Application of 18 U.S.C. § 208 to Service by Federal Officials

on the District of Columbia Downtown Business Improvement

District Corporation Board of Directors

A federal official serving on the Board o f Directors o f the District o f Columbia Downtown Business 

Im provem ent D istnct Corporation in h is or her official capacity is not a director of an outside 

organization within the meaning of 18 U.S C §208, and therefore the official’s service is not 

barred by § 208.

August 7, 1998

M e m o r a n d u m O p i n i o n f o r t h e G e n e r a l C o u n s e l

G e n e r a l S e r v i c e s A d m i n i s t r a t i o n

This memorandum responds to your request for our opinion regarding the 

application of 18 U.S.C. §208 (1994) to the service of federal officials on the 

board of the District of Columbia Downtown Business Improvement District Corporation (“ the Downtown BID Corporation” ).1 We have concluded that the District of Columbia ordinance authorizing the formation of BID Corporations eliminates the potential for conflict between a federal official’s loyalty to the federal 

government and his or her fiduciary duty to the BID Corporation under District 

of Columbia law. Accordingly, a federal official who serves on the board of a 

BID Corporation in his or her governmental capacity will not be a director of 

an outside organization within the meaning of §208, and that section’s restrictions 

will not bar such service.

I. The Downtown BID Corporation

The Business Improvement Districts Act of 1996, D.C. Law 11-134 (Michie) 

(codified as amended at D.C. Code Ann. §§ 1-2271 to 2292 (Michie Supp. 1998)) 

( “ the BID Act” or “ the Act” ), authorizes the formation of “ business improvement district corporations,” including a Downtown BID Corporation, to be organized under the District of Columbia’s Nonprofit Corporation Act, D.C. Code 

Ann. §§29-501 to 599.16 (Michie 1996 & Supp. 1998). Id. §§ l-2274(c), 1-2273. 

Each owner and commercial tenant of nonexempt real property within the boundaries described in the statute is a member of the Downtown BID Corporation. 

Id. § 1-2273. Once formed, a BID Corporation must apply for registration. If the 

application is accepted, a “ BID tax” will be assessed on the owners of nonexempt 

property in the BID. Id. § 1-2285. Owners of exempt real property, including the 

District government and the federal government, may voluntarily make a payment 

to a BID Corporation in lieu of the BID tax. Id. § 1-2291. The revenues will

1 Letter for Dawn Johnsen, Acting Assistant Attorney General, Office of Legal Counsel, from Emily C Hewitt, 

General Counsel, General Services Administration (Aug 26, 1997)

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fund additional services and improvements to the area within the BID’s boundaries. See id. §§ 1-2272(6), 1-2271(b), l-2274(a)(2); Articles of Incorporation, 

District of Columbia Department of Consumer and Regulatory Affairs, Business 

Regulation Administration Certificate of Incorporation, art. III(A) (May 20, 1997) 

(“ Articles of Incorporation” ).

The Downtown BID Corporation was incorporated in the District of Columbia 

on May 20, 1997. See Articles of Incorporation. It is governed by a board of 

directors, which “ shall include owners . . . and commercial tenants, and also may 

include residents, community members, and governmental officials', provided, that 

not less than a majority of all Board members shall represent owners.” D.C. Code 

Ann. § l-2277(a) (emphasis added). Directors do not receive a salary or a fee 

for attending meetings, but may be reimbursed for actual and reasonable out-ofpocket expenses incurred in the performance of their duties. Bylaws of the Downtown Business Improvement District Corporation, art. IV(E) (“ Bylaws” ). Because 

the federal government owns and leases a substantial amount of property in the 

Downtown BID, and because the BID taxes may be passed through to the federal 

government under the terms of certain leases, the General Services Administration 

(“ GSA” ) would like to have a representative on the board of the Downtown 

BID Corporation.

The Articles of Incorporation list thirty-seven initial directors, including Nelson 

Alcalde, GSA’s Regional Administrator for the National Capital Region. Mr. 

Alcalde is listed by name, with no reference to his federal office. Articles of Incorporation, art. XIV. The initial board was to serve for 120 days, after which the 

directors were to be elected by the members of the BID. Bylaws, art. IV(B)(2). 

A director may be removed by a two-thirds vote of the other directors in office, 

but only for cause. Bylaws, art. IV(B)(6).

The participation of the federal government in the Downtown BID Corporation 

is expressly addressed just once in the corporation’s bylaws. That provision sets 

out the formula for determining the number of votes to which each member of 

the corporation is entitled. The number of votes allocated to each member varies 

based on several factors, including the use of the property; whether the member 

is an owner, an owner/occupant, or a commercial tenant;1 the square footage of 

the property; and whether the property is exempt or nonexempt. Bylaws, art. 

VIII(C). Each owner of exempt real property in the BID area, “ including the 

District of Columbia and the federal government, who becomes a member of the 

BID by voluntarily making payments to the BID,” is to have a vote proportional 

to the ratio of its voluntary contribution and the BID tax that would be assessed 

on a nonexempt property of equal size. Bylaws, art. VIII(C)(8).

Application o f 18 U S.C. § 208 to Service by Federal Officials on the District o f

Columbia Downtown Business Improvement District Corporation Board o f Directors

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Opinions o f the Office o f Legal Counsel in Volume 22

II. Analysis

Section 208 prohibits any officer or employee from participating “ personally 

and substantially” as a government official in any “ particular matter” in which 

an ‘ ‘organization in which he is serving as officer, director, trustee, general partner 

or employee . . . has a financial interest” unless he obtains a waiver or satisfies 

an exception outlined in § 208(b). 18 U.S.C. § 208(a) (1994). Ordinarily, §208 

disqualifies a government official from taking part in decisions affecting the financial interests of a private entity on whose board of directors he or she sits.

In a 1996 opinion, this office concluded that 18 U.S.C. § 208(a) “ would prevent 

a government employee from serving on the board of directors of an outside 

organization in his or her official capacity, in the absence of: (1) statutory 

authority or a release of fiduciary obligations by the organization that might eliminate the conflict of interest, or (2) a waiver of the requirements of § 208(a), pursuant to 18 U.S.C. § 208(b).” Service on the Board of Directors o f Non-Federal

Entities by Federal Bureau of Investigation Personnel in Their Official Capacities,

20 Op. O.L.C. 379 (1996) (“FBI Memorandum” ). Both a statute and a release 

by the organization (assuming such a release is permissible under state law), we 

reasoned, would overcome the inherent conflict of interest between a government 

employee’s loyalty to the federal government and his or her fiduciary duty to 

an outside organization under state law. See id.2

The BID Act does not fit neatly into either of these previously recognized 

grounds for relief from the requirements of §208. The BID Act is a District of 

Columbia ordinance, not a federal statute, and it does not provide a release on 

behalf of a BID Corporation. Nevertheless, the ordinance defines the duty of a 

federal official who serves as a BID Corporation director under District of 

Columbia law so as to eliminate the potential for a conflict of interest with the 

United States. The BID Act, we believe, provides for service by federal officials 

in their official capacities, and recognizes that federal officials, in cases of conflict, 

must give their allegiance to their federal employer. It thus provides the equivalent 

of a waiver of conflicting fiduciary duty. For that reason, we conclude that the 

prohibitions of § 208(a) would not bar a federal official from serving on a BID 

Corporation board in his or her official capacity.

2 We have twice concluded that §208 would apply to service on a private board where no statute provided for 

ex officio service and where it appeared that the director would owe the private corporation a fiduciary duty. See

FBI M emorandum (concluding that §208 would apply to the service of FBI personnel on non-federal non-profit 

entities m their official capacities); Applicability o f 18 V S C. §208 to Proposed Appointment o f Government Official

to the Board o f Connie Lee, 18 Op O.LC 136 (1994) (finding that §208 would apply to a Treasury official serving 

on the board of a private, for-profit corporation owned m part by the federal government).

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Application o f 18 U.S.C. § 208 to Service by Federal O fficials on the District o f

Columbia Downtown Business Improvem ent D istrict Corporation Board o f D irectors

A.

We believe that § 1—2277 of the BID Act authorizes federal officials to serve 

as directors of a BID Corporation in an official capacity. Section l-2277(a) of 

the BID Act provides that

Board members shall include owners, or principals, agents, partners, 

managers, trustees, stockholders, officers, or directors of owners, 

and commercial tenants, and also may include residents, community 

members, and government officials; provided, that not less than a 

majority of all Board members shall represent owners.

Id. Given the pervasive presence of the federal government in the District of 

Columbia, it is reasonable to construe the term “ government official” in a District 

of Columbia ordinance as including officials of the United States. This construction is consistent with the treatment of the District of Columbia and the federal 

government in the portion of the Downtown BID Corporation bylaws governing 

the voting rights of owners of exempt property. See Bylaws, art. VIII(C)(8) (an 

owner of exempt property, “ including the District of Columbia and the federal 

government, who becomes a member of the BID by voluntarily making payments 

to the BID,” is entitled to proportional vote).

Although the BID Act does not address whether a federal official who serves 

as a director does so in a personal or official capacity, the better interpretation 

is that § l-2277(a) authorizes service in an official capacity. Statutes must be interpreted, if possible, to give each word some operative effect. Walters v. Metropolitan Educ. Enters., Inc., 519 U.S. 202, 209 (1997); United States v. Menasche,

348 U.S. 528, 538-39 (1955). If the District of Columbia Council (“ Council” ) 

intended to allow government officials merely to serve in a personal capacity, 

it would not have been necessary, as a general matter, to include the term 

“ government official” in the list of persons eligible for membership on the board. 

In most instances, a government official serving as a director in his or her personal 

capacity will be eligible as a member of one of the other categories enumerated 

in § l-2277(a), such as a “ community member,” a “ resident,” or a “ commercial 

tenant.” Construing the term “ government official” to authorize service in an 

official capacity gives that term a meaning not covered by those other categories. 

We therefore interpret § 1-2277 as authorizing a federal official to serve on the 

board of a BID Corporation in his or her official capacity.

B.

The BID Act does not expressly address the duty of a federal official serving 

on the board in the event that the interests of the BID Corporation conflict with

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those of the federal government. To determine the scope of that duty, we must 

consider the purposes of the Act and attempt to construe the statute in a manner 

that effectuates the intent of the Council.

When interpreting a statute, “ [w]e may presume ‘that our elected representatives, like other citizens, know the law.’ ” Director, Office o f Workers’ Compensation Programs v. Perini North River Assocs., 459 U.S. 297, 319 (1983) (quoting 

Cannon v. University o f Chicago, 441 U.S. 677, 696-97 (1979)); cf Smith v.

United States, 597 A.2d 377, 382 n .ll (D.C. 1991) (presumption that Congress 

knows statutory construction given to prior statutory provisions when it incorporates them into later legislation also applies to D.C. Council). The District of 

Columbia’s authorization for a federal official to serve in an official capacity 

occurred against two background principles of law that are relevant to our analysis. 

The first is that a federal government employee serving in an official capacity 

owes a duty of loyalty to the United States. See, e.g., 18 U.S.C. §§201-209 (1994 

& Supp. II 1996); Crocker v. United States, 240 U.S. 74 (1916) (allowing government to rescind contract where contractor would pay employee a portion of contract amount); United States v. Carter, 217 U.S. 286 (1910) (permitting government to recover $500,000 received by Army officer after using his influence to 

award a contract to a paying party). The District of Columbia has no authority 

to modify that duty. The second is that a director of a District of Columbia membership corporation owes a fiduciary duty to the corporation and its members, 

Wisconsin Ave. Assocs. v. 2720 Wisconsin Ave. Cooperative Assoc., 441 A.2d 956, 

962-63 (D.C.), cert, denied, 459 U.S. 827 (1982), but the District of Columbia 

has the authority to define and thus to modify the obligations of a director to 

a District of Columbia corporation under District of Columbia law. See District 

of Columbia Self-Government and Governmental Reorganization Act, Pub. L. No. 

93-198, §§ 302, 404(a), 87 Stat. 774, 784, 787 (1973) (vesting legislative power 

of the District in the Council).3

Considering these two background principles together, we conclude that when 

the Council authorized federal officials to serve as directors in their official capacities, it must be deemed to have anticipated that, in the event of a conflict between 

the interests of the BID Corporation and the interests of the United States, those 

officials would serve the interests of the United States. Because the Council has 

the authority to define the duty of a director under District of Columbia law, 

its authorization of official service by federal government officials is best read 

as implying that serving the interests of the United States in that situation would 

not violate the director’s obligations to the BID Corporation under District of

3The Distnct of Columbia Financial Responsibility and Management Assistance Act of 1995, Pub L No 104- 

8, 109 Stat 97, did not remove the legislative power from the Council, but did place significant limitations on 

the Council’s authonty. In any control year, the Council must submit each act passed by the Council and signed 

by the Mayor to the Control Board for review to determine if the act is consistent with the approved financial 

plan and budget Id. § 203(a), 109 Stat. at 116 if, within seven days, the Control Board concludes that the act 

is not consistent with those requirements, the act will not take effect Id. § 203(a)(5), 109 Stat. at 117.

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Application o f 18 U.S.C. §208 to Service by Federal Officials on the District o f

Columbia Downtown Business Improvement District Corporation Board o f Directors

Columbia law. Accordingly, in the event of any conflict, a federal official serving 

as a BID Corporation director in his or her governmental capacity is authorized 

by the BID Act to serve the interests of the United States without violating his 

or her duty to the BID Corporation under District of Columbia law. For that rea- • 

son, § 208(a) would not bar the service of a federal official in his or her official 

capacity on the board of the Downtown BID Corporation.

III. Conclusion

Section 1-2277 of the BID Act authorizes federal officials to serve as BID 

Corporation directors in an official capacity. In so doing, that section impliedly 

authorizes a federal official who is serving as such a director to place the interests 

of the United States above those of the BID Corporation in the event of a conflict 

between the two. Therefore, the Act is the equivalent of a waiver of conflicting 

fiduciary duty. Thus, a GSA official serving on the board of the Downtown BID 

Corporation in his or her official capacity would not be a “ director” within the 

meaning of § 208(a), and that section’s proscriptions would not bar the official’s 

service.

BETH NOLAN 

Deputy Assistant Attorney General

Office o f Legal Counsel

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