June 19, 1989

FACTS:


You are an elected municipal council (Council) member. Your
spouse is employed by a corporation (Corporation) in your community
as a middle-management, non-executive position, receives a regular
salary and participates in an employee stock ownership program.

To date, several hundred shares of common stock have been
allocated to your spouse's aceount under the Corporation's Plan
(Plan). These shares of common stock are held by a trustee and are
not readily available to your spouse for sale until he/she retires
or leaves the employ of the Corporation. He/she does not receive
dividends on these shares. In addition to the employee stock
program, your spouse owns other shares of common stock outright.
The combined total number of shares of stock held by your spouse
equals less than 1% of the total outstanding stock of the
Corporation.

The planning board (Board) in your municipality has proposed
temporary zoning changes and intends to propose to your Council a
permanent zoning ordinance for this area.

The proposed zoning ordinance will restrict future development
and land use in the area. At present, the land may be used for
business, office, educational, research and development and heavy
industrial uses. The new business uses would include business,
office, educational, retail, research and development, but not
heavy industrial use. Parking capacity will be restricted by two-
thirds. Currently, the building height is not restricted. Under
the proposed ordinance, building height will be restricted to a
range of 40 to 120 feet, depending on the relationship of the
building to nearby residential areas. Size of the floor area will
also be decreased. Neither you nor your spouse owns any property
in this area or any property abutting this area.

The Corporation is one of approximately five major landowners
in this district and operates a portion of its business in this
district. The Corporation's use is consistent with the proposed
land uses in the new ordinance. The Corporation has not indicated
any future development plans in this district or when any plans
may be implemented.


QUESTION:



Does G.L. c. 268A permit you to participate as a member of the
Council in the decision on the proposed zoning ordinance where your
spouse holds common stock in the Corporation which could be
affected by the proposed ordinance?


ANSWER:


Yes, subject to the limitations discussed below.

DISCUSSION:


As an elected member of the Council, you are a municipal
employee for the purposes of G.L. c. 268A. Two sections of G.L. c.
268A are relevant to your question.


1. Section 19


Section 19(a) provides in pertinent part that no municipal
employee may participate as such an employee in any particular
matter[1] in which she or a member of her immediate family[2] has
a financial interest. Proposed zoning amendments are considered to
be particular matters for purposes of G.L. c. 268A. See, EC-COI-
84-76
(zoning matters before a city council); 85-22 (zoning
amendments to town's protective zoning by-law). The definItion of
participation includes participating in the formulation of a matter
for a vote, as well as voting on the particular matter. See, Graham
v. McGrail
, 370 Mass. 133, 138 (1976).

Therefore, you must abstain from official participation in the
proposed zoning decision if your spouse has a direct or reasonably
foreseeable financial interest in the enactment of the ordinance.
EC-COI-

Page 256

84-96; 84-98. Section 19 encompasses any financial interest
without regard to the size of said interest. However, the financial
interest must be direct and immediate or reasonably foreseeable.
See, EC-COI-86-25 (city councillor required to abstain from
participating in school committee appointment as school committee
reviewing specific provisions that may affect councillor's
employer); 82-34 (financial interest in pending lawsuit that may
include money damages); 84-96 (financial interest where municipal
employee's land abuts and opposite to land to be developed).
Financial interests which are remote, speculative, or not
sufficiently identifiable do not require disqualification under G.L
c. 268A. EC-COI-84-98; 87-16.

Since neither his/her position or salary would be affected by
the zoning ordinance, a determination of the foreseeability of your
spouse's financial interest involves his/her status as an investor
and thus hinges upon the effect of the ordinance on the
Corporation. Your spouse would have a foreseeable and sufficiently
identifiable financial interest if the potential impact of the
ordinance on the Corporation's business would be such that a
reasonable investor would consider it material in determining
whether to buy, sell or hold stock. See, Basic Inc. v. Levinson,
108 978,983 (1988); TSC Industries, Inc. v. Northway, Inc. 426 U.S.
438,449(1976); Securities and Exchange Commission v. Texas Gulf
Sulphur
, 401 F. 2d 833, 849 (2d Ct. 1968) (material investor
information includes facts affecting the probable future of the
company). The Commission's standard of materiality regarding
securities investments is consistent with that enunciated by the
Unlted States Supreme Court, in the context of withheld information
under the securities laws. The Supreme Court recently stated that,
"an omitted fact is material if there is a substantial likelihood
that a reasonable shareholder would consider it important in
deciding how to vote." Basic Inc. v. Levinson, supra (citing TSC
Industries, Inc. v. Northway, supra
).

For example, the zoning ordinance would probably affect the
future of the Corporation's business if the real estate involved
was their only business location or if the Corporation announced
intentions to build a significant new facility in the area.
Similarly, an investor's financial interest would be implicated if
the Corporation expressed plans for a new use or new technology
and the ordinance restricted said use.9 In EC-COI-89-8, the
Commission considered the financial impact of legislation on a
family member's business. Abstention was warranted where the family
member's decision to open his business depended on the enactment
of the legislation. The potential effect of the legislation was
to increase the number of people (i.e., customers) in the area of
the business and to enhance the viability of the business.

The Commission concludes that your spouse's financial interest
is not reasonably foreseeable because the effect of the proposed
zoning changes on the Corporation's financial interest is not
sufficiently identifiable. The proposed ordinance is not directed
solely at the Corporation nor does it restrict any of the
Corporations present business uses. Further, the proposed
ordinance restricts but does not prohibit development. The
Corporation has not stated its future development plans or its
ideas for the area, so any impact on future business is unknown,
nor has it expressed any plans to sell its property in the area.


2. Section 23


Section 23 contains general standards of conduct which are
applicable to all public employees. It prohibits a public employee
from

(2) use or attempt to use his official position to secure for
himself or others unwarranted privileges or exemptions which are
of substantial value and which are not properly available to
similarly situated individuals;

(3) act in a manner which would cause a reasonable person,
having knowledge of the relevant circumstances, to conclude that
any person can improperly influence or unduly enjoy his favor
in the performance of his official duties, or that he is likely
to act or fail to act as a result of kinship, rank, position or
undue influence of any party or person.

Section 23 focuses not only on actual conflict of interest but also
on appearances of conflicts. Therefore, you may not use your
official position to secure an unwarranted privilege of substantial
value for yourself, your spouse, or the Corporation, or to act in
a manner which would create a reasonable conclusion that you are
likely to act as a result of your relationship with your spouse or
the Corporation which employs your spouse. To avoid violating
these restrictions, you must[4]

(a) publically disclose, prior to your participation in the
zoning ordinance, your spouse's stock ownership and employment with
the Corporation, and

(b) base your evaluation and vote on the merits of the
ordinance, using the same objective standards which the Council
applies to other ordinances.

Page 257

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[1] "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.

[2] "Immediate family," the employee and his spouse, and their
parents, children, brothers and sisters. Your spouse is an
immediate family member.

[3] The Commission does not suggest that these examples are the
only instances where investor's financial interest would be
sufficiently identifiable.

[4] The Commission advises that public disclosure of your spouse's
employment and stock interest is mandatory under these
circumstances as the Corporation is one of a small number of
landowners affected by the proposed ordinance. You should be
careful that any action you take is impartial and that there is no
basis for any perception that it is not. The proper procedure is
to disclose in writing all of the relevant facts and to file the
disclosure with the municipal clerk. Further, you should make a
verbal public disclosure for inclusion in the meeting minutes prior
to any official participation or action.

End Of Decision