March 8, 1989

FACTS:


You are a newly elected member of the General Court. Prior to
January 1, 1989, you were the owner and president of ABC, a family
owned company. You purchased the business in 1983, and you and your
wife served as co-owners until 1989. Both of you worked in the
business, which operates out of an office located at your residence
which you and your wife jointly own. The business was incorporated
in 1987 with you serving as president and your wife as treasurer.

In 1988, you turned the business over to your wife for no
consideration and relinquished your corporate presidency. Since
January, 1989 you no longer receive compensation for any services
for ABC. You are frequently in the ABC office, however, and answer
questions from customers and your wife. You continue to assist your
wife in making business decisions relating to the operation of ABC.
Although you are not present the office during most working hours,
you participate in the management of the business, albeit not as
the company president.

You indicate that in March, 1989, you and your wife may jointly
purchase a building in which you would relocate the operation of
the ABC business. ABC provides pest control services to somel
state, county and municipal agencies.


QUESTIONS:


1. Do you have a financial interest in contracts made by ABC?

2. Assuming that you do, does G.L. c. 268A permit you to retain
your financial interest in contracts made by ABC with state, county
and municipal agencies?


ANSWERS:


1. Yes.

2. The propriety of your retaining your interest in these
contracts is subject to the discussion set forth below.


DISCUSSION:


1. Financial Interest


As a member of the General Court, you are a state employee for
the purposes of G.L. c. 268A. As a state employee, you are subject
to the restrictions of G.L.c. 268A s.7 which, with certain
exceptions, prohibits a state employee from having a financial
interest in a contract made by a state agency. Until 1989, you had
a financial interest in contracts made by ABC with state agencies
in light of your relationship with ABC as a co-owner and president
who received income for your services. Notwithstanding your recent
divestiure to your wife of your interest in ABC, we conclude that
you retain a financial interest in ABC and, therefore, in any
contracts made by ABC. In effect, the financial interest which your
wife may have in contracts made by ABC will continue to be
attributable to you.

In determining whether the financial interest of a non-state
employee spouse is attributable to the state employee spouse, the
Commission will examine the divesture and subsequent relationship
to ascertain whether the employee can fairly be said to still have
a financial interest in the spouse's contract. Buss, The
Massachusetts Conflict of Interest Law: An Analysis
, 45 B.U. Law
Review, 299, 375 (1965). Where, notwithstanding divestiture, a
state employee retains either a role in the management or control
of the spouse's company, or an unliquidated financial stake in the
company, the Commission will attribute the spouse's financial
interest to the state employee. On the other hand, where the
spouse's business is independently capitalized, and where the
spouse does not look to the state employee to share in the
management or control of the business, the Commission will not deem
attribution warrants See, EC-COI-83-111 (attribution found where
state employee transferred to his spouse for no consideration land
to be sold to employee's state agency); 83-37 (attribution found
where state employee transferred partnership interest to spouse for
no

Page 240

consideration and spouse had no prior experience in partnership
business); 83-125 (attribution found where state employee
capitalied spouse's company, operating out of their home, and where
employee regularly participates in company's financial decisions);
85-24 ( attribution found where employee shares in management and
control of spouse's business); 83-123 (no attribution found where
state employee transfer was based on an arm's length transaction
and asset liquidation to spouse who had independent experience in
business).

In light of these principles, we conclude that you retain a
financial interest in your spouse's company and that her
financial interest in contracts made by the state will be attributed to you
for the purposes of s.7. Our conclusion is based on the fact that

(a) no money passed hands in your transfer of the business to
your wife;

(b) your initial investment in the company was not liquidated;

(c) you continue to participate in the management and control
of the company; and

(d) you continue to own the property from which the business
operates, and would continue to do so under your proposed
relocation plans.

While a restructuring of your relationship with ABC might lead to
a reconsideration of this conclusion, EC-COI-84-13, any
restructuring would have to remove you from any continuing
financial or managerial relationship with ABC.


2. Application of G.L. c. 268A


In light of the foregoing, you have a financial interest in any
contract made by ABC. To the extent that ABC contracts with state
agencies such as a community college and a state correctional
facility, your financial interest in those contracts will violate
s.7. No exemption is available to you because the propriety
interest of you and your family in ABC exceeds 10%. G.L. c. 268A,
s.7(c). Under s.7(a), you will have thirty days from receipt of
this opinion to divest your financial interest in these contracts.



Nothing in G.L. c. 268A prohibits you from serving as a member
of the General Court and having a financial interest in a contract
made by a county or municipal agency such as a housing authority.
Should matters came before you in your legislative capacity
involving any of the county or municipal agencies with which ABC
contracts, you should observe the safeguards and limitations of
G.L. c. 268A, s.23. In particular, prior to your legislative
participation in such matters, you should publicly disclose the
relevant facts. G.L. c. 268A, s.23(b)(3). You may satisfy the
disclosure requirement with either a letter to the Commission or
a notice of the Clerk of the House of Representatives to be
inserted in the House Journal.[1]

---------------

[1] We understand that you also serve as a member of a municipal
agency. While G.L. c. 268A, s.20 would limit your having a
financial interest in a contract made by the municipal housing
authority, a municipal agency, your financial interest may be
eligible for an exemption under s.20(b). We suggest that you review
the enclosed s.20(b) exemption conditions, particularly the public
advertising or competitive bid requirements, and renew your request
with us regarding this contract once you have ascertained the
relevant facts.

End Of Decision