August 31, 1995
                                       DO-95-032

MEMORANDUM

TO:       Designated Agency Ethics Officials

FROM:     Stephen D. Potts
          Director

SUBJECT:  Exemption from 18 U.S.C. 208 for Interests Arising from 
          Federal Government Employment or from Social Security 
          or Veterans' Benefits


     The Office of Government Ethics (OGE) published an interim
rule, Certain Miscellaneous Exemptions Under 18 U.S.C. § 208(b)(2)
(Acts Affecting a Personal Financial Interest), in Part IX of the
Federal Register for August 28, 1995.  See 60 Federal Register
44706 (August 28, 1995).  This interim rule establishes an
exemption under 18 U.S.C. § 208(b)(2) for financial interests that
arise from employment in the executive branch of the Federal
Government.  With certain exceptions, the regulation specifically
exempts an employee's interest in his Government salary and
benefits, and his interest in Social Security and veterans'
benefits.  It also exempts the disqualifying financial interests
that arise from the Federal Government employment interests of an
employee's spouse, minor child, general partner, or anyone with
whom he is negotiating or has an arrangement for prospective
employment.  The 60-day period for submission of comments on the
interim rule will end on October 27, 1995.

     As the Preamble to the interim rule indicates, the question of
whether an executive branch employee has a disqualifying financial
interest in his Government salary and benefits has never been
definitively resolved.  Uncertainty in this area has created
problems for agencies engaged in downsizing and privatization
activities that would result in the elimination of employee
positions.  Because downsizing and privatization plans  typically
would be developed and implemented by agency employees whose
positions would be affected, section 208 could be a significant
impediment to executing these plans.  To resolve this problem, and
after consultation with the Department of Justice, OGE has decided
to treat an employee's interest in Government salary and benefits
as disqualifying under section 208, but to exempt most such
interests.  1 

     The provision contained in the interim rule will be recodified
as part of the more comprehensive section 208 waiver regulation
that is expected to be published as a proposed rule shortly.  That
regulation will contain a listing of miscellaneous exemptions under
section 208(b)(2) to which this exemption will be added.
_______________________

1   This determination may differ from guidance OGE has issued
in the past concerning the applicability of section 208.  In
particular, an article in the most recent Government Ethics
Newsgram published by OGE states that "[p]articipation in
particular matters that affect only an employee's Federal
'salary' is not barred under section 208 because salary is not a
disqualifying financial interest within the meaning of section
208."   Privatization Issues Affect Federal Employees, [1995] 12
Government Ethics Newsgram 1, 3n.1.  The endnote in that article
was written prior to OGE's decision to reconsider the question of
whether Federal salary and benefits constitute a disqualifying
financial interest.