September 11, 1991

FACTS:

Page 358

You are a member of the General Court. You plan to establish
a business known as the Company. The Company will conduct seminars
on government relations for small and medium sized businesses. The
seminars will, for a fee, teach business leaders how to participate
in and monitor public policy decision-making that affects them at
both the federal and state levels of government. The seminars will
focus on timely public policy issues which concern business
leaders.

You would serve as the principal in the Company, which will
be organized as a corporation. You would become the majority
stockholder. You anticipate that the Company will have four other
associates, each of whom will also own an equity interest in the
Company. Depending on the terms of the financing arrangements, you
anticipate that your equity interest in the Company would either
be 50%, if a bank loan is required, or 28%, if outside investors
are sought. Similarly, your four associates would each own either
12.5% or 7%, depending on the terms of the financing arrangements.
Your spouse and your current Administrative Assistant would be
among the four associates. You have informed us that you will not
permit your Administrative Assistant to work for the Company during
the business hours when he is otherwise working as a state
employee.

Most of the anticipated seminars and consulting activity will
relate to the federal government and issues of national policy or
international trade. Most federal government seminars will be held
in Washington, D.C. Some seminars will focus on government
decision-making at the state level. Of these, some state level
programs will focus on public policy issues in Massachusetts. In
such instances, you would not personally discuss specific
legislation which may be pending before the General Court, although
other seminar

Page 359

panelists may do so. Furthermore, if a client or seminar
participant were to request the Company's services on legislative
matters or matters pending before Massachusetts state agencies, the
Company would decline to represent that client. That client would
instead be referred to another appropriate source.

Seminar participants will receive a notebook containing
information on how to communicate with executive branch agencies,
the Congress, or the specified state legislature, how to track
legislation and regulatory action, how to plan a lobbying strategy,
and sources for further assistance on specific problems.
Participants will learn about professional lobbyists, in-house
government relations offices, and government relation efforts that
can be undertaken by corporate managers and employees.

The Company will also be available to assist clients on a
consulting basis in resolving specific issues faced by the client
in its government relations. Assistance in preparing a lobbying
strategy or in hiring a lobbyist or government affairs
representative are also possible activities. The Company could
serve as a consultant to government relations firms to refer
clients as appropriate when services are needed for specific
activities.

The Company does not expect to solicit contracts from any
state agency for seminars or any other services. It is possible,
however, that seminar participants may work for businesses which
have state contracts. The Company will pay seminar speakers travel
expenses and/or honoraria for their participation.

Seminar registrants are expected to be key business people.
While legislative agents registered at the federal or state levels
may be asked to serve as speakers or panelists at the seminars,
they are not generally expected to be among those who would
register as clients or seminar participants. However, the Company
intends to make a good faith effort through its registration
procedure to seek disclosure from all registrants if they have any
direct financial interest in specific issues being considered by
the Massachusetts legislature. Any such disclosures will be
retained for at least three years as part of the Company's
corporate records.

At no time will the Company use state facilities for its
seminars except as may be available for rental on a competitive
basis to all other businesses and organizations. For example, you
would consider renting the Great Hall for a State House reception
after usual business hours. You may also consider renting
conference facilities at public colleges or the state archives.

You have requested guidance as to how the Massachusetts
conflict of interest law, G.L. c. 268A, would affect your proposed
business. You have included a copy of your Company's Business
Profile for our review.
 


QUESTION:


May a member of the General Court own and operate the
seminar/consulting company described above within the confines of
the conflict of interest law?
 


ANSWER:


Yes, but only subject to certain conditions, the most
restrictive of which prohibits the Company from any activity
involving Massachusetts legislative matters.
 


DISCUSSION:


1. Jurisdiction


As a member of the General Court, you are a state employee
for purposes of the conflict of interest law, G.L. c. 268A. See,
e.g. EC-COI-89-35; 89-8
. Your administrative assistant would also
be a state employee. As such, several provisions of c. 268A would
apply to you, your administrative assistant, and, potentially, to
your proposed Company. You should also be aware that, because your
Company might have dealings with legislative agents,[1] you may
want to discuss your proposed business with the Office of the
Secretary of State, the state agency which regulates legislative
agents and lobbyists. Finally, to the extent that any issues might
arise under G.L. c. 55, the campaign finance law, you should also
seek advice from the Office of Campaign and Political Finance.


2. The Conflict of Interest Law Applicable to You


(a) Section 3


Section 3(b) of c. 268A prohibits a state employee from
directly or indirectly receiving anything of "substantial value"
($50 or more) from anyone for or because of any official act[2]
performed or to be performed by the state employee, unless
otherwise provided by law for the proper discharge of his official
duty. See, e.g. Free Passes Advisory No. 8; In the Matter of George
Michael
, 1981 SEC 59; In the Matter of Charles F. Flaherty, 1990
SEC 498. This section prohibits, among other things, gifts intended
to foster "good will" for future acts or gifts intended as a "thank
you" for acts which have already been performed. A reciprocal
provision prohibits a donor from giving anything of substantial
value. G.L. c. 268A, s.3(a).

While this section does not prohibit your proposed business
venture because your Company would be providing a service in
exchange for a fee, we can conceive of certain circumstances where
questions might arise. For example, seminar registrant or a
client has a direct interest in legislation pending before the

Page 360

General Court or one of your legislative Committees, and if the
payment of a fee by that registrant or client were for services not
actually contemplated or rendered (or for services rendered but
which were significantly disproportionate to the size of the fee)
an inference could arise that the fee was nothing more than an
effort to circumvent the restrictions of s.3. As Advisory No. 8
makes clear:

"[W]here there is no prior social or business relationship
between the giver and the recipient, and the recipient is a
public official who is in a position to use their authority
in a manner which could affect the giver, an inference can be
drawn that the giver was seeking the goodwill of the official
because of a perception by the giver that that public
official's influence could benefit the giver. [Citation
omitted]. In such a case, the gratuity is given for as yet
unidentified 'acts to be performed."'

We would point out that the registrant or client need not be
a legislative agent or lobbyist to create the issue of a gift.[3]
Anyone with an interest, or a foreseeable interest, in
Massachusetts legislation might create s.3 issues in the
circumstances described. You should bear in mind that this
inference could arise even where the client has purchased services
which involve issues or laws which are wholly unrelated to matters
before the Massachusetts legislature. ( See s.23(b)(1), below, for
a discussion on matters related to the Massachusetts legislature.)
The critical question under this section is whether the person you
are doing business with has, or foreseeably could have, an interest
in legislation at the time that the services are purchased from
your Company. If so, the inference of a gift could arise.[4] See
also s.23(b)(3), below.

We note that one of the steps that your Company will undertake
is a written disclosure by registrants concerning any interest
which they may have in pending legislation. That good faith inquiry
could help you to avoid questions arising under this section. Those
disclosures should, at a minimum, be made available for public
inspection during normal operating hours. Further, in order to
later avoid other issues arising under this section, we would urge
your Company to consider adopting a policy which would fully refund
all registration fees to any registrant who is unable to attend a
seminar for any reason if, to your knowledge, he or she has any
interest in pending legislation or in matters before your
legislative Committees. Of course, accurate and complete corporate
records are essential and would serve as your best protection.


(b) Section 4


Section 4 of c. 268A prohibits a state employee from acting
as an agent or attorney for, or receiving compensation[5] directly
or indirectly from, anyone other than the Commonwealth in
connection with any particular matter[6] in which the Commonwealth
is a party or in which it has a direct and substantial interest.

A member or the General Court is not subject to the above
restriction, except that no such member shall personally
appear for any compensation other than his legislative salary before any state
agency, unless:

(1) the particular matter before the state agency is
ministerial in nature;

(2) the appearance is before a court of the Commonwealth; or

(3) the appearance is in a quasijudicial proceeding.

For purposes of this section, ministerial functions include,
but are not limited to, the filing or amendment of: tax returns,
applications for permits or licenses, incorporation papers, or
other documents. Further, for the purposes of this section, a
proceeding shall be considered quasijudicial if:

(1) the action of the state agency is adjudicatory in nature;
and

(2) the action of the state agency is appealable to the
courts; and

(3) both sides are entitled to representation by counsel and
such counsel is neither the attorney general nor counsel for
the state agency conducting the proceeding. See, e.g.
EC-COI-89-31; 86-15; 85-82; 79-68.

The above legislator's exemption would appear to alleviate
most concerns for you as long as you do not personally appear[7]
before state agencies in connection with particular matters in
which the Commonwealth is a party or in which it has a direct and
substantial interest.

You should note, however, that the above exemption applies
only to legislators. Section 4 could still restrict certain
activities of your administrative assistant in his role as an
employee of the Company. For example, he could not receive income
or fees in connection with a seminar on how to lobby the
Massachusetts Department of Environmental Protection in a given
application or proceeding pending before that agency.


(c) Section 6


Section 6 of c. 268A prohibits a state employee from
participating[8] in a particular matter in which to his knowledge
he, his immediate family[9] or partner, a business organization in
which he is serving as officer, director, trustee, partner, or
employee, or any person with whom he is negotiating or has any
arrangement concerning prospective employment, has a direct or a
reasonably foreseeable financial interest. See, e.g. EC-COI-83-43;
86-15; 89-19; 90-17.

This section would prohibit you from acting as a legislator
on special legislation which could affect the Company or one of
your Company's clients. Note that

Page 361

the definition of "particular matter" specifically excludes the
enactment of general legislation. See EC-COI-89-8; 90-17. In
addition, s.6A requires that you make and file a full written
disclosure with this Commission if you are required to knowingly
take any action as a legislator which would substantially affect
your own financial interests, unless the effect is no greater than
the effect on the general public. See EC-COI-86-15; 83-43. This
disclosure is required regardless of whether the matter in question
is special or general legislation.


(d) Section 7


Section 7 of c. 268A prohibits a state employee from having
a direct or indirect financial interest in a contract made by a
state agency, unless an exemption applies. See, e.g. EC-COI-84-108;
85-3; 89-31; 90-17; see also Conley v. Ipswich
, 352 Mass. 201
(1967) (addressing s.20 - the reciprocal municipal section). This
section would prohibit you or your Company from, among other
things, contracting with any state agency to provide consulting or
other services, or to lease facilities, equipment, etc., in the
conduct of your business. For example, your proposed plan to lease
the Great Hall or other state facilities would be prohibited even
if the space is available to others under the same conditions or
circumstances. No exemption would appear to be available to you.
See, e.g. EC-COI-84-109; 91-2. Section 7(c) does permit certain
exemptions for members of the General Court who own less than 10%
of the stock of a corporation. In light of your proposed ownership
interest in the Company, however, you would not be eligible for
this de minimis exception. See EC-COI-90-17.

On the other hand, even though the Company may have clients
who are state vendors, you would not necessarily have a financial
interest in that contract. As long as your arrangement with the
client is independent of any contract the client has with a state
agency, you would not violate s.7. EC-COI-90-17.


(e) Section 23


There are four parts of s.23 which are pertinent to your
question.

First, s.23(b)(1) of c. 268A prohibits a state employee from
accepting employment involving compensation of substantial value
($50 or more), the responsibilities of which are inherently
incompatible with the responsibilities of his public office.
Whenever your company provides consulting or other services to a
paying client, you are engaged in employment within the meaning of
this section. See, e.g. EC-COI-84-93.

We find that this section will prohibit your Company from
conducting seminars or providing consulting services on any matters
which involve the Massachusetts legislature. It would be
inappropriate for you or your associates, for example, to advise
clients or seminar participants on how to receive some advantage
or favorable treatment before the legislature, or how to lobby
colleagues, while you continued to serve in that body. See, e.g.
In the Matter of Adam DiPasquale
, 1985 SEC 239 (the private
activity necessarily impaired the public employee's independence
of judgment in the performance of his official duties); see also
84-93 (attorney's consulting services necessarily impaired his
independence of judgment); 81-151 (in carrying out his official
state responsibilities, the state employee must be free to exercise
independent judgment and must maintain his loyalty solely to the
interests of the Commonwealth. By accepting employment from certain
private employers, a potential for the impairment of independence
of judgment can arise which can call into question the credibility
of the employee's state work); Cf. EC-COI-89-30 (services were not
inherently incompatible).

We find that a Massachusetts legislator cannot properly give
private advice to a paying client about Massachusetts legislative
matters without also impairing his independent legislative
judgment.[10] As a state legislator, your private business
activities would be inherently incompatible with your public duties
whenever those activities involve Massachusetts legislative
matters.[11] Consequently, in order to avoid the potential for
divided loyalty, your Company must refrain from involvement with
all Massachusetts legislative matters. We also find that this
section would prohibit your Company from referring such matters to
other appropriate sources for the same reasons.

While s.23(b)(1) will not prohibit you from providing services
on matters which are not connected to the Massachusetts legislature
(for example - seminars on federal agencies or legislation, or
seminars involving states other than Massachusetts), if a
particular client has an interest in Massachusetts legislation,
issues under s.23(b)(3) can still arise. See below.

Second, s.23(b)(2) of c. 268A prohibits a state employee from
using or attempting to use his official position to secure for
himself or others unwarranted privileges of substantial value ($50
or more) and which are not properly available to similarly situated
individuals. This section would prohibit the use of state time,
facilities, personnel, or equipment in the conduct of your
business. EC-COI-83-43; 91-6; 91-7. To comply with s.23(b)(2), you
must conduct your Company's business entirely outside of state time
and without the use of state resources. You must also refrain from
using your state title or office in any way in an effort to solicit
business for the Company. See EC-COI-84-127; 89-30; 89-31. This
section would, of course, also apply to your administrative
assistant and anyone else working for the Company who is also a
public employee.

Third, s.23(b)(3) prohibits a state employee from acting
ina 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

Page 362

of kinship, rank, position or undue influence of any party or
person. It shall be unreasonable to so conclude if such officer or
employee has disclosed in writing to his appointing authority or,
if no appointing authority exists, discloses in a manner which is
public, the facts which would otherwise lead to such a conclusion.
In effect, this section prohibits the creation of even an
"appearance" of a conflict of interest. See EC-COI-91-2.

Given your role as a state legislator, and given your proposed
business venture concerning the rendering of advice on how to
conduct business with the government, questions under this section
might arise for you. Accordingly, it would be appropriate for you
to make a full public disclosure to this Commission and/or the
House Clerk concerning your proposed business venture prior to
beginning operation. That disclosure will dispel any appearance of
a conflict arising under s.23(b)(3). See, e.g. EC-COI-90-17.

In addition, issues under this section can arise in specific
situations. For example, if your Company is providing consulting
services to a person who also happens to have an interest in a
matter pending before the Massachusetts legislature, an appearance
of a conflict will arise because of the dual public/private
relationship. A full public disclosure would be warranted under
the circumstances to dispel any appearance of a conflict of
interest.[12] Alternatively, you could abstain as a legislator on
those matters which are pending.

Further, this Commission recently held that a legislator who
has private business dealings with someone over whom he also
exercises authority as a state employee, violates this section
unless he has first made a full public disclosure of the dual
relationship. In the Matter of George Keverian, 1990 SEC 460. In
the present case, because your administrative assistant will also
have private financial dealings with you through the Company, it
is advisable for you to make an additional public disclosure to
this Commission and/or the House Clerk.

Fourth, s.23(c) of c. 268A prohibits a state employee from
disclosing confidential information which he has acquired through
his public position. Confidential information is any information
which cannot be obtained through a public records request pursuant
to G.L. c. 4 and c. 66. See, e.g. EC-COI-89-30; 90-6.

Finally, you should also be aware that another section of c.
268A might also apply to the conduct of a private business where
former state employees are involved (s.5). Although nothing in your
opinion request raises an issue under that section at this time,
you should be aware that s.5(e) will restrict any lobbying
activities before the legislature which might later be conducted
by you for a period of one-year from the time that you leave state
service.


3. Conclusion


In summary, although nothing in the conflict of interest law
will prohibit you from conducting the proposed business for matters
other than those involving the Massachusetts legislature, certain
strict guidelines must be kept in mind. The Commission does not,
however, express any opinion as to the wisdom of your proposed
course of conduct, or as to your Company's ability to maintain
compliance with each of the provisions of c. 268A. Cf. EC-COI-91-1
(footnote 5).

These guidelines are intended solely as a broad outline of the
types of issues which may arise under c. 268A from time to time.
You should renew your opinion request whenever a specific fact
situation arises which is not adequately addressed by the
guidelines set forth herein. You should also renew your opinion
request whenever you anticipate that a material change will affect
the structure or mission of your proposed consulting business.

---------------
 

[1] "Legislative agent" means any person who for compensation
or reward does any act to promote, oppose or influence legislation,
or to promote, oppose or influence the governor's approval or veto
thereof or to influence the decision of any member of the executive
branch where such decision concerns legislation or the adoption,
defeat, or postponement of a standard, rate, rule of regulation
pursuant thereto. The term shall include persons who, as any part
of their regular and usual employment and not simply incidental
thereof, attempt to promote, oppose or influence legislation or the
governor's approval or veto thereof, whether or not any
compensation in addition to the salary for such employment is
received for such services. G.L. c. 268B, s. 1(k).

[2] "Official act," any decision or action in a particular
matter or in the enactment of legislation. G.L. c. 268A S.1(h).

[3] Where a legislative agent is involved, issues might also
arise under G.L. c. 268B, s.6. That section prohibits gifts of $100
or more per calendar year made by legislative agency and which are
given to a public employee. Note also that c. 268B has certain
reporting requirements. G.L. c. 268B, s.5.

[4] Cf. {Commission Advisory No. 2} (Guidelines for
Legislators Accepting Expenses and Fees for Speaking Engagements) ("[t]he
critical question when a legislator receives expenses or fees is
whether these items were either for, or made necessary by, the
speaking engagement, or whether the speaking engagement was merely
a pretext for an improper benefit or gratuity."

Page 363

(Emphasis added). Advisory No. 2 lists several criteria for
determining when an honorarium will be considered "legitimate" as
opposed to a pretext to circumvent s.3. In order to be considered
legitimate, the speaking engagement must be: (i) a formally
scheduled event, (ii) scheduled in advance of the legislator's
arrival, (iii) before an organization which would normally have
outside speakers, and (iv) significant to the event (that is, not
perfunctory).

While none of these criteria are directly relevant to your
particular business, they should provide you with an insight into
when an inference of wrongdoing could arise under s.3. If you are
uncertain about any aspect of how s.3 applies to a specific fact
situation, you should renew your opinion request to this
Commission.

[5] "Compensation," any money, thing of value or economic
benefit conferred on or received by any person in return for
services rendered or to be rendered by himself or another. G.L. c.
268A, s. 1(a).

[6] "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).

[7] See EC-COI-87-27 (personally appearing includes any
contract with any agency, whether written or oral, with the intent
to influence).

[8] "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).

[9] "Immediate family," the employee and his spouse, and their
parents, children, brothers and sisters. G.L. c. 268A, s.1(e).

[10] Although matters which are pending before Massachusetts
executive branch agencies would not be inherently incompatible with
your responsibilities as a state legislator, your Company must
exercise caution whenever such matters are discussed. Executive
branch matters may, at times, foreseeably implicate your
legislative duties.

[11] We recognize that legislators may, in exchange for an
honorarium, address private parties about pending legislation. See
{Commission Advisory No. 2}. Speaking engagements are an inherent
part of a legislator's official duties. We must, however,
distinguish such engagements from services which, for a fee, are
being offered privately by a someone who is also a member of the
general court. Your private business cannot be considered a part
of your official duties as a legislator.

[12] To be explicit, we would find that the appearance issue
arises whenever your Company provides any type of service to
someone who also happens to have an interest in a matter pending
before the legislature, even though the services which your Company
would be providing are wholly unrelated to that pending matter. The
appearance arises as a result of the dual, albeit permissible,
public/private relationship. On the other hand, s.23(b)(1) would
outright prohibit your Company from providing services to anyone
if those services involve Massachusetts legislative matters. See
supra.

 

End Of Decision