[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR2635.502]

[Page 563-566]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
                CHAPTER XVI--OFFICE OF GOVERNMENT ETHICS
 
PART 2635--STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES OF THE EXECUTIVE BRANCH--Table of Contents
 
          Subpart E--Impartiality in Performing Official Duties
 
Sec. 2635.502  Personal and business relationships.

    (a) Consideration of appearances by the employee. Where an employee 
knows that a particular matter involving specific parties is likely to 
have a direct and predictable effect on the financial interest of a 
member of his household, or knows that a person with whom he has a 
covered relationship is or represents a party to such matter, and where 
the employee determines that the circumstances would cause a reasonable 
person with knowledge of the relevant facts to question his impartiality 
in the matter, the employee should not participate in the matter unless 
he has informed the agency designee of the appearance problem and 
received authorization from the agency designee in accordance with 
paragraph (d) of this section.

[[Page 564]]

    (1) In considering whether a relationship would cause a reasonable 
person to question his impartiality, an employee may seek the assistance 
of his supervisor, an agency ethics official or the agency designee.
    (2) An employee who is concerned that circumstances other than those 
specifically described in this section would raise a question regarding 
his impartiality should use the process described in this section to 
determine whether he should or should not participate in a particular 
matter.
    (b) Definitions. For purposes of this section:
    (1) An employee has a covered relationship with:
    (i) A person, other than a prospective employer described in 
Sec. 2635.603(c), with whom the employee has or seeks a business, 
contractual or other financial relationship that involves other than a 
routine consumer transaction;
    Note: An employee who is seeking employment within the meaning of 
Sec. 2635.603 shall comply with subpart F of this part rather than with 
this section.
    (ii) A person who is a member of the employee's household, or who is 
a relative with whom the employee has a close personal relationship;
    (iii) A person for whom the employee's spouse, parent or dependent 
child is, to the employee's knowledge, serving or seeking to serve as an 
officer, director, trustee, general partner, agent, attorney, 
consultant, contractor or employee;
    (iv) Any person for whom the employee has, within the last year, 
served as officer, director, trustee, general partner, agent, attorney, 
consultant, contractor or employee; or
    (v) An organization, other than a political party described in 26 
U.S.C. 527(e), in which the employee is an active participant. 
Participation is active if, for example, it involves service as an 
official of the organization or in a capacity similar to that of a 
committee or subcommittee chairperson or spokesperson, or participation 
in directing the activities of the organization. In other cases, 
significant time devoted to promoting specific programs of the 
organization, including coordination of fundraising efforts, is an 
indication of active participation. Payment of dues or the donation or 
solicitation of financial support does not, in itself, constitute active 
participation.
    Note: Nothing in this section shall be construed to suggest that an 
employee should not participate in a matter because of his political, 
religious or moral views.
    (2) Direct and predictable effect has the meaning set forth in 
Sec. 2635.402(b)(1).
    (3) Particular matter involving specific parties has the meaning set 
forth in Sec. 2637.102(a)(7) of this chapter.
    Example 1: An employee of the General Services Administration has 
made an offer to purchase a restaurant owned by a local developer. The 
developer has submitted an offer in response to a GSA solicitation for 
lease of office space. Under the circumstances, she would be correct in 
concluding that a reasonable person would be likely to question her 
impartiality if she were to participate in evaluating that developer's 
or its competitor's lease proposal.
    Example 2: An employee of the Department of Labor is providing 
technical assistance in drafting occupational safety and health 
legislation that will affect all employers of five or more persons. His 
wife is employed as an administrative assistant by a large corporation 
that will incur additional costs if the proposed legislation is enacted. 
Because the legislation is not a particular matter involving specific 
parties, the employee may continue to work on the legislation and need 
not be concerned that his wife's employment with an affected corporation 
would raise a question concerning his impartiality.
    Example 3: An employee of the Defense Logistics Agency who has 
responsibilities for testing avionics being produced by an Air Force 
contractor has just learned that his sister-in-law has accepted 
employment as an engineer with the contractor's parent corporation. 
Where the parent corporation is a conglomerate, the employee could 
reasonably conclude that, under the circumstances, a reasonable person 
would not be likely to question his impartiality if he were to continue 
to perform his test and evaluation responsibilities.
    Example 4: An engineer has just resigned from her position as vice 
president of an electronics company in order to accept employment with 
the Federal Aviation Administration in a position involving procurement 
responsibilities. Although the employee did not receive an extraordinary 
payment in connection with her resignation and has severed all financial 
ties with the firm, under the circumstances she would be correct in 
concluding that her former service as an officer of the company would be 
likely to cause a reasonable person to question her impartiality if she 
were to participate in the administration of a DOT contract for which 
the firm is a first-tier subcontractor.

[[Page 565]]

    Example 5: An employee of the Internal Revenue Service is a member 
of a private organization whose purpose is to restore a Victorian-era 
railroad station and she chairs its annual fundraising drive. Under the 
circumstances, the employee would be correct in concluding that her 
active membership in the organization would be likely to cause a 
reasonable person to question her impartiality if she were to 
participate in an IRS determination regarding the tax-exempt status of 
the organization.
    (c) Determination by agency designee. Where he has information 
concerning a potential appearance problem arising from the financial 
interest of a member of the employee's household in a particular matter 
involving specific parties, or from the role in such matter of a person 
with whom the employee has a covered relationship, the agency designee 
may make an independent determination as to whether a reasonable person 
with knowledge of the relevant facts would be likely to question the 
employee's impartiality in the matter. Ordinarily, the agency designee's 
determination will be initiated by information provided by the employee 
pursuant to paragraph (a) of this section. However, at any time, 
including after the employee has disqualified himself from participation 
in a matter pursuant to paragraph (e) of this section, the agency 
designee may make this determination on his own initiative or when 
requested by the employee's supervisor or any other person responsible 
for the employee's assignment.
    (1) If the agency designee determines that the employee's 
impartiality is likely to be questioned, he shall then determine, in 
accordance with paragraph (d) of this section, whether the employee 
should be authorized to participate in the matter. Where the agency 
designee determines that the employee's participation should not be 
authorized, the employee will be disqualified from participation in the 
matter in accordance with paragraph (e) of this section.
    (2) If the agency designee determines that the employee's 
impartiality is not likely to be questioned, he may advise the employee, 
including an employee who has reached a contrary conclusion under 
paragraph (a) of this section, that the employee's participation in the 
matter would be proper.
    (d) Authorization by agency designee. Where an employee's 
participation in a particular matter involving specific parties would 
not violate 18 U.S.C. 208(a), but would raise a question in the mind of 
a reasonable person about his impartiality, the agency designee may 
authorize the employee to participate in the matter based on a 
determination, made in light of all relevant circumstances, that the 
interest of the Government in the employee's participation outweighs the 
concern that a reasonable person may question the integrity of the 
agency's programs and operations. Factors which may be taken into 
consideration include:
    (1) The nature of the relationship involved;
    (2) The effect that resolution of the matter would have upon the 
financial interests of the person involved in the relationship;
    (3) The nature and importance of the employee's role in the matter, 
including the extent to which the employee is called upon to exercise 
discretion in the matter;
    (4) The sensitivity of the matter;
    (5) The difficulty of reassigning the matter to another employee; 
and
    (6) Adjustments that may be made in the employee's duties that would 
reduce or eliminate the likelihood that a reasonable person would 
question the employee's impartiality.
    Authorization by the agency designee shall be documented in writing 
at the agency designee's discretion or when requested by the employee. 
An employee who has been authorized to participate in a particular 
matter involving specific parties may not thereafter disqualify himself 
from participation in the matter on the basis of an appearance problem 
involving the same circumstances that have been considered by the agency 
designee.
    Example 1: The Deputy Director of Personnel for the Department of 
the Treasury and an attorney with the Department's Office of General 
Counsel are general partners in a real estate partnership. The Deputy 
Director advises his supervisor, the Director of Personnel, of the 
relationship upon being assigned to a selection panel for a position for 
which his partner has applied. If selected, the partner would receive a 
substantial increase in salary. The agency designee cannot authorize the 
Deputy Director to participate

[[Page 566]]

on the panel under the authority of this section since the Deputy 
Director is prohibited by criminal statute, 18 U.S.C. 208(a), from 
participating in a particular matter affecting the financial interest of 
a person who is his general partner. See Sec. 2635.402.
    Example 2: A new employee of the Securities and Exchange Commission 
is assigned to an investigation of insider trading by the brokerage 
house where she had recently been employed. Because of the sensitivity 
of the investigation, the agency designee may be unable to conclude that 
the Government's interest in the employee's participation in the 
investigation outweighs the concern that a reasonable person may 
question the integrity of the investigation, even though the employee 
has severed all financial ties with the company. Based on consideration 
of all relevant circumstances, the agency designee might determine, 
however, that it is in the interest of the Government for the employee 
to pass on a routine filing by the particular brokerage house.
    Example 3: An Internal Revenue Service employee involved in a long 
and complex tax audit is advised by her son that he has just accepted an 
entry-level management position with a corporation whose taxes are the 
subject of the audit. Because the audit is essentially complete and 
because the employee is the only one with an intimate knowledge of the 
case, the agency designee might determine, after considering all 
relevant circumstances, that it is in the Government's interest for the 
employee to complete the audit, which is subject to additional levels of 
review.
    (e) Disqualification. Unless the employee is authorized to 
participate in the matter under paragraph (d) of this section, an 
employee shall not participate in a particular matter involving specific 
parties when he or the agency designee has concluded, in accordance with 
paragraph (a) or (c) of this section, that the financial interest of a 
member of the employee's household, or the role of a person with whom he 
has a covered relationship, is likely to raise a question in the mind of 
a reasonable person about his impartiality. Disqualification is 
accomplished by not participating in the matter.
    (1) Notification. An employee who becomes aware of the need to 
disqualify himself from participation in a particular matter involving 
specific parties to which he has been assigned should notify the person 
responsible for his assignment. An employee who is responsible for his 
own assignment should take whatever steps are necessary to ensure that 
he does not participate in the matter from which he is disqualified. 
Appropriate oral or written notification of the employee's 
disqualification may be made to coworkers by the employee or a 
supervisor to ensure that the employee is not involved in a particular 
matter involving specific parties from which he is disqualified.
    (2) Documentation. An employee need not file a written 
disqualification statement unless he is required by part 2634 of this 
chapter to file written evidence of compliance with an ethics agreement 
with the Office of Government Ethics or is specifically asked by an 
agency ethics official or the person responsible for his assignment to 
file a written disqualification statement. However, an employee may 
elect to create a record of his actions by providing written notice to a 
supervisor or other appropriate official.
    (f) Relevant considerations. An employee's reputation for honesty 
and integrity is not a relevant consideration for purposes of any 
determination required by this section.