Sec.

721.5 General policies governing the con

duct of naval personnel.

721.6 Regulations governing the conduct of naval personnel.

721.7 Related statutes and directives. 721.8 Responsibilities for action.

721.9 Statements of affiliations and financial interests (DD Form 1555). 721.10 Information to personnel. 721.11 [Reserved]

721.12 Reporting of post-retirement employment.

721.13 Availability of forms.

AUTHORITY: 5 U.S.C. 301; 10 U.S.C. 133 and 5031; E.O. No. 11222, May 8, 1965; 5 CFR Part 735; 32 CFR Part 40.

SOURCE: 42 FR 43070, Aug. 26, 1977, unless otherwise noted.

§ 721.1 Purpose.

Part 721 implements and supplements Part 40 of this title in prescribing required standards of ethical conduct governing all personnel of the Department of the Navy; related requirements applicable to all personnel of certain categories in the Department of the Navy; amplifying policies for the guidance of personnel in interpreting and executing the standard of conduct and related requirements; and responsibilities and procedures for monitoring and enforcing compliance with the standards of conduct and related requirements within the Department of the Navy.

§ 721.2 [Reserved]

§ 721.3 Scope and effect.

(a) Applicability. The provisions of this part apply to all naval personnel as defined in § 721.4(a). The provisions of § 721.6(1)(2) apply to all retired naval personnel and members of Reserve components. The provisions of § 721.12 also apply to all retired Regular officers.

(b) Violations. The regulations prescribed in § 721.6 are a general order upon which disciplinary or punitive proceedings may be based in appropriate cases. Noncompliance with other provisions of this part are expected to be corrected by timely and appropriate administrative measures.

(a) Naval personnel. All civilian officers and employees and all active-duty military personnel of the Department of the Navy, including special Government employees and personnel of nonappropriated fund instrumentalities.

(b) Department of Defense (DOD) components. The Office of the Secretary of Defense, the Military Departments, the Organization of the Joint Chiefs of Staff, the Unified and Specified Commands, and the Defense Agencies, including nonappropriated fund instrumentalities.

(c) Special government employee. A person who is retained, designated, appointed, or employed to perform with or without compensation, not to exceed 130 days during any period of 365 consecutive days, temporary duties, on either a full-time or intermittent basis. The term also includes a Reserve officer while on active duty solely for training for any length of time, one who is serving on active duty involuntarily for any length of time, and one who is serving voluntarily on extended active duty for 130 days or less. It does not include enlisted personnel.

(d) Gratuity. Any gift, favor, entertainment, hospitality, transportation, loan, any other tangible item, and any intangible benefit-for example, discounts, passes, and promotional vendor training-given or extended to, or on behalf of, naval personnel or their spouses, minor children, households, for which fair market value is not paid by the recipient or the U.S. Government.

or

(e) Appropriate supervisor. That superior within the chain of authority who is acquainted with the duties of the naval personnel concerned and can best determine the existence and effect of any conflict of interests of such personnel. Ordinarily, this will be the immediate superior of the person concerned. Each commanding officer or activity head should ensure that all personnel are aware of the identity of their appropriate supervisor.

§ 721.5 General policies governing the conduct of naval personnel.

(a) Proper conduct of official activities.

(1) Naval personnel shall become familiar with the scope of authority for, and the limitations concerning, the activities for which they have responsibilities.

(2) The attention of naval personnel is directed to the appropriate statutory prohibitions which apply to the conduct of naval personnel.

(3) Naval personnel shall not make or recommend any expenditure of funds or take or recommend any action known or believed to be in violation of U.S. laws, Executive Orders, or applicable directives, instructions, or regulations.

(4) In cases of doubt of the propriety of a proposed action or decision in terms of regulation or law, naval personnel shall consult legal counsel or, if appropriate, a Standards of Conduct Counsellor or Deputy Counsellor to ensure the proper and lawful conduct of naval programs and activities.

(b) Conduct prejudicial to the Government. Naval personnel shall avoid any action, whether or not specifically prohibited by this part, which might result in or reasonbly be expected to create the appearance of:

(1) Using public office for private gain:

(2) Giving preferential treatment to any person or entity;

(3) Impeding Government efficiency or economy;

(4) Losing complete independence or impartiality;

(5) Making a Government decision outside official channels; or

(6) Adversely affecting the confidence of the public in the integrity of the Government.

(c) Standards of personal judgment. All naval personnel will adhere strictly to the standards of conduct and related requirements prescribed in this part. In some instances, standards are imposed which require the exercise of personal judgment. Naval personnel must consider each such instance carefully and be prepared to account for the manner in which the judgment is exercised. This is particularly true in situations which involve acceptance of

hospitality or favors from persons or entities who do, or seek to do, business with the Department of Defense.

(d) Dealings with business and industry representatives. Persons who represent the Government in business dealings with representatives of industry have positions of trust and grave responsibility which require them to observe the highest ethical standards. Practices which may be accepted in the private business world are not necessarily acceptable for naval personnel. No person will allow himself to be placed in a position in which a conflict of interests might arise or might justifiably be suspected. Such a conflict of interests may arise or appear to arise by reason of the acceptance of gratuities, or by any other action which could influence or reasonably be interpreted as influencing the strict impartiality that must prevail in all business relationships involving the Government. Strict impartiality is often particularly difficult to maintain when business relationships are allowed to become overly personal. Naval personnel should at all times ensure that persons doing business or attempting to do business with the Department of Defense, or representing such entities, are not permitted to ingratiate themselves to the extent that naval personnel hesitate to deny requests for special treatment made by such persons or otherwise to follow the rule of strict impartiality when dealing with such persons in their official capacities. Acceptance of gratuities (no matter how innocently tendered or received) from those who have or seek business dealings with the Department of the Navy may be a source of embarrassment to the department and to the naval personnel involved, may affect the objective judgment of the recipient, and may impair public confidence in the integrity of business relations between the department and industry. It is emphasized that prohibited conflicts and apparent conflicts of interests can sometimes arise even from relationships and transactions which the personnel concerned preceive as inconsequential. Where there is doubt as to the propriety of accepting gratuities, attending functions, or accepting other invitations of a hospitable

nature, naval personnel will refrain therefrom.

(e) Preferential treatment. Special treatment must not be accorded to particular individuals or firms unless equivalent treatment is also accorded to other individuals of firms justifiably entitled thereto.

(f) Acquiring conflicting financial interests. Notwithstanding the fact that they may have filed confidential statements of affiliations and financial interests (DD Form 1555), naval personnel must at all times avoid acquiring or retaining financial interests which would disqualify them from performing their assigned duties or responsibilities. Some of the more likely situations in which conflicts of interests might arise are where naval personnel have Government duties or responsibilities related to business enti

ties:

(1) With which they, or their spouses, minor children, or household members are associated as employees, officers, owners, directors, members, trustees, partners, advisers, or consultants;

(2) With which they, or their spouses, minor children, or household members are negotiating or have arrangements for prosective employment; or

(3) In which they, or their spouses, minor children, or household members have interests through ownership of stock options, bonds, securities or other financial arrangements, such as trusts, or through participation in pension or retirement plans.

(g) Membership in associations. Naval personnel who are members or officers of non-Governmental associations or organizations must avoid activities on behalf of the association or organization that are incompatible with their official Government positions. Secretary of the Navy Instruction (SECNAVINST) 5760.4 (series) sets forth the Department of the Navy policy regarding participation by naval activities and naval personnel in the activities of private associations.

(h) Equal opportunity. Naval personnel shall scrupulously adhere to the DoD program of equal opportunity regardless of race, color, religion, sex, age, or national origin, in accordance

with equal opportunity directives. See, for example, SECNAVINST 5350.6 (series) and SECNAVINST 5350.10 (series).

(i) Reporting suspected violations. Naval personnel who have information which causes them to believe that other DoD personnel have violated a statute or standard of conduct imposed by this part should bring the matter to the attention of the appropriate command authority. The matter thereafter should be brought to the attention of the person concerned, for possible resolution without further command action, unless the command determines that such communication is not likely to remedy the problem or will adversely affect a proper investigation of the matter.

(j) Resolving violations. The resolution of standards of conduct violations shall be accomplished promptly by one or more measures, such as divestiture of conflicting interests, disqualification for particular assignments, changes in assigned duties, termination, or other appropriate action, as provided by statute or administrative procedures. Disciplinary actions shall be in accordance with established personnel procedures. See § 721.6(a).

§ 721.6 Regulations governing the conduct of naval personnel.

(a) Affiliations and financial intersts. shall Naval personnel not engage in any personal, business, or professional activity, or receive or retain any direct or indirect financial interest, which places them in a position of conflict between their private interests and the public interests of the United States related to the duties or responsibilities of their official positions. For the purpose of this prohibition, the private interests of a spouse, minor child, and any household member are treated as private interests of the naval personnel.

(1) Unless otherwise expressly authorized by action taken under 18 U.S.C. 208(b), all naval personnel who have or acquire an affiliation or a financial interest which creates a conflict or appearance of a conflict with their official duties shall report the possibly disqualifying interest to the

appropriate supervisor, who shall resolve the matter in accordance with this part. If it is determined that the individual should be disqualified from participation in any official activities that are related to the conflicting interest, a formal disqualification notice must be sent to the concerned individual's appropriate supervisor and immediate subordinates. If the individual cannot adequately perform his official duties after such disqualification, he must divest himself of such involvement or be removed from that position.

(2) Naval personnel need not disqualify themselves under this section, however, for holding shares of a widely held, diversified mutual fund or regulated investment company. Such holdings are exempted as being too remote or inconsequential to affect the integrity of the services of Government personnel.

(b) Using inside information. Naval personnel shall not use, directly or indirectly, inside informaion to further a private gain for themselves or others if that information is not generally available to the public and was obtained by reason of their DoD positions.

(c) Using naval position. Naval personnel are prohibited from using their official positions to induce, coerce, or in any manner unlawfully influence any person, including subordinates, to provide any benefit, financial or otherwise, to themselves or others.

(d) Dealing with present and former military and civilian personnel. Naval personnel shall not knowingly deal on behalf of the Government with present or former Government personnel, military of civilian, whose participation in the transaction would be in violation of a statute, regulation, or policy set forth in this part. While all applicable prohibitions are within the prohibition established by this paragraph, attention is directed to the prohibition on retired Regular officers selling to the Government through the department in which they hold a retired status, 18 U.S.C. 281; the prohibition on former personnel acting as an agent or attorney for anyone other than the United States in connection with "claims" against the Govern

ment, 18 U.S.C. 207; and the prohibition on paying appropriated funds to retired Regular officers who are "selling" to certain Government agencies, 37 U.S.C. 801(c).

(e) Commercial soliciting by naval personnel. To eliminate the appearance of coercion, intimidation, or pressure from rank, grade, or position, full-time naval personnel, except special Government employees and Reserve enlisted personnel on active duty for training, are prohibited from making personal commercial solicitations or sales to DoD personnel who are junior in rank or grade, at any time, on or off duty.

(1) This limitation includes, but is not limited to, the solicitation and sale of insurance, stocks, mutual funds, real estate, and any other commodities, goods, or services.

(2) This prohibition is not applicable to the one-time sale by an individual of his own personal property or privately owned dwelling, or to the offduty employment of naval personnel as employees in retail stores or other situations not including solicited sales.

(3) With regard to solicitation by and of civilian personnel, the limitation applies only to solicitation of personnel under the supervision, at any level, of the solicitor.

(f) Assignment of Reserve personnel for training. Naval personnel who are responsible for assigning Reserves for training shall not assign them to duties in which they will obtain information that could be used by them or their private sector employers to gain unfair advantage over civilian competitors.

(g) Gratuities. (1) Except as provided in paragraph (g)(2) of this section, naval personnel and their spouses, minor children, and members of their households shall not solicit, accept, or agree to accept any gratuity for themselves, members of their families, or others, either directly or indirectly from, or on behalf of, a defense contractor. A defense contractor is a person or other entity which:

(i) Is engaged in or seeks business or financial relations of any sort with any DoD component;

(ii) Conducts operations or activities that are either regulated by a DoD

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