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03-1 Ethics Concerns for Rural Development State Directors

U.S. DEPARTMENT OF AGRICULTURE - OFFICE OF ETHICS

ETHICS ISSUANCE: Number 03-1 - DATE: February 4, 2003 (Updated November 2017)

SUBJECT: ETHICS CONCERNS FOR RURAL DEVELOPMENT STATE DIRECTORS

1. Purpose

The Rural Development Mission Area (RD) serves a vital role in delivering a wide array of government services to rural America. The agency is a prominent source of Federal funding and assistance to rural communities. Given the important role played by RD in terms of the financial health of rural communities, maintaining high ethical standards is essential. In a worst-case scenario, failure to follow the ethics statutes and regulations can lead to administrative discipline, or even criminal prosecution of the individual. Even where no adverse action is taken or contemplated against an employee, ignoring ethics rules can quickly lead to an appearance of losing impartiality in dealing with RD clients, or of misusing one’s official position. In either case, the failure to follow ethical guidelines serves to undermine the agency’s credibility with its clients. Given the need for RD State Directors (SDs) to interact and work closely with their client communities in accomplishing the mission of the agency, SDs must maintain a clear focus on the dividing line between their Federal role and their private interests.

This issuance is designed to provide practical guidance to SDs concerning some of the ethics restrictions most likely to impact them in their dealings with non-Federal clients during their Federal tenure, and focusing specifically upon the restrictions that have unexpected applications. In this regard, the issuance is designed to be a quick-reference compendium of pertinent rules taken from other, more specific, statutory and regulatory sources that are cited in each section. In addressing actual ethics questions, reference should always be made to the statutes and regulations themselves, particularly to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards), 5 C.F.R. Part 2635.

Note: Not all ethics issues are treated herein. Some common issues that are not of increased concern for SDs in the performance of their official duties were omitted. For example, rules concerning solicitation and acceptance of gifts, whether from outside sources or from fellow employees, are best-addressed in the Standards (see 5 C.F.R. Part 2635, Subparts B and C, respectively). Some other issues not addressed include acceptance of travel costs from non-Federal sources (5 U.S.C. § 1353); teaching, speaking, and writing (5 C.F.R. § 2635.807); acceptance of bribes (18 U.S.C. § 201); post-employment restrictions (18 U.S.C. § 207); negotiating for non-Federal employment (18 U.S.C. § 208); and dual compensation (18 U.S.C. § 209). For information on any ethics-related restriction, including training modules that address most common ethics issues, see the Office of Ethics website at www.usda.gov/ethics.

2. Controlling Statutes and Regulations

18 U.S.C. § 203 - Compensation to Members of Congress, officers, and others in matters affecting the Government.

18 U.S.C. § 205 - Activities of officers and employees in claims against and other matters affecting the Government.

18 U.S.C. § 208 - Acts affecting a personal financial interests.

18 U.S.C. § 1913 - Lobbying with appropriated moneys.

5 C.F.R. Part 734 - Political Activities of Federal Employees.

5 C.F.R. Part 2635 - Standards of Ethical Conduct for Employees of the Executive Branch, and specifically:
     Subpart E - Impartiality in Performing Official Duties.
     Subpart G - Misuse of Position.
     Subpart H - Outside Activities.

5 C.F.R. Part 8301 - Supplemental Standards of Ethical Conduct for Employees of the Department of Agriculture.

3. Definitions

Active participant - As defined at 5 C.F.R. 2635.502(b)(1)(v), and as used in this guidance, it is one who serves with a non-Federal (also referred to as “outside”) organization or association (e.g., a trade association such as the National Association of Realtors or an organization like the Rural Housing Coalition) as an official, committee or subcommittee chairperson, spokesperson, attorney, agent, contractor, or who participates in directing the activities of the non-Federal organization or association. Undertaking a fiduciary responsibility (see definition, below) for a non-Federal organization or association would make one an “active participant,” as would devoting significant time to promoting specific programs of the non-Federal organization or association (e.g., fundraising efforts). Membership by itself, payment of dues, or donation to the outside organization or association would not constitute “active” participation.

Advisory/liaison/consultative role - This refers to service as an agency representative for the purpose of exchanging comments, views, or official opinions with a non-Federal organization on substantive matters of mutual concern to the non-Federal organization and to the Department of Agriculture (USDA) or RD.

Covered relationship- As defined at 5 C.F.R. 2635.502(b)(1), you have a covered relationship with:

  1. A person, other than a prospective employer, with whom you have or seek a business, contractual or other financial relationship that involves other than a routine consumer transaction;
  2. A person who is a member of your household, or who is a relative with whom you have a close personal relationship;
  3. A person for whom your spouse, parent or dependent child is, to your knowledge, serving or seeking to serve as an officer, director, trustee, general partner, agent, attorney, consultant, contractor or employee;
  4. Any person for whom you have, within the last year, served as officer, director, trustee, general partner, agent, attorney, consultant, contractor or employee; or
  5. An organization, other than a political party, in which you are an active participant (see definition above).

Fiduciary responsibility - For purposes of this issuance, this means service as an officer (e.g., president, vice-president, secretary, treasurer), or in the role of a member of the board of directors or trustees (which includes voting authority for organization matters) of a non-Federal entity, such as an organization, non-profit, or business entity. Normally, this will involve a non-Federal entity that is recognized in law (e.g., a corporation or partnership, etc.). It would not involve informally-organized groups or teams of individuals. It does not include committee chair positions unless the individual also serves in one of the previously-mentioned roles contained within this definition. One who exercises “fiduciary responsibility” for a non-Federal organization also would be an active participant (see definition above).

Prohibited Source - As defined at 5 C.F.R. § 2635.203(d) and as applied to USDA, a “prohibited source” is any person who:

  1. Seeks official action by USDA;
  2. Does business or seeks to do business with USDA;
  3. Conducts activities regulated by USDA;
  4. Has interests that may be substantially affected by performance or nonperformance of the employee’s official duties;
  5. Is an organization a majority of whose members are described above.

Represent on behalf of another - This means to knowingly make with intent to influence, any communication to or appearance before any officer or employee of the Federal Government on behalf of a third party in connection with a matter of interest to the Federal government. The term does not include the communication of technical information.

4. Conflicting Interest

4.1. Conflicting Financial Interests. 18 U.S.C. § 208. Financial interests owned or imputed to you1 can affect your ability to do your Federal job and, depending upon the circumstances, may lead to criminal prosecution or administrative discipline. You may not participate in any fashion in a matter that affects your financial interests, unless you first obtain a written waiver, or qualify for a regulatory exemption. Examples of financial interests that can conflict with official duties include:

  1. Your minor child’s stock in banks that guarantee RD loans;
  2. Your spouse’s real estate firm; or
  3. Your service as an officer or director of a local electrical cooperative.

4.2. Other Conflicting Relationships. 5 C.F.R. § 2635.502. Even where not prohibited as a conflicting financial interest, certain other interests and relationships can affect your ability to do your job and may lead to the appearance of a loss of impartiality which, depending upon the circumstances, can result in administrative discipline. Absent authorization to do so, you may not participate in any fashion in a matter that affects the financial interests of a member of your household, or in which any other person with whom you have a covered relationship is, or represents a party to that matter. An appearance of a loss of impartiality could occur should you participate in official actions involving the following persons/entities with whom you have a covered relationship:

  1. A “significant other” with whom you cohabit;
  2. A lessee of your rental property;
  3. Your adult child who owns a real estate development company;
  4. A land grant college which your spouse serves as trustee;
  5. A local utility that employs your minor child for the summer;
  6. A rural business organization from which you resigned as an officer within the last year; or
  7. A bank that holds a mortgage on your property.

4.3. Misuse of Official Position. 5 C.F.R. § 2635.701. Even where a matter does not involve a member of your household, or any other person with whom you have a covered relationship, your ability to do your job may be affected if it appears that you misused your official position, either to benefit yourself in some non-financial fashion, or to benefit anyone else (e.g., a friend). This provision also may come into play, in addition to other Federal laws, in cases where a supervisor gives preferential treatment to a subordinate. Depending upon the circumstances, such misuse can result in administrative discipline.

5. Representation of Others before the Federal Government. 18 U.S.C. §§ 203 & 205. Given your position as SD, you may be asked by private parties to intervene on their behalf with other Federal officials on matters that are not directly part of your official duties. Also, many SDs come to the positions possessing managerial- or fiduciary-level affiliations with non-Federal organizations that are seeking relationships with agencies or departments of Federal Government (e.g., loans, grants, contracts, administrative decisions, etc.) During your tenure as a Federal officer, you are subject to the following limitations upon your ability, as a private person, to interact with the Executive and Judicial Branches of the Federal Government:

  1. You may not meet with any Executive or Judicial Branch officer on behalf of another person with regard to any business that they have with the Federal Government unless it is clearly part of your official duties or permitted by statute;
  2. You may not otherwise communicate orally or in writing to an Executive or Judicial Branch officer on behalf of another with regard to matters involving the Federal Government; and
  3. You may not seek or accept a commission, gratuity, fee, or any other form of compensation, for services that you provide, or work that you do, that is directly related to the efforts of another to represent before any Executive or Judicial Branch officer with regard to matters involving the Federal Government.

Examples of unlawful representation:

  1. Meeting with a Department of Interior official to discuss an application for a mining permit on behalf of your mining partnership (e.g., a disaster payment);
  2. Submitting, under your own signature, a loan application to RD on behalf of your incorporated farm; or
  3. Receiving or seeking a commission or fee for providing “behind-the-scenes” assistance to a real estate development company seeking a Rural Housing Service loan.

Note: This does not bar you from representing yourself as a private individual, or as a sole proprietor should your business be so configured (e.g., you would not be prohibited from engaging in such representation if the farm is not incorporated or, even if incorporated, you could have another member of the corporation who is not a Federal employee submit the application). Also, under limited circumstances, you may be able to represent family members and some private organizations seeking certain Federal actions (e.g., representing a parent submitting a benefits claim to the Veterans Administration; representing a fellow employee in a administrative disciplinary action). Check with your agency ethics official for further information. Also, since this prohibition is limited to representations before the Executive or Judicial Branches, it does not prohibit communications with Congress. However, see Part 8, below.

6. Use of Government Equipment, Space, Time, Personnel, or Information. 5 C.F.R. Part 2635, Subpart G. In furtherance of any outside business interests that you may have, you are prohibited from using:

  1. Office telephone, email, copy, or facsimile machines;
  2. Government vehicles;
  3. Federal buildings or spaces;
  4. Official work hours unless you take personal leave for that period of time;
  5. Services of your subordinates; and
  6. Non-public government information for the purpose of benefiting yourself, or any other persons.

7. Involvement in Non-Federal Organizations

7.1. Official Participation on National Rural Development Coordinating Committees and State Rural Development Councils. Pursuant to section 6021 of the Farm Security and Rural Investment Act of 2002, Pub. L. No., 107-171, RD State Directors, other USDA employees, and employees of other agencies involved in rural issues are required to serve as full voting members on both the National Rural Development Coordinating Committee and State Rural Development Councils and may participate free of concerns over conflict of interest statutes. (Prior to the statute, service on these boards in an official capacity could’ve resulted in violations of 18 U.S.C. 208 & 205, see 7.2, below).

7.2. Official Participation in Other Non-Federal Organizations. Unless specifically required by Federal statute, or unless you receive a written waiver in advance, you may not serve as a director, officer, trustee, general partner, or employee of any other non-Federal organization in your official capacity. You are deemed to be serving in your official capacity if:

  1. Attendance or participation is accomplished at Federal expense (e.g., travel costs);
  2. Attendance or participation occurs on official time; or
  3. The circumstances make it clear that your involvement in that organization is primarily due to your official position, rather than as a private citizen.

You may not engage in your official capacity in the following activities on behalf of the non-Federal organization:

  1. Management activities, including voting on organizational administration matters or on organizational policy decisions; or rendering advice or making decisions regarding organization contracts or finances; etc.;
  2. Representing the interests of the non-Federal organization back to any officer, of the Executive or Judicial Branches of the Federal Government on matters unrelated to your official duties with the non-Federal organization;
  3. Fundraising (see Part 9, below);
  4. Activities related to lobbying the Federal Government (see Part 8, below); or
  5. Accepting any form of compensation or gratuities provided in connection to your official participation in the non-Federal organization (18 U.S.C. § 209).

You may in your official capacity attend meetings of non-Federal organizations in an advisory/liaison/consultative role (e.g., in the capacity of RD liaison, technical representative, advisory board member, or in other non-managerial roles that relate to your official duties).

7.3. Personal Participation in Non-Federal Organizations. As a private citizen, you are free to participate in a non-Federal organization in any manner at whatever level you choose. For example, you may participate in an unofficial capacity in the administrative functions of the organization and exercise fiduciary responsibility on behalf of the organization. The Department, however, may not pay for travel, expenses, official time, supplies and equipment use that is for the business purposes of the organization as that could make the participation official. Also, your personal participation is subject to the following guidance:

  1. You may not represent the interests of the non-Federal organization back to any officer, of the Executive or Judicial Branches of the Federal Government (see Part 5, above);
  2. You may not fundraise through solicitations aimed at prohibited sources or official subordinates (see Part 9, below); and
  3. If you serve in a fiduciary capacity or as an active participant in a non-Federal organization in your personal capacity, you may not take official action as part of your Federal job that directly affects the interests of that organization. Additionally, should you leave that organization after having served in a fiduciary capacity or as an active participant role, pursuant to 5 C.F.R. § 2635.502, for a period of one year after you terminate your service in such positions, you may not participate in any matter in which the organization is a party or represents a party unless authorized to participate (Part 4, above).

Note: Should you choose to remain a member of the organization, you still must avoid taking official actions that give the appearance that you are using your official position for the benefit of that organization. However, there is not the immediate presumption of a real or potential conflict as there is with service in a fiduciary capacity or as an active participant.

7.4. Conflicting Personal Participation in Certain Non-Federal Entities. While you may participate in any lawful capacity in non-Federal organizations in your personal capacity, given your position within your State and the involvement of the following in Federal programs, it is likely that your participation in the following entities in any significant manner (e.g., in a fiduciary or active participant capacity) will raise ethical concerns, whether real or apparent:

  1. Financial institutions (i.e., banks, mortgage brokers, lenders, etc.);
  2. Federal Land Grant colleges and universities; or
  3. Non-profit industry organizations (e.g., American Banking Association); and
  4. Organizations and lobbying groups dealing with rural real estate-related issues.

Note: The dangers inherent in service with non-profit industry, trade, and lobbying organizations, generally would not be found in service on boards of non-profit, charitable organizations (e.g., food banks, Goodwill Industries, etc.).

8. Lobbying with Appropriated Funds. 18 U.S.C. § 1913. Federal employees must avoid using appropriated funds to lobby (e.g., lobbying on official time, or in official capacity, etc.). In your personal capacity, however, you may promote policy positions, including those on behalf of another (e.g., a non-Federal organization) to the Congress provided:

  1. Lobbying is not paid for with appropriated funds (e.g., official travel, time, equipment, etc.); and
  2. You do not identify yourself as a USDA official.

9. Fundraising. While an employee who is a member of a non-Federal charitable organization may participate in fundraising on behalf of the organization, limits exist in terms of the extent of such participation.

9.1. Fundraising in Your Official Capacity. Under 5 C.F.R. Part 950, the Combined Federal Campaign (CFC) generally is the only authorized fundraising permitted in the Federal workplace. Thus, other than as part of CFC, you may not engage in fundraising for a non-Federal charitable organization as part of your Federal job. See also, 5 C.F.R. § 2635.808(b).

9.2. Fundraising in Your Personal Capacity. Under 5 C.F.R. § 2635.808(c), you may participate in fundraising efforts except where solicitations come into contact with the Federal workplace. Specifically, you may not:

  1. Personally solicit for donations inside a Federal workplace, or inside a Federal vehicle (this also would preclude mailing solicitations to Federal officials at their official addresses, or targeting Federal officials for solicitation); or
  2. Personally solicit funds or donations from either: (i) Official subordinates; or (ii) Persons whom you know to be prohibited sources to USDA.

Finally, if engaged in otherwise permitted fundraising, you still must be mindful not use your official title, position, or any authority associated with your public office to further the fundraising effort.

10. Political Activities

10.1. Political Activities in Your Official Capacity. Pursuant to the Hatch Act, as amended, you may not participate in any partisan political activity in your official capacity.2 This means that, in your official capacity, you could greet and tour a visiting Senator or congressman through your State to show him or her what RD programs are accomplishing. You could not, in your official capacity, attend a political rally, or fundraiser for the Senator or congressman.

10.2. Political Activities in Your Personal Capacity. Given your position within your State, you will likely find it difficult to clearly demonstrate to your critics and political opponents that your political participation is in your personal capacity. However, unless you are a career Senior Executive Service employee, you retain the right to participate in partisan political activities while in your personal capacity (i.e., on your own time and dime and with no reference to your official position or authority). The main restrictions on this ability are that you may not do the following:

  1. Be a candidate for election to office in a partisan political campaign3;
  2. Be involved in fundraising in relation to anyone’s campaign for a partisan political office;
  3. Use Federal buildings, vehicles, equipment, time, or personnel to accomplish otherwise permissible partisan political activities; or
  4. Use your official position or authority to encourage or discourage others to participate or not participate in permissible partisan political activities.

Note: It is not unusual that a State-level RD official commences Federal service while serving in a political position, either with a town, county, or State. The Hatch Act does not prohibit you from completing the term you were serving upon entering Federal service. It would, however, prohibit you from running for election subsequent to entering Federal service, unless the position happens to be non-partisan in nature. If continuing to serve in an elected position, however, you would have to consider the public entity that you serve as the same as an outside employer and a financial interest that you possess. Further, you must refrain from representing the interests of the entity you serve to the Federal Government for to do so could be a prohibited representation under the Criminal statutes (Part 5, above).

11. Outside Employment. 4 As SD, you are subject to the OGE 278 – Public Financial Disclosure reporting requirements. Pursuant to USDA supplemental regulations (at 5 CFR § 8301.102(a)), all public filers are required to obtain prior written approval from their agency and the USDA Office of Ethics before engaging in any form of employment with outside (non-Federal) organizations. Report positions you hold in a personal capacity with outside organizations in Part I of the OGE 278e (Positions Held Outside U.S. Government). Report the source and amount of income from outside employment that exceeds $200, e.g., fees, salary, honoraria, in Part 2 (Filer’s Employment Assets, Income and Retirement Accounts). Please consult the Office of Ethics before seeking to engage in outside employment, or any form of commercial activity, located within the State that you serve as SD which involves the following:

  1. Sale, appraisal, or assessment of real estate;Code of Federal Regulations / Title 5 - Administrative Personnel / Vol. 3 / 2017-01-011002
  2. Performance of real estate brokerage services;
  3. Service as a title attorney or title insurance representative;
  4. Real estate development, including the construction of houses or other buildings;
  5. Service as an officer or on the board of directors of a bank or savings and loan association;
  6. Service as an officer, member of the board of directors or trustees, or as an employee of an RD-financed entity;
  7. Service as an officer, employee, or member of a governing board of a State, county, municipal, or other local political jurisdiction having the power to tax or zone real estate;
  8. Membership in grazing associations, un-incorporated Economic Opportunity cooperatives, rental housing groups, and closely-held labor housing organizations;
  9. Insurance sales; or
  10. Land speculation.

Outside employment is also subject to the prior approval requirements if it is with or for a person whom the RD employee knows, or reasonably should know, is both: (i) An RD program participant; and(ii) Directly affected by decisions made by the particular RD office in which the RD employee serves.

12. Compensated Teaching, Speaking, and Writing Activities. You may not receive compensation for outside teaching, speaking, or writing activities that relate to your official duties. Your teaching, speaking, or writing relates to your official duties if:

  1. Your participation is undertaken as part of your official duties;
  2. The invitation to participate was extended to you because of your official position, rather than your expertise on a particular subject;
  3. The invitation was extended, directly or indirectly, by one whose interests may be affected substantially by the performance or nonperformance of your official duties;
  4. Your participation draws substantially on agency ideas or official data that is not available to the public; or
  5. The subject of the activity deals in significant part with:
    1. Any matter to which you are assigned or that has been assigned to you within the past year; or
    2. Any ongoing or announced policy, program, or operation of the agency.

If your activities have nothing to do with your official duties, there are no ethical restrictions.

1The financial interests of the following persons are imputed to you (treated as if you owned them yourself):

  1. Your spouse;
  2. Your minor children;
  3. Your general partners;
  4. Any organization in which you serve as officer, director, trustee, general partner or employee; and
  5. Any person or organization with which you are negotiating or have an arrangement concerning prospective employment.

2 Although the Hatch Act prohibits participation by most Federal officials in partisan political activity while in their official capacity, it does not prohibit official participation in non-partisan political activity. However, an employee participating in such activity in official capacity (other than as specified in 11.1, above) could be subjected to discipline for misuse of official position.

3 A political office is partisan if any candidate for that office represents a party that received a vote for elector in the most recent Presidential election. This covers just about every political party in the U.S.

4  “[E]mployment” means any form of non-Federal employment or business relationship or activity involving the provision of personal services by the employee for direct, indirect, or deferred compensation other than reimbursement of actual and necessary expenses. It also includes, irrespective of compensation, the following outside activities: (1) Providing personal services as a consultant or professional, including service as an expert witness or as an attorney; and(2) Providing personal services to a for-profit entity as an officer, director, employee, agent, attorney, consultant, contractor, general partner, or trustee, which involves decision making or policymaking for the non-Federal entity, or the provision of advice or counsel (5 CFR § 8301.102(b)(1)-(2)). See also 5 CFR § 8301.107 – Additional rules for RD employees.