December 12, 1990

FACTS:

Page 322

You are the legal counsel to a Regional Vocational Technical
High School District (District). The District is managed by a
District School Committee whose members are elected from certain
municipalities, and which serves as the appointing official for
superintendent ABC. You seek this opinion on behalf of both the
District and ABC.

Outside of his superintendent responsibilities, ABC is a 26%
equity owner of XYZ (XYZ) which has entered into a distribution
agreement with a manufacturer STU to distribute a software package
which is manufactured by STU. The software has educational
applications in the areas of finance, scheduling and general
education and administration and is considered a major upgrade of
the District's present software. The software package has an
approximate retail value of $20,000. ABC has purchased for himself
a copy of this software at a wholesale price and has donated it to
the District at no cost to the District. This software has been
installed in the District's computer system and is ready to be
used, although it has not been used to date.

Page 323

XYZ plans to incorporate the software into the financial
management and student administration systems of the District, to
help the District maintain the system, and to make any necessary
modifications to the system, all at no cost to the District. The
system will be examined, investigated and evaluated for a period
of one year. If proved useful the software will be adopted by the
District at no cost. If the system has no benefit to the District,
the software will be returned to ABC. In no event will the District
be paying either ABC or XYZ for the software or its maintenance.

Other than the long-term benefits that may accrue to ABC as
a stockholder of XYZ should the District utilize the system, ABC
is not receiving any compensation of any kind from either XYZ or
the manufacturer with regard to the installation or utilization of
the software.

If the software is used, both the manufacturer and XYZ will
consider the District as a test site. Utilization of the software
on a day-to-day basis by the District will allow the manufacturer
and the distributor the opportunity to observe the software package
under actual working conditions. As a result of its use by the
District, corrections and modifications will be made to the package
which will ostensibly serve as an enhancement to it. XYZ draws its
primary benefits from this arrangement by receiving an opportunity
to have the program used under actual conditions.

You state that this would not be the first occasion in which
a software company has donated a package to the District.
Approximately two years ago, the District accepted and implemented
an offer of software from an out-of-state company, at no cost to
the District. Pending before the District School Committee is the
decision as to whether to accept and implement the software donated
by ABC.


QUESTION:


Does G.L. c. 268A permit the District to accept ABC's
software
gift under the arrangement described above?


ANSWER:


Yes, subject to certain conditions.


DISCUSSION:

1. Application of G.L. c. 268A to ABC


The District is considered a regional municipal agency for the
purposes of G.L. c. 268A. See EC-COI-82-25; In the Matter of Norman
McMann
, 1988 SEC 379. As an employee of the District, ABC is
therefore a "municipal employee" for the purposes of G.L. c. 268A.


Section 19


This section places restrictions on ABC's official activities
as superintendent. Specifically, G.L. c. 263A s.19 prohibits ABC
from participating[2] officially as superintendent in any decision
or other particular matter[3] in which either he or XYZ has a
financial interest. In construing s.19, the Commission applies a
reasonable foreseeability test to financial interests.
EC-COI-84-96. Thus, if either ABC or XYZ has a reasonably
foreseeable financial interest ia decisions regarding the
implementation of the software, ABC must abstain from official
participation in those decisions. The abstention requirement
applies to discussion as well as recommendations.

Based on the information you have provided, we conclude that
both XYZ and ABC have a reasonably foreseeable financial interest
in the District's acceptance of the software package. If the
package proves successful, XYZ will be able to market the product
to other school systems as software which has successfully been
test-marketed in a school system. It is reasonably foreseeable,
therefore, that the District's decision to accept the software will
affect XYZ's marketing prospects for the software, and thus, the
financial interest of XYZ. As a 26% equity owner of XYZ, ABC shares
the financial interest of XYZ in the test-marketing decision. It
is well established that a public employee who owns stock or an
equity interest in a company which wishes to test-market a product
is prohibited from participating officially in any decisions
relating to the testing or implementation of the same product. See,
In the Matter of John Hanlon, Raymond Sestini and Louis Sakin, 1986
SEC 253-259.

Notwithstanding the prohibition of s.19, ABC may participate
in matters in which either he or XYZ has a financial interest if
he discloses to the District School Committee the relevant facts
surrounding the financial interest and he receives a written
determination by the School Committee 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 him. G.L. c. 268A,
s.19(b)(1). Unless and until such determination is made, however,
ABC must continue to abstain from any official participation as
superintendent in the decision to accept or implement the software.

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Section 17(c)


This section places limitations on the private activities of
ABC. Under G.L. c. 268A s.17(c), a District employee may not
represent or otherwise act as agent for anyone other than his
District in connection with any particular matter in which the
District is either a party or has a direct and substantial
interest. Thus, ABC may not represent XYZ or act as XYZ's agent in
connection with the District decision to accept or implement the
software. To avoid any potential problems under s.17, XYZ should
designate an indual other than ABC to represent its interest22 the
particular matter before the School Committee.


Section 23(b)(2)


This section prohibits a District employee from using his
official position to secure an unwarranted privilege or exemption
of substantial value not properly available to similarly situated
individuals. As applied to ABC, he must conduct his work for XYZ
entirely outside of his District work schedule and refrain from
using District resources such as telephones and computer equipment
for his XYZ activities. He must also refrain from granting any
unwarranted official endorsement to XYZ. See, In the Matter of
Byron Battle
, 1988 SEC 369.


2. Application of G.L. c. 268A to District School Committee
Members


District School Committee members are also subject to the
limitations of s.23(b)(2) and must therefore avoid granting any
unwarranted privileges or exemptions of substantial value to either
ABC or XYZ. Based on the information you have provided, District
rrers would not violate s.23(b)(2) by acceptinthe DMZ Commissioner
on policy, program development and priorities for mental health programs;
and (3) participating with DMZ in conducting public hearings to obtain DMZ
area board and citizen input into DMZ programs and services, you
participate as a Council member in activities of DMZ. See, EC-COI-
86-7; 85-80.
Accordingly, you do not qualify for an exemption under
s.7(d) with respect to your financial interest in a DMZ contract.
Your financial interest would be permissible, however if you
received a gubernatorial exemption under s.7(e)[6] or if your
services for DMZ qualified under an exemption designed for services
to mental health institutions or clients.[7]

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

[*] Pursuant to G.L. c. 268B, s.3(g), the requesting person
has consented to the publication of this opinion with identifying
information.

[1] "State Agency", any department of state government
including the executive, legislative or judicial, and all councils
thereof and thereunder, and

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any division, board, bureau, commission, institution, tribunal or
other instrumentality within such department, and any independent
state authority, district, commission, instrumentality or agency,
but not an agency of a county, city or town. G.L. c. 268A, s.1(p)

[2] The fact that the Council may have had its origin in a
federal statute does not detract from the Council's status as a
state agency. See, EC-COI-83-30; EC-COI-84-55.

[3] Jurisdiction has consistently been based on the
destination of the services which a state employee provides rather
than on the identity of the appointing official of the employee.
Otherwise, jurisdiction under G.L. c. 268A would result in
anomalies such as judges being considered employees of the governor
and executive branch.

[4] Even if, for the sake of argument, we were to conclude
that the Council is a separate state agency, independent of DMZ,
the conclusion which we reach in applying G.L. c. 268A, s.7 would
be unchanged. For the purposes of s.7(d), the key issue is not the
identity of the agency with which a special state employee is
associated, but rather whether the special state employee
participates in or has official responsibility for any activity of
the contracting agency. It follows that if DMZ is the contracting
agency, a special state employee does not qualify for a s.7(d)
exemption if the employee participates in or has official
responsibility for any activity of DMZ while serving as a special
state employee.

[5] Section 7(d) states that the prohibition of s.7 does not
apply

to a special state employee who does not participate in or
have official responsibility for any of the activities of the
contracting agency and who files with the state ethics
commission a statement making full disclosure of his interest
and the interest of his immediate family in the contract ...

[6] Section 7(e) exempts from s.7:

... a special state employee who files with the state ethics
commission a statement making full disclosure of his interest
and the interests of his immediate family in the contract, if
the governor with the advice and consent of the executive
council exempts him.

[7] The final paragraph of s.7 provides as follows:


This section shall not prohibit a e employee from
being employed on a parttime basis by a facility operated or
designed for mental health care, public health, correctional
facility or any other facility principally funded by the state
which provides similar services and which operates on an
uninterrupted and continuous basis; provided that such employee
does not participate in, or have official responsibility for, the
financial management of such facility, that he is compensated for
such part-time employment for not more than four hours in any day
in which he is otherwise compensated by the commonwealth, and at
a rate which does not exceed that of a state employee classified
in step one of job group XX of the general salary schedule
contained in section forty-six of chapter thirty, and that the head
of the facility makes and files with the state ethics commission
a written certification that there is a critical need for the
services of the employee. Such employee may be compensated for such
services, notwithstanding the provisions of section twenty-one of
chapter thirty.

End Of Decision