For example, an “interest
in the matter” for purposes of a statutory right to intervene was traditionally
understood to mean an interest “in the matter in litigation and of such a direct and


    10
       Congress enacted the first judicial disqualification statute in 1792. That statute, which remained
in effect in substantially the same form until 1974, required that “in all suits and actions in any district
court of the United States, in which it shall appear that the judge of such court is, any ways, concerned
in interest, or has been of counsel for either party, it shall be the duty of such judge” to disqualify
himself. Act of May 8, 1792, ch. 36, § 11, 1 Stat. 275, 278–79; see also Act of Mar. 3, 1911, ch. 231,
§ 21, 36 Stat. 1087, 1090 (amending the statute to include as additional grounds for disqualification
bias or prejudice, which, unlike pecuniary interest, was not a recognized ground for disqualification at
common law); Act of June 25, 1948, ch. 646, § 455, 62 Stat. 907, 908 (extending the statute to justices
and appellate court judges; rephrasing as “any case in which he has a substantial interest”). These
words were interpreted by reference to English common law, see Spencer v. Lapsley, 61 U.S. (20
How.) 264 (1857), and were understood to refer to a direct pecuniary interest in the outcome of the
matter. See, e.g., In re Honolulu Consol. Oil Co., 243 F. 348, 353 (9th Cir. 1917) (a judge is disquali-
fied under section 455 where he is “concerned in interest in the result of th[e] suit”); In re Grand Jury
Investigation, 486 F.2d 1013, 1016 (3d Cir. 1973) (judge not substantially interested in a case because,
among other reasons, he did not have “a special interest in the outcome of th[e] case”). The judicial
disqualification statute was rewritten in 1974 to reflect the new Canon 3C of the Model Code of
Judicial Conduct adopted in 1972. Under the new statute (still codified at 28 U.S.C. § 455 (2000)), a
judge must disqualify himself if, among other reasons, “[h]e knows that he, individually or as a
fiduciary, or his spouse or minor child residing in his household, has a financial interest in the subject
matter in controversy [for example, in an in rem proceeding] or in a party to the proceeding, or any
other interest that could be substantially affected by the outcome of the proceeding.” Id. § 455(b)(4)
(emphasis added). “Financial interest” as used in section 455 is a term of art that means, with certain
exceptions, “ownership of a legal or equitable interest, however small, or a relationship as director,
adviser, or other active participant in the affairs of a party.” Id. § 455(d)(4).




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                      Opinions in the Office of Legal Counsel in Volume 30


immediate character that the intervenor will either gain or lose by the direct legal
operation and effect of the judgment.” Bernheimer v. Bernheimer, 196 P.2d 813,
814 (Cal. Dist. Ct. App. 1948). A potential appellant was “interested in a suit” if it
had “a direct and substantial interest in the outcome.” People ex rel. Poage v.
Walsh, 174 N.E. 881, 882 (Ill. 1931). And a disqualifying interest for purposes of
determining a witness’s interest in an adjudication of a will was “a legal or
pecuniary interest in the outcome of the suit.” Fortner v. McCorkle, 50 S.E.2d 250,
252 (Ga. Ct. App. 1948). “[T]he test” was “whether the witness will gain or lose
by the direct legal operation and effect of the judgment.” State v. Robbins, 213
P.2d 310, 315 (Wash. 1950). 11
   The Supreme Court’s opinion in Tumey v. Ohio illustrates well the historical
distinction between the financial consequences flowing from a proceeding and the
financial consequences flowing from the outcome of a proceeding. In Tumey, the
Court held that it violated due process for a mayor to preside over a case in
mayor’s court where the mayor would receive payment for his services only if he
convicted the defendant—i.e., where the mayor had a “direct pecuniary interest in
the outcome” of the case. 273 U.S. 510, 535 (1927). In determining what consti-
tuted “due process of law,” the Court examined the common law of judicial
disqualification, and found “no cases at common law” whereby “inferior judicial
officers were dependant upon the conviction of the defendant for receiving their
compensation.” Id. at 524. However, there were cases at common law where a
judge would have a pecuniary stake in the case that did not depend on the outcome
of the case, for example where a judge received daily wages collected from the
parties regardless of the outcome. Id. at 524–25. A direct pecuniary interest in the
outcome of the case, by contrast, was disqualifying at common law, and thus could
not be regarded as due process of law. Id. at 526, 531. See also In re Murchison,
349 U.S. 133, 136 (1955) (“no man can be a judge in his own case and no man is
permitted to try cases where he has an interest in the outcome”) (emphasis added).
   Section 208 was enacted against the background of this traditional understand-
ing of what it means to have an interest in a matter. Even if an expenditure on
advocacy could constitute a “financial interest” in a particular proceeding, it would
be, at most, a financial interest in the process by which the matter is considered

   11
      See also, e.g., Spencer v. Wilsey, 71 N.E.2d 804, 809 (Ill. App. Ct. 1947) (“The interest which
will render a witness incompetent [under a ‘dead man’s statute’] must be such an interest in the
judgment or decree that a pecuniary gain or loss will come to him directly as the immediate result of
the judgment or decree.”); Weber v. City of Cheyenne, 97 P.2d 667, 669 (Wyo. 1940) (“‘Interest,’
within the meaning of this rule [for determining real party in interest], means material interest, an
interest in issue and to be affected by the decree, as distinguished from mere interest in the question
involved, or mere incidental interest.”); cf. Alleghany Corp. v. Breswick & Co., 353 U.S. 151, 173
(1957) (“interested party” for purposes of statutory right to be heard in an agency proceeding was “a
legal right or interest that will be injuriously affected by the order,” i.e., the action to be taken in or
outcome of the proceeding).




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       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


rather than in the outcome of the proceeding. The absence of any pecuniary
interest by SEA or AMS in a particular decision, action, or outcome in the matters
at issue reinforces the conclusion that section 208 does not apply to their expendi-
tures on advocacy.
    One might argue that placing weight on the decision or outcome at issue is
inconsistent with the examples of particular matters specifically enumerated in
section 208(a). The statute refers to “a judicial or other proceeding, application,
request for a ruling or other determination, contract, claim, controversy, charge,
accusation, arrest, or other particular matter.” Although it is true that some of the
matters specified can be intermediate steps in a larger proceeding, that does not
contradict our conclusion that it is the potential outcome that typically will
determine whether section 208 can be invoked. The statute covers even “particular
matters” that may be terminated before all the possible steps in a process have
occurred, but all of the steps, if they occur, typically make up a single “particular
matter.” See United States v. Jewell, 827 F.2d 586, 587–88 (9th Cir. 1987).
    The view that intermediate steps would be separate “particular matters” would
undercut our understanding of the term “particular matter” for purposes of related
statutes. For example, 18 U.S.C. § 207 (2000 & Supp. II 2002) imposes a perma-
nent post-employment ban on representing a party in a “particular matter” in
which an individual participated as a government employee. Were a charge and a
criminal trial different particular matters, an employee who prepared the charge
against a company could, after leaving the government, defend the company at the
trial of that charge without violating section 207, on the theory that the charge and
the trial were not the same particular matter. The term “particular matter” has not
been construed to compel such a surprising and unwarranted result. See 5 C.F.R.
§ 2637.201(c)(4) (2005) (“The same particular matter may continue in another
form or in part.”); id. (example 2) (an application for a wiretap and the prosecution
of a person overheard during the wiretap are part of the same particular matter).
Our reading of these words, moreover, makes good sense: Section 208 specifically
enumerates charges, accusations, and arrests in order to give examples of matters
that are “particular” in the sense of being focused on specific individuals or
entities or a discrete and identifiable class of individuals and entities, not to
suggest that various intermediate steps in an overall proceeding constitute discrete
particular matters. 12



    12
       It is possible to have a financial interest in an intermediate step in a matter without having an
interest in the final outcome. For example, a person who has a contractual right to a fee if the
government initiates a rulemaking would have a financial interest in that intermediate step, without
regard to the outcome. Because the intermediate step would be part of a larger matter, however, such a
person would have an interest in that entire, larger matter.




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                 Opinions in the Office of Legal Counsel in Volume 30


                                         2.

    Typically, moreover, a person or entity that has a financial interest in a matter
will be within the category of persons or entities on which the “particular matter”
is focused. Although we do not conclude that this fact must be present if section
208 is to apply, its absence with respect to SEA and AMS is further confirmation
of our conclusion that section 208 does not apply here.
    A “particular matter” includes “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.” 5 C.F.R. § 2640.103(a)(1); see also Memorandum
for C. Boyden Gray, Counsel to the President, from J. Michael Luttig, Acting
Assistant Attorney General, Office of Legal Counsel, Re: Applicability of 18
U.S.C. § 208 to General Policy Deliberations, Decisions, and Actions Relating to
Iraq’s Recent Invasion of Kuwait at 3 (Aug. 8, 1990) (same). The term encom-
passes matters that involve specific parties, such as a government enforcement
action against a specific organization, as well as matters of general applicability
that are narrowly focused on the interests of a discrete industry, such as the meat
packing industry or the trucking industry. See 5 C.F.R. § 2640.103(a)(1) (example
3); id. § 2635.402(b)(3) (example 2).
    The definition of “particular matter” provides a useful tool in analyzing the
difficult question of what qualifies as a direct and predictable effect of a decision
or outcome in a matter. OGE’s regulations explain that,

      [i]f a particular matter involves a specific party or parties, generally
      the matter will at most only have a direct and predictable effect . . .
      on a financial interest of the employee in or with a party, such as the
      employee’s interest by virtue of owning stock. There may, however,
      be some situations in which, under the above standards, a particular
      matter will have a direct and predictable effect on an employee’s fi-
      nancial interests in or with a nonparty. For example, if a party is a
      corporation, a particular matter may also have a direct and predicta-
      ble effect on an employee’s financial interests through ownership of
      stock in an affiliate, parent, or subsidiary of that party. Similarly, the
      disposition of a protest against the award of a contract to a particular
      company may also have a direct and predictable effect on an em-
      ployee’s financial interest in another company listed as a subcontrac-
      tor in the proposal of one of the competing offerors.

Id. § 2635.402(b)(1) note (emphasis added). Logic dictates that the same principle
operates even when a particular matter is not limited to specific parties, but
extends to a discrete and identifiable class of persons. In most circumstances, the
outcome of a particular matter will not have a direct and predictable effect on a




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      Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


nonprofit organization outside of the discrete and identifiable class of persons or
entities upon which the proceeding is focused.
   In view of this guidance, it stretches section 208 beyond its limit to conclude
that SEA and AMS have financial interests in particular matters that are simply the
focus of their advocacy. If an organization were to spend money to issue a press
release containing its views on a lawsuit to which it was not a party, we could not
say, consistent with this guidance, that it would have a financial interest in the
case. The parties to the case might have a financial interest; others whose financial
interests would be affected by a particular decision or outcome in the case might
have a financial interest; but the rest of the public at large, including non-profit
organizations that have policy interests in the case, would not have a financial
interest simply by virtue of expressing a view about the case, even if such an
organization expends resources to express that view. The same reasoning applies
here. The executive pay matter in which SEA has an advocacy interest is not
directed at nonprofit organizations like SEA; it is focused on federal employees in
the Senior Executive Service. Nor are the science policies described in Com-
merce’s letter focused on regulation of nonprofit organizations like AMS.

                                           III.

                                           A.

    Nor does this Office’s FAA Opinion compel us to conclude that section 208
applies here. The FAA Opinion, to be sure, describes a “financial interest” as “an
interest ‘pertaining to monetary receipts and expenditures,’” 28 Op. O.L.C. at 239
(citation omitted), and the nonprofit organizations here are making monetary
expenditures for advocacy. That opinion also states that “one has a financial
interest in a governmental matter only when the particular matter can affect one’s
finances—i.e., one’s monetary receipts and expenditures.” Id. at 240. The FAA
Opinion correctly stated that a required expenditure can give rise to a financial
interest. But, in that opinion, it was the outcome of a particular matter that we
suggested could give rise to a financial interest in the matter, under circumstances
that would surely qualify as a “loss” to the employee (being forced to pay for air
travel previously provided free of charge). Specifically, we suggested that an FAA
employee who had flight privileges with an airline would have a financial interest
in a matter that could result in an airline’s losing its ability to fly.
    Indeed, one might argue that the FAA Opinion construed the words “financial
interest” too broadly. Under one possible definition of “financial interest,” a
monetary expenditure alone would never qualify because a financial interest is a
“property interest,” such as an equity stake in something. See Black’s Law
Dictionary 828 (8th ed. 2004) (second definition of “interest,” defining the word
to mean “[a] legal share in something; all or part of a legal or equitable claim to or




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                       Opinions in the Office of Legal Counsel in Volume 30


right in property <right, title, and interest>”); The American Heritage Dictionary
of the English Language 912 (4th ed. 2000) (an “interest” is, among other things,
“[a] right, claim, or legal share: an interest in the new company”). We do not
believe, however, that the statute uses “interest” exclusively in this sense of the
word. Section 208(a) requires a “financial interest” “in” a “matter,” as opposed to
a “financial interest” in property or a party, and one does not typically refer to a
“legal share” in a matter. Compare 18 U.S.C. § 208(a) (requiring a determination
whether an employee has a financial interest in a matter) with 18 U.S.C. § 434
(1958) (section 208(a)’s predecessor, requiring a determination whether an
employee has an “interest[] in the pecuniary profits or contracts of any corpora-
tion . . . or other business entity”). Nor would the narrower definition cover some
seemingly obvious examples of a financial interest, such as the interest of a
defendant in a potential judgment against him in a tort action.
   We believe, instead, that section 208(a) incorporates a broader understanding of
“interest”—a concern based upon the potential for pecuniary gain or loss. 5 C.F.R.
§ 2640.103(b). An interest in a matter, then, is “[a] relation to the matter in
controversy . . . in the nature of a prospective gain or loss, which actually does, or
presumably might, create a bias or prejudice in the mind inclining the person to
favor one side or the other.” 33 C.J. Interest 262 (1924) (footnotes omitted).
Whatever the precise formulation (which we need not resolve here), an expendi-
ture, just like a stock or a bond, can give rise to an interest in a matter, but, as
noted, only if a particular action or outcome in the matter holds the potential for a
financial gain or a loss to the organization. Only then will the organization have a
sufficient financial reason for wanting a particular result in the matter. 13


    13
       For the difference between the two definitions of “interest,” one involving a share in property and
the other a relation giving rise to prospective gain or loss, see Restatement (First) of Property § 5
(1936) (in effect when section 208 was enacted) (“Note on the Use of the Word Interest in the
Restatement: Throughout all the Restatements the word ‘interest’ is used to denote one of three things:
a legal relation, a human desire, and return for the use of money. When the word is used in the last
sense the context clearly indicates the meaning. With this exception throughout all the Restatements,
except the restatement of Torts, ‘interest’ is used as defined in this Section; that is, as a word denoting a
legal relation or relations. In restating the law of Torts it has been found necessary to use the word
‘interest’ to denote any human desire. (See Restatement of Torts § 1). The two different meanings of
the word correspond to existing differences in common and legal usage. When it is said that ‘A has sold
his interest in Blackacre,’ the word is used as it is used in this and other Restatements except the
Restatement of Torts; when it is said that ‘A has an interest in being free from bodily harm’ the word is
used as it is used throughout the Restatement of the Law of Torts.”); 33 C.J. Interest 261–62 (1924)
(“As applied to property. The chief use of the term ‘interest’ seems to be to designate some right
attached to property which either cannot, or need not, be defined with precision. It means such a right
in or to a thing capable of being possessed or enjoyed as property which can be enforced by judicial
proceedings . . . . In a suit or action. A relation to the matter in controversy, or to the issue of the suit, in
the nature of a prospective gain or loss, which actually does, or presumably might, create a bias or
prejudice in the mind inclining the person to favor one side or the other; such relation to the matter in
issue as creates a liability to pecuniary loss or gain from the event of a suit; the benefit which a person




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       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


    Neither is our conclusion inconsistent with the general understanding that an
organization has a financial interest in a matter when it formally intervenes to
assert the financial interests of its members. The Rehnquist Opinion stated that
“[i]f a pending proceeding [before the FPC] involved intervention by NCA as in
[Natural Gas Pipeline Co. of Am., 33 F.P.C. 545 (1965)], or [Great Lakes Gas
Transmission Co., 37 F.P.C. 1070 (1967)], participation by [the Commissioner] in
the Commission’s consideration and decision would obviously be ruled out.”
Rehnquist Opinion at 4 n.3. Earlier, the Rehnquist Opinion described the financial
interest of coal producers in natural gas rates and then cited the two FPC proceed-
ings as support for the proposition that “[t]he interest of coal producers in natural
gas rate and certification proceedings has in past years (though not recently) been
manifested by their direct intervention, through NCA, in such proceedings.” Id.
at 4. The Rehnquist Opinion thus treated such formal intervention as a means by
which the members of the outside organization asserted their financial interests,
with the outside organization standing in the shoes of the members. In these
circumstances, the outside organization, as the surrogate for its members, could
well be found to have a “financial interest” in the proceeding, and a government
employee to whom section 208(a) imputes the financial interest of the outside
organization would therefore have to recuse himself.
    This understanding of formal intervention, however, has no application in the
present context. According to Commerce’s letter, AMS does not intervene in
governmental proceedings involving science policy; it merely issues policy
statements. Even if AMS were to intervene in some sufficiently formal manner,
AMS’s members are not financially interested. They have only a policy interest in
the questions being addressed by the government, not a financial or pecuniary
interest in the resolution of those questions. AMS, therefore, would not be
representing the financial interests of its members. SEA, by contrast, submitted
comments in the informal rulemaking involving the establishment of a new pay
system for senior executives, and SEA resembles a typical trade association in that
it advocates on behalf of the financial interests of its members. However, we need
not decide whether SEA’s submitting comments in an informal rulemaking
constitutes a sufficiently formal intervention to impute the financial interests of its
members to SEA, because, as we explained above, SEA’s members themselves do
not have a disqualifying financial interest in matters regarding the pay system for
senior executives. A federal employee’s interest in his own federal compensation


has in the matter about to be decided and which is in issue between the parties.”) (footnotes omitted);
Persky v. Greever, 202 S.W.2d 303, 306 (Tex. Civ. App. 1947) (“The word ‘interest’ has more than
one meaning, depending upon the manner of its use and the context of the sentence, phrase of grouped
words, or subject matter under consideration. An interest may well be said to exist in an action which
creates or determines a liability or pecuniary loss or gain, depending upon the result of a trial in
court.”).




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                      Opinions in the Office of Legal Counsel in Volume 30


generally does not constitute a disqualifying financial interest under section 208,
because OGE has issued an exemption, over a wide range of circumstances, for the
“financial interest aris[ing] from Federal Government . . . salary or benefits”—the
sort of financial interest that SEA might assert on behalf of its members. 5 C.F.R.
§ 2640.203(d). Given that an SEA member may participate in matters involving
the pay system for senior executives (so long as he does not make determinations
that individually or specially affect his own salary and benefits, or determinations
that individually or specially affect the salary and benefits of another person
specified in section 208, 5 C.F.R. § 2640.203(d)), we cannot say that SEA itself
would have a disqualifying financial interest merely by virtue of representing its
members’ interests.

                                                    B.

    Concluding that section 208 encompasses a nonprofit organization’s expendi-
tures on advocacy would have untoward consequences. If expenditures on
advocacy alone gave rise to a financial interest that implicates section 208(a), the
statute would disqualify an employee whenever an organization in which the
employee is a director makes any expenditure, even a minimal one, with respect to
an issue that might come before him in his official capacity. 14 If, for example, an
organization had a meeting to consider whether to take a position on the issue and
spent some small amount of money—indeed, perhaps if two salaried employees of
the organization, during the time for which the organization pays them, briefly
discussed the possibility of taking a position, or if the organization did nothing
more than issue a press release—a federal employee who serves on the organiza-
tion’s board would be disqualified from his agency’s work on that issue (at least
absent a waiver). By logic, the same principle, moreover, would apply to spending
on advocacy by individual federal employees, as well as organizational spending.
Were an employee to purchase a bumper sticker or yard sign expressing an
opinion on a policy at issue in a governmental matter, that employee might have a
financial interest in the matter under such reasoning.
    It seems unlikely that Congress intended for this criminal conflict-of-interest
statute to reach so far. What led to the regulation of financial interests was the
economic temptation to put a finger on the scale that exists when an employee has
a financial reason to prefer a particular outcome. But when a government actor has
no financial temptation, however slight, to prefer one outcome over another, the
financial justification for requiring recusal disappears. And, while there are many
potential non-financial reasons for requiring a government actor to recuse

    14
       The statute would apply, however, only if the employee had knowledge of the organization’s
financial interest. 18 U.S.C. § 208(a) (covering particular matters “in which, to [the employee’s]
knowledge . . . [an] organization in which he is serving as . . . director . . . has a financial interest”).




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      Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


himself—bias, prejudice, social relationship with the parties, etc.—section 208
singles out only financial interests. “The simplest reason,” explained the influen-
tial Bar Association Report that led to the enactment of section 208, “is that it is
better to control whatever fraction of improper behavior is attributable to econom-
ic motives than to control none. The second reason is that regulatory schemes have
to be administered. Restrictions on outside economic affiliations can be written
with reasonable particularity and enforced with moderate predictability.” Associa-
tion of the Bar of the City of New York, Conflict of Interest and Federal Service
17 (1960). Both reasons suggest that section 208 does not reach the advocacy
expenditures at issue here.
    At any rate, even if section 208 were ambiguous with respect to the question
presented, because section 208 is a penal statute, the law requires that it receive a
strict construction. United States v. Chem. Found., Inc., 272 U.S. 1, 18 (1926)
(interpreting section 208’s predecessor). This rule is “not merely a convenient
maxim of statutory construction,” but “is rooted in fundamental principles of due
process which mandate that no individual be forced to speculate, at peril of
indictment, whether his conduct is prohibited,” Dunn v. United States, 442 U.S.
100, 112 (1979), and in the separation of powers principle that “‘legislatures and
not courts should define criminal activity,’” Ratzlaf v. United States, 510 U.S. 135,
148–49 (1994) (quoting United States v. Bass, 404 U.S. 336, 348 (1971)). And the
rule surely applies here, where construing the words “financial interest in a
particular matter” to include mere policy-motivated expenditures on advocacy
would expand the criminal conflict of interest law beyond its traditional applica-
tion.
    Accordingly, we conclude that SEA and AMS do not have financial interests in
the matters you have described.

                                           IV.

    Although section 208(a) may not apply in these circumstances, government
employees are under a separate duty to “avoid any actions creating the appearance
that they are violating the law or . . . ethical standards.” 5 C.F.R. § 2635.101(b)(14)
(2005) (emphasis added); see Exec. Order No. 12674, § 101(n) (Apr. 12, 1989),
3 C.F.R. 215 (1989 Comp.), as amended by Exec. Order No. 12731 (Oct. 17, 1990),
3 C.F.R. 306 (1990 Comp.); see also 5 C.F.R. § 2635.502 (2005). Among the
relevant ethical standards is an obligation to “act impartially and not give preferential
treatment to any private organization or individual,” 5 C.F.R. § 2635.101(b)(8), and
a prohibition against an employee’s use of “his public office . . . for the private gain
of . . . persons with whom the employee is affiliated in a nongovernmental capacity,
including nonprofit organizations of which the employee is an officer or member,”
id. § 2635.702. Citing the predecessor version of these provisions, Exec. Order No.
11222, § 201(c) (May 8, 1965), 3 C.F.R. 130, 131 (1965 Supp.), the Rehnquist




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                     Opinions in the Office of Legal Counsel in Volume 30


Opinion observed that “[w]hile [the Commissioner] in our judgment cannot be
viewed as having the type of financial interest covered by 18 U.S.C. 208, the fact
remains that NCA does have a direct non-financial interest in any matters affecting
coal in its competitive fight with natural gas” and that “even assuming all good faith
on [the Commissioner’s] part, his participation in the direct regulation of the chief
competitor of NCA’s members is likely to suggest an inference of preferential
treatment or loss of independence which could be difficult to dispel.” Id. at 6–7.
Here, too, when an outside organization on whose board a government employee
serves is actively advocating a position, particularly where it devotes a large portion
of its budget to such advocacy, the employee’s official participation in his agency’s
work on the same issue may “suggest an inference of preferential treatment or loss of
independence” giving rise to an appearance of partiality for purposes of the ethical
rules.
    As we wrote in the FAA Opinion, OGE takes the view that it “‘is not in a posi-
tion to decide for an agency whether a reasonable person would question the
impartiality of [an] employee’s participation in a particular matter,’” FAA
Opinion, 28 Op. O.L.C. at 244–45 (quoting OGE, Letter to an Agency Ethics
Advisor, Informal Advisory Ltr. 00x4, 2000 WL 33407281, at *3 (Apr. 11)), and
“[t]he same generally holds for this Office; the question of an appearance problem
is best left to the employee and the agency based on the facts of a particular case,”
id. at 245. Nevertheless, we note that, on the facts presented to us, there is a
substantial question whether it would create the appearance of a conflict for an
agency employee who is a director of SEA to participate in an official capacity in
deciding on recommendations for the agency’s senior executive pay system. SEA
apparently is engaged in a broad and active campaign involving communications
directly to the agencies of the federal government, in which SEA advances
positions about the system for senior executive pay. For example, when OPM
issued a notice of proposed rulemaking to prescribe the standards for senior
executive pay, 69 Fed. Reg. 45,536 (July 29, 2004), SEA filed a set of comments
in response. See Comments of the Senior Executives Association on the Proposed
Rule Regarding “Senior Executive Service Pay and Performance Awards and
Aggregate Limitation on Pay” (undated). SEA lists its “Current Objectives” on its
website, and advocacy about the new senior executive pay system used to be the
first objective on the list, see Senior Executives Association, http://seniorexecs.org
(last visited June 2, 2005), and remains one of the objectives, see id. (last visited
Jan. 11, 2006). 15 At the same time, the Executive Resources Board on which the

   15
      To the extent that SEA represents its members’ interests in the pay system, a director’s official
role in the matter might not raise an appearance problem, because the regulatory exemption for an
employee’s actions affecting his own pay or benefits “constitute[s] a determination that the interest of
the Government in the employee’s participation outweighs the concern that a reasonable person may
question the integrity of agency programs or operations.” 5 C.F.R. § 2635.501 note (2005). But, apart




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       Financial Interests of Nonprofit Organizations for Purposes of 18 U.S.C. § 208


employee has served in his official capacity makes recommendations regarding the
senior executive pay system. SEA Letter at 1. If an outside organization in which
an employee is a director has been advocating its views directly to the federal
government on a matter that the organization has identified as especially signifi-
cant, there is a significantly heightened risk that the employee, by taking a
personal and substantial role in the same matter, will at least appear less than
independent in his judgments for purposes of 5 C.F.R. § 2635.101(b), and that
risk, along with other factors such as the importance of the particular employee’s
role in the government’s deliberations, calls for serious consideration by the
employee’s agency. 16

                                                     STEVEN G. BRADBURY
                                                  Acting Assistant Attorney General
                                                       Office of Legal Counsel




from this representation of its members’ financial interests, SEA as an organization has a substantial
policy interest in the SES pay system that raises a separate concern about the appearance of an SEA
director’s taking part in such agency deliberations.
    16
       In contrast, AMS appears in some instances only to have issued public statements about matters
identified in the Commerce Letter, rather than directly communicating with federal agencies. See
Commerce Letter at 2 n.2.




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