Going backward through revolving door
- By Carl Peckinpaugh
- Feb 02, 1997
A private individual raised the following topic: I am employed by a federal government contractor. However I am thinking of resigning to take a position with one of the agencies with which my company contracts. Would this create problems for me or my company? Do I need to do anything to avoid potential conflicts of interest?
This question raises the sometimes troublesome issue of the "revolving door" between government and industry. Many regulations and much commentary have been made about the topic especially as it relates to government officials who leave for positions in private industry. However less guidance is provided for those moving from the private to the public sector. But some points are fairly clear.
First retaining any type of ownership in a company could be difficult. In general government employees are not prohibited from investing in companies that do business with the federal government. However 18 U.S.C. § 208 precludes government employees from participating personally a nd substantially in matters in which they have a financial interest.
The Office of Government Ethics (OGE) has interpreted this restriction as precluding employees from participating in matters that would have a direct and predictable effect on a personal financial interest of the employee. 5 C.F.R. Section 2635.402(a). Employees faced with conflicting financial interests must disqualify themselves from participation in the matter. 5 C.F.R. Section 2635.402(c).
Moreover a government employee may not receive outside compensation for work performed as a public employee. Thus 18 U.S.C. § 209(a) prohibits a government employee from receiving any salary from a nongovernmental source for services performed as a federal employee. However federal employees generally may continue to participate in the employee benefit programs of their former employer such as a bona fide pension retirement group life health or accident insurance profit sharing stock bonus or other employee welfare or benefit plan . 18 U.S.C. Section 209(b).
Even so retention of benefits can be a prohibited conflict of interest if the federal employee participates in a matter that could affect the former employer's ability to pay the benefit. Benefits directly associated with the financial condition of the former employer such as company stock plans are particularly suspect. But benefits that are independent of the employer's operations would be less of a concern.
The payment of severance pay is a different issue. The Supreme Court held in Crandon v. United States [494 U.S. 152 (1990)] that payments given to employees who left a company for government employment in order to compensate them for lost income and benefits did not violate 18 U.S.C. Section 209(a). In the case the payment was made to individuals before they became government employees. It is not clear if a former employer could structure severance payments so that the employee received them while in government employment. In general severance payments that are m ade in accordance with an established company policy are the most supportable.
OGE regulations also require federal employees to disqualify themselves for two years from any matter involving a former employer where the former employer made an "extraordinary payment" to the employee. An extraordinary payment is greater than $10 000.
However payments made pursuant to an established compensation partnership or benefit program are exempt.
Sometimes a government employee will be restricted from participation in matters involving prior employers even when they have no financial interest in their previous employers. OGE regulations restrict government employees from participating in matters involving previous employers within the past year if a reasonable person would question the employee's impartiality. 5 C.F.R. Section 2635.502.
Other regulations may apply in particular situations. Anyone with a specific question in this area would be well-advised to make a full disclosure and ask for advice fro m the agency involved.
Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn Washington D.C.