14.2 Prohibited Acts, Financial Conflicts, Outside Employment, and Divestment

14.2 Prohibited Acts, Financial Conflicts, Outside Employment, and Divestment

Quick Answer: Section 7 of Republic Act No. 6713 establishes four major categories of prohibited acts and transactions for all public servants: (1) holding direct or indirect financial or material interest in any contract or transaction connected with their official office; (2) engaging in outside employment or private practice of profession that conflicts with official duties or involves entities regulated by their office; (3) disclosing or using non-public confidential information for private gain; and (4) soliciting or accepting gifts, loans, or favors in connection with official operations. Under Section 9, a newly appointed or elected official who has conflicts of interest must resign from private business positions within thirty (30) days and divest shareholdings or material interests within sixty (60) days from assumption of office. Furthermore, former public officers are subject to a one (1) year post-employment ban prohibiting them from practicing their profession or representing clients before the office they previously served on matters pending during their tenure.

---

1. Statutory Scope of Prohibited Acts and Transactions (Section 7)

While Section 4 outlines the positive norms of conduct that public officials must embody, Section 7 sets forth negative statutory prohibitions—acts that public officials and employees are strictly forbidden from committing under pain of administrative dismissal and criminal imprisonment.

1.1 Financial and Material Interest (Section 7(a))

Under Section 7(a):

"Public officials and employees shall not, directly or indirectly, have any financial or material interest in any transaction requiring the approval of their office, and on which they exercise discretion or authority."

This prohibition prevents public officers from using their official authority to approve, influence, or steer government business toward commercial enterprises in which they, their spouses, or their family members hold an equity, partnership, or creditor stake.

Local Treasury Application

• A Municipal Treasurer whose spouse or immediate family operates a local computer hardware store, fuel depot, or office stationer cannot allow that enterprise to bid on municipal procurement contracts where the treasurer sits as a member of the Bids and Awards Committee (BAC) or approves purchase orders and disbursement vouchers.
• A City Treasurer cannot maintain an undisclosed profit-sharing arrangement or consultancy fee with a private commercial bank selected as an Authorized Government Depository Bank (AGDB) for municipal deposits.

1.2 Outside Employment and Practice of Profession (Section 7(b))

Section 7(b) establishes stringent limitations on outside commercial engagements and professional practice. Public servants are strictly prohibited from:

1. Owning, Managing, or Serving in Regulated Enterprises: Owning, controlling, managing, or accepting employment as officer, employee, consultant, counsel, broker, agent, trustee, or nominee in any private enterprise regulated, supervised, or licensed by their office, unless expressly authorized by law.
2. Private Practice of Profession with Inherent Conflicts: Engaging in the private practice of their profession unless authorized by the Constitution or law, and provided that such practice will not conflict or tend to conflict with their official functions.
3. Recommending Private Employment: Recommending any person to any position in a private enterprise that has a regular or pending official transaction with their office.

The Rule on Outside Practice of Profession

Under Civil Service Commission (CSC) rules and Department of Finance regulations:

• A career civil servant (such as an Assistant Treasurer who is a Certified Public Accountant or lawyer) cannot practice their profession during official office hours.
• Outside practice requires a prior written permit issued by the head of the agency (for local treasury personnel, the Secretary of Finance or authorized BLGF Regional Director).
• Absolute Conflict of Interest Ban: Even with permission, a treasury officer can never prepare financial statements, file tax returns, or represent private taxpayers who operate within their LGU's jurisdiction, as this creates an irreconcilable conflict with their public assessment and collection duties.

1.3 Disclosure or Misuse of Confidential Information (Section 7(c))

Pursuant to Section 7(c), public officials and employees shall not:

"Use or divulge, confidential or classified information officially known to them by reason of their office and not made available to the public, either: (1) To further their private interests, or give undue advantage to anyone; or (2) To prejudice the public interest."

In local government administration, treasury personnel possess sensitive non-public data, including:

• Gross sales declarations and audited financial statements submitted by commercial enterprises during annual business permit tax assessments;
• Real property tax assessment rolls, market value appraisals, and scheduled road widening or infrastructure alignments;
• Municipal bank account balances, cash placement schedules, and internal revenue allotment (NTA) release figures.

Leaking commercial gross sales figures to a business competitor, or tipping off private real estate speculators regarding upcoming municipal infrastructure expropriations, constitutes a serious criminal violation of Section 7(c).

1.4 Solicitation or Acceptance of Gifts and Loans (Section 7(d))

Section 7(d) establishes an uncompromising statutory prohibition:

"Public officials and employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office."

This provision is reinforced by Presidential Decree No. 46 (which criminalizes the giving and receiving of gifts to public officials on any occasion) and Section 3 of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act).

| Permissible vs. Prohibited Gifts under RA 6713 & PD 46 | |:---|:---| | Strictly Prohibited | Narrow Statutory Exceptions | | • Cash, checks, or gift certificates in any amount.<br/>• Expensive consumer electronics, smartphones, or laptops.<br/>• Free lodging, airline tickets, or luxury resort accommodations.<br/>• Lavish dinners or entertainment hosted by government contractors or commercial taxpayers.<br/>• Low-interest or uncollateralized private loans from entities doing business with the LGU. | • Unsolicited gifts of nominal or insignificant value given as a mere token of gratitude or courtesy.<br/>• Modest gifts from relatives given on customary family occasions (birthdays, weddings, holidays) where family ties govern.<br/>• Promotional corporate calendars, diaries, or inexpensive ballpens distributed generally.<br/>• Standard commercial loans from accredited banks offered at market rates to the general public. |

---

2. Divestment Protocols and Statutory Timelines (Section 9)

When a person holding private business interests, corporate directorships, or commercial equities enters public service, the potential for conflicts of interest arises immediately. Section 9 of RA 6713 establishes an unambiguous statutory mechanism to eliminate these conflicts:

$\text{Conflict of Interest Arises} \longrightarrow \begin{cases} \mathbf{\text{Resign from Private Position:}} & \text{Within } \mathbf{30 \text{ days}} \text{ from assumption of office} \\[6pt] \mathbf{\text{Divest Equity / Shareholdings:}} & \text{Within } \mathbf{60 \text{ days}} \text{ from assumption of office} \end{cases}$

Resignation from Private Corporate Positions (30 Days)

An incoming public official must formally and completely resign from all managerial positions, directorships, officer roles, consulting agreements, or employment contracts with private commercial enterprises within thirty (30) days from the date of assumption of office.

Divestment of Equity Holdings and Ownership (60 Days)

If the official holds proprietary shares, partnership equity, or material ownership in a business enterprise that transacts with, is regulated by, or conflicts with their official office, the official must completely divest those holdings within sixty (60) days from assumption of office.

Legal Standards for Valid Divestment

Under the Implementing Rules and Regulations (IRR) of RA 6713:

• No Transfer to Relatives: Divestment cannot be accomplished by merely transferring shares to a spouse or to relatives within the fourth civil degree of consanguinity or affinity (e.g., parents, children, siblings, uncles, aunts, first cousins, or in-laws). A transfer to an immediate family member is legally treated as a sham or dummy transaction.
• Bona Fide Arm's-Length Sale: The shares must be sold or transferred irrevocably to an unrelated third party at fair market value, or placed into a recognized, fully irrevocable Blind Trust where an independent trustee manages the assets without the official's knowledge or intervention.

---

3. Post-Employment Prohibitions: The One-Year Cooling-Off Period

Ethical duties do not evaporate upon retirement or resignation. Section 7(b) concludes with an essential post-employment restriction designed to prevent the "revolving door" phenomenon and the exploitation of insider influence:

"These prohibitions shall continue to apply for a period of one (1) year after resignation, retirement, or separation from public office."

Scope of the One-Year Ban

For a period of exactly twelve (12) months following separation from public service, a former public servant:

1. Cannot own, control, or accept employment as officer, employee, consultant, counsel, broker, agent, trustee, or nominee in any private enterprise regulated, supervised, or licensed by their former office;
2. Cannot engage in the private practice of their profession in connection with any matter before the office they used to be with, in whole or in part, during their incumbency.

Local Treasury Significance

A City Treasurer who retires on June 30 cannot, within the succeeding one-year period (until July 1 of the following year), accept a position as a tax consultant or legal representative for a corporate taxpayer handling disputed local business tax assessments or real property tax protests before that City Treasury. Even if the former treasurer does not appear in person, preparing briefs or consulting on cases that were pending during their tenure violates this statutory cooling-off rule.

---

4. Administrative and Criminal Penalties (Section 11)

Violations of Sections 7, 8, or 9 of RA 6713 are treated with statutory severity:

• Administrative Sanctions: Suspension for up to one (1) year, fine equivalent to up to six (6) months' salary, or dismissal from the service with forfeiture of retirement benefits and perpetual disqualification from public office.
• Criminal Sanctions: Violations of Section 7, 8, or 9 carry a penalty of imprisonment not exceeding five (5) years, or a fine not exceeding five thousand pesos (₱5,000), or both, alongside civil disqualification.
• Concurrent Liability: Criminal conviction under RA 6713 does not bar simultaneous prosecution under Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) for corrupt practices, or under the Revised Penal Code for direct or indirect bribery.