February 3, 1988

FACTS:


You are counsel to a non-profit organization that sells certain
products to municipalities. Most of the directors and most of the
trustees of your organization are municipal officials of the
municipalities which are members of your organization. The
directors and trustees of the organization are unpaid for this
work.



QUESTION:


Does G.L. c. 268A, s.19 permit municipal officials who are
directors or trustees of this organization to participate in their
municipality's decision to contract with this organization?


ANSWER:


No, unless they are appointed officials who receive an exemption
under s.19.


DISCUSSION:


Municipal officials are municipal employees as defined in the
conflict of interest law and, as a result, are subject to the
provisions of that law. G.L. c. 268A, s.1(g). Section 19 of c.
268A[1] prohibits municipal employees from participating[2] as such
in any particular matter[3] in which a business organization in
which they are serving as an officer or director has a financial
interest.[4]

Non-profit corporations, like this organization, are business
organizations for the purposes of s.19, and the decision to
contract with this organization is a particular matter in which the
organization has a financial interest. Accordingly, a municipal
employee who is a director or officer of the organization may not
participate in their municipality's decision to contract with the
organization.

We base this conclusion on longstanding Commission precedent
that non-profit corporations that conduct business are business
organizations for the purposes of the conflict of interest law.
See, e.g., EC-COI-82-25; 81-56. Although early opinions of the
Attorney Ceneral construings s.6 of the statute (the parallel
provision involving state officials) indicated that s.6 did not
apply to nonprofit organizations, a long line of Attorney General
and Commission precedent extending forward from Conflict Opinion
No. 613 (February, 1974) concludes that a nonprofit organization
is a business organization. In particular, organizations engaged
in the buying and selling of commodities or services have been
found to be business organizations.[1] The General Court, in St.
210, s.24 indicated that Conflict Opinion No. 613 and its progeny
shall remain valid and shall be binding on the Commission

Page 190

until and unless reversed or modified by the Commission. We
decline to reverse or modify this precedent.

This long-standing precedent reflects Attorney General Quinn's
and, subsequentiy, the Commission's conclusion that s.19's purpose
is, as one commentator has noted, to target certain kinds of
financial interests which may be presumed to "undermine the
employee's ability to perform his public function disinterestedly
and which are likely to undermine the confidence of the public in
the employee's governmental service." Buss, supra, at 301. Such a
conclusion is reflected in a reading of s.19 that acknowledges that
the pressure to perform public service in favor of a business
organization, of which the municipal employee is a trustee or a
member of the board of directors, is not lessened by the internal
structural characteristics of that business organization. There is
no distinguishing characteristic peculiar to nonprofit business
corporations or even to non-profit business corporations whose
membership is limited to public entities, or a majority of whose
board of directors or trustees are municipal officials, that
convinces us that the prohibitions of s.19 should not apply. To
rule otherwise would produce anomalous results. Buss, supra, at
357. If the purpose of an organization is to conduct business, it
is within the terms of the statute. The fact that this business
organization's constituency is a group of municipalities is
irrelevant to this analysis, particularly where the organization
is competing with other entities for municipal contracts.

You have conceded the financial interest of the organization in
obtaining contracts with municipalities. There is nothing about
the non-profit structure of the organization that lessens the risk
that a municipal employee serving as a trustee or a member of the
board of directors of the organization would not be disinterested
in the continued existence of the organization or influenced, as
municipal employees, to put the business organization's interests
before that of the municipality.

There is no s.19 violation inherent when a municipal official
serves the organization as a trustee or a member of the board of
directors. The conflict law targets only those of the above
described officials who wish to participate as municipal employees
in their municipality's decision to contract with the very business
organization they serve.

You should also note that s.19(b) contains an exemption for
those of the above described municipal officials who are appointed.
Those individuals, by advising their appointing authorities of the
nature and circumstances of the particular matter at issue and
their financial interest in it, may receive a written determination
from that authority that the interest involved is not so
substantial as to be deemed likely to affect the integrity of the
services which the municipality may expect from the employee. The
exemption does not apply to elected officials.

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[1] (a) Except as permitted paragraph (b), a municipal employee who
participates as such an employee in a particular matter in which
to his knowledge he, his immediate family or partner, a business
organization in which he is serving as officer, director. trustee,
partner or employee, or any person or organization with whom he is
negotiating or has any arrangement concerning prospective
employment has a financial interest, shall be punished by a fine
of not more than three thousand dollars or by imprisonment for not
more than two years, or both. (b) It shall not be a violation of
this section (1) if the municipal employee first advises the
official responsible for appointment to his position of the nature
and circumstances of the particular matter and makes full
disclosure of such financial interest, and receives in advance a
written determination made by that official that the interest is
not so substantial as to be deemed likely to affect the integrity
of the services which the municipality may expect from the
employee, or (2) if, in the case of an elected municipal official
making demand bank deposits of municipal funds, said official first
files, with the clerk of the city or town, a statement making full
disclosure of such financial interest, or (9) if the particular
matter involves a determination of general policy and the interest
of the municipal employee or members of his immediate family is
shared with a substantial segment of the population of the
municipality.

[2] "Participate," participate in agency action or in a particular
matter personally and substantially as a state, county or municipal
employee, through approval, disapproval, decision, recommendation,
the rendering of advice, investigation or otherwise.

[3] "Particular matter," any Judicial or other proceeding,
application, submission, request for a ruling or other
determination, contract, claim, controversy, charge, accusation,
arrest, decision, determination, finding, but excluding enactment
of general legislation by the general court and petitions of
cities, towns, counties and districts for special laws related to
their governmental organizations, powers, duties, finances and
property.

[4] You have already agreed that municipal officials who are
trustees or members of the Board of Directors of one or more of
the Associations may not act as agents or spokespersons for the
Associations before any municipal agencies. See, c.g., EC-COI-84-
76
. We note that the policy reflected in s.17(c) is that of
protecting the public interest in situations where there is
potential for divided loyalties, influence peddling,. the use of
insider information, or favoritism. See generally, Buss, The
Massachussetts Conflict of Interest Statute: An Analysis
, 45 B.U.
Law Rev. 299 (1965); Town of Edgartown v. State Ethics Commission,
391 Mass. 83 (1984).

End Of Decision