Date: April 6, 1987

FACTS:

You are the elected treasurer/collector for a town. You presently have an account for the town on deposit

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at the XYZ Savings Bank (Bank), which has asked you to become one of its unpaid corporators.

A corporator is a statutorily-created position which is unique to a non-stockholder type of savings bank such as the Bank. A corporator's statutory duties are to attend an annual meeting and to elect trustees, the president and vice president of the bank, and other corporators. Id. Although corporators are not otherwise responsible for the management of the bank or for any business policies, they are required, together with trustees, to approve fundamental changes in a bank, such as a merger, consolidation, liquidation or dissolution. Id. In the event a savings bank is converted to a stockholder form of savings bank, corporators will become directors in the stock bank. Id.
 

QUESTION:

As a town treasurer/collector, does G.L. c. 268A permit you to
serve as corporator for the Bank?
 

ANSWER:

Yes; however, you will be subject to the limitations discussed
below.
 

DISCUSSION:

As a town treasurer, you are a municipal employee for the purposes of G.L. c. 268A. Several sections of c. 268A are relevant to your question.


1. Section 17


Section 17(c) prohibits a municipal employee from acting as an agent for anyone other than the town or municipal agency in connection with any particular matter in which the same town is a party or has a direct and substantial interest. Under this section, a recommendation or decision to deposit town funds with a specific bank would be a particular matter in which the town would have a direct and substantial interest Therefore, as a corporator, you could not act as an agent for the Bank in connection with the deposit of the town funds at the Bank. You also could not act as an agent on behalf of the Bank in soliciting accounts from town agencies.


2. Section 19

Section 19 prohibits a municipal official from participating[1] in any particular matter[2] in which a business organization in which he is serving as officer, director, trustee, partner or employee has a financial interest. A corporation such as the Bank is considered a business organization. See, EC-COI-85-14. Under this section, ifa corporator is considered an officer, director, trustee or partner of the Bank, you would be prohibited from officially participating as a treasurer in any particular matter which could foreseeably affect the Bank's financial interest.

While the term "corporator" is not expressly included within the categories of relationships which will mandate abstention under s.19, the Commission is not bound by the formal name given to a position to determine whether the abstention requirements apply.  For example, in EC-COI-80-43, the Commission concluded that a law office relationship, although technically not organized as a partnership, would be treated as a partnership for the purposes of G.L. c. 268A because the conduct of the attorneys gave the impression that they were partners.

Based on our review of the activities of corporators, we conclude that corporators are sufficiently similar in function to directors of stock banks to trigger the restrictions contained in s.19. This decision is primarily based on two facts: 1) that the corporators, like directors, elect the management of the bank; and 2) that under G.L. c. 168, s.s.33,34,34A, B, C, D and E, corporators make fundamental decisions concerning the liquidation, dissolution or merger of the Bank. Furthermore, in the case of a conversion under s.34C, corporators would be treated as directors in the stock corporation. Therefore, if you agree to become a corporator, you may not participate as town treasurer/collector in any matters which will affect the financial interests of the Bank.

You should be aware, however, that a limited exemption from s.19 is available under certain circumstances. Section 19(b)(2) provides that it shall not be a violation, "if in the case of an elected municipal official making demand bank deposits of a municipal funds, said official first files, with the clerk of the city or town, a statement making full disclosure of such financial interest" This exemption is limited solely to demand deposits, such as checking accounts, which do not accrue interest See, 12 U.S.C. s.1828(g)(1) (1980). See also, Federal Deposit Insurance Corporation, 12 C.F.R. s.329.2(1987).


3. Section 23


In addition to the provisions of s.19, you would also be subject to substantial limitations in your dealings with the Bank under s.23. Section 23(b)(2) prohibits you from using your treasurer position to secure any unwarranted privileges or exemptions of substantial value for the Bank. For example, if you used your official position to promote the Bank or gave the impression that the Bank was endorsed by the town, you would violate this section.  You must therefore make clear when engaging in your corporator activities on behalf of the Bank that you are not acting as a town official, and that your activities do not constitute a town endorsement of the

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Bank. Further, you must avoid creating a reasonable impression that you will unduly favor the Bank in carrying out your treasurer duties. For example, decisions as to where to deposit town funds must be based on objective standards applicable to all eligible banks which are seeking the deposits. Moreover, prior to any official action affecting the Bank, you must publicly disclose your status as a Bank corporator.[3]

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[1] "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. (G.L. c. 268A, s.1(j)).

[2] "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. (G.L. c. 268A, s.1(k)).

[3] Since the corporator position is unpaid, we do not reach the issue as to whether the corporator position is inherently incompatible with the duties of a town treasurer under s.23(b)(1). 

End Of Decision