Remedies for Financial Conflicts of Interests
There are a number of ways in which an employee may deal with a potential financial conflict of interest.
Recusals
One remedy that is often appropriate for avoiding a potential conflict of interest is recusal or disqualification. This simply means that the employee does not participate in a matter that poses a conflict of interest.
Waivers
Another remedy for dealing with conflicts of interest is the use of waivers. As noted above, several kinds of financial interests are waived by regulation. In addition, an individual waiver of the statutory bar may be granted by an authorized official when the conflicting financial interest is not substantial.
Divestiture
Another remedy for a conflict of interest is to sell (or divest) the conflicting property. Section 1043 of the Internal Revenue Code and OGE regulations enable eligible persons to defer capital gains taxes on property that must be sold to comply with conflict of interest requirements. To defer the gains, an eligible person must obtain a "cxrtificate of divestiture" from OGE before selling the property and must reinvest the proceeds into permitted investments. More information about certificates of divestiture is available on this web site.
Trusts
A qualified trust may be available as a remedy for a potential conflict of interest, especially for employees who have a large number of assets and who serve in positions with wide-ranging responsibilities. A trust must be certified by OGE and meet other requirements set forth in OGE regulations before it is considered a qualified trust. One requirement is that the employee turn over management of the trust assets to a trustee who is approved by OGE.
There are two types of trusts within the qualified trust program: the qualified blind trust and the qualified diversified trust. An employee may place any type of asset in a blind trust portfolio. These initial assets continue to pose a conflict of interest until they have been sold or reduced to less than a value of $1,000. Any new assets purchased by the independent trustee may not be disclosed to the employee and therefore will not present a conflict of interest.
With a diversified trust, an employee can place only readily marketable securities in the trust portfolio and the portfolio must meet certain diversification standards. The initial assets of a diversified trust are not considered to pose a conflict of interest because the portfolio is so diversified that an official action taken by the employee would not directly and predictably affect the value of the portfolio.