April 11, 1995


You are an elected member of the Housing Authority
("Authority") of the Town of Marblehead ("Town"). You are
currently serving a 10-year term as one of the approximately 80
corporators of the Marblehead Savings Bank ("Bank"). The Authority
keeps a significant portion of its monies in accounts at the Bank.

Savings Banks - Historical Context

Savings banks flourished in the mid-nineteenth century; they
are concentrated in the northeastern United States. The first
Massachusetts savings bank was organized in 1816 and the last in
1955. Until the early 1980's, all Massachusetts savings banks were
mutual, in that they were not-for-profit organizations, like most
hospitals and colleges, operated solely on behalf of their
depositors. Corporators of such traditional mutual savings banks
are intended to represent a cross-section of a bank's depositors.

In 1982, savings banks were permitted to convert to
stockholder owned institutions. St. 1982, c. 155, s.29, as
amended. Today, of the approximately 100 Massachusetts savings
banks, approximately two-thirds are traditional mutual banks,
rather than stockholder owned banks. The principal procedural,
organizational, governance and managerial functions and operations
of Savings Banks are set forth in G.L. c. 168 ("Savings Bank

Savings Bank Statute

A savings bank is required to have at least 25 corporators,
who serve for 10-year staggered terms and must be or become
depositors. At least 75% of the corporators must be citizens and
residents of the Commonwealth. The principal legal responsibility
of corporators is to attend annual meetings[2] to elect (i) their
bank's trustees (from among the corporators) and (ii) their bank's
president, vice president(s) and clerk.[3] G.L. c. 168, s.s.9, 9A,
10, 13, 14.

A savings bank's corporators are also authorized to amend
their bank's by-laws and are among those who are required to
approve certain major changes in their bank's corporate structure,
e.g., the merger and/ or consolidation of their bank with other
savings or cooperative banks, the conversion of their bank into a
stockholder owned form of corporation, the formation of a mutual
holding company and the dissolution of their bank. G.L. c. 167H
and c. 168, s.s.33, 34, 34A, 34C and 34E; 209 CMR 33.00.

A savings bank's board of trustees is specifically charged
with managing the business of the bank. There are required to be
at least 11 trustees who meet at least quarterly. The board of
trustees elects the bank's treasurer, vice treasurer and assistant
treasurer and such other officers as it deems necessary. It also
elects, from among the trustees, a board of investment having not
less than five members who meet at least monthly. Among other
responsibilities, the board of investment is specifically charged
with approving the following bank activities: (i) all loans and
changes in loan terms and security pledged therefor; (ii) the
purchase and sale of any securities; (iii) all foreclosures and
sales of foreclosed property; and (iv) interest rates for various
deposit accounts. G.L. c. 168, s.s.10, 11, 12, 14.

Bank's By-Laws and Practice

The Bank was created in 1871 by legislative act of the General
Court. St. 1871, c. 99. The Bank's by-laws ("By-Laws") are
consistent with provisions of the Savings Bank Statute. The By-
Laws specify that the Bank is required to have (i) from 25 to 85
corporators ("Corporators"); (ii) a 20-member board of trustees
("Trustees"); (iii) a president, four vice presidents and a clerk
(all elected by the Corporators); (iii) a Treasurer (elected by
the Trustees); and (iv) a board of investment ("Board of
Investment") consisting of the president and four trustees elected
by the Trustees. In addition, the By-Laws require that there be an

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auditing committee, distinct from the Board of Investment, composed
of at least three trustees and that salaried bank employees may not
be Corporators.

Practically speaking and, again consistent with the Savings
Bank Statute, the essential responsibility of the Bank's 80
Corporators is to attend the annual meeting to elect Corporators,
Trustees and certain of the officers to fill vacant and/or term-
expired positions. At such meetings, they also listen to report(s)
about the affairs of the Bank. Corporators are unpaid; virtually
all of the Corporators are either residents of or have businesses
in the Town or both. As such, individual Corporators may, but are
not required to, help the Bank to maintain an awareness of
community needs and problems with Bank products, services or
activities and promote the use of the Bank's products and services.

By contrast, the Trustees (who meet quarterly) are charged
with exercising "general supervision of the management of the
Bank," and the members of the Board of Investment (who meet weekly)
are charged with exercising "general supervision and control in all
matters pertaining to the interest of the Bank." The Trustees and
the members of the Board of Investment are paid for each meeting
they attend.

The Bank's president and vice presidents work part-time. They
receive no compensation for serving as such officers. The Bank's
treasurer (elected by the Board of Trustees) works full-time and
receives a salary; it is the treasurer who is the day-to-day "boss"
of the Bank.


Does G.L. c. 268A (the conflict of interest law) permit you to
serve as a member of the Authority and a Corporator of the Bank?


Yes, subject to the limitations discussed below.


As a member of the Authority, you are a special municipal
employee[4] for purposes of the conflict of interest law. G.L. c.
121B, s.7.

1. Applicability of Section 19

Section 19 of the conflict of interest law, in relevant part,
prohibits a municipal employee from participating in any particular
matter[5] in which (i) he, his immediate family or his partner,
(ii) a business organization in which he serves as an officer,
director, trustee, partner or employee or (iii) a person or
organization with whom he is negotiating or has an arrangement for
prospective employment has a financial interest.

The purpose of this section (and its county and state
counterparts) is to require the public employee to avoid situations
in which he or certain persons or entities with whom he has a close
family or business relationship have a "private stake." See Buss,
The Massachusetts Conflict of Interest Statute: An Analysis, 45 B.
U. Law Rev. 299, 353 (1965).

An employee may have a close cousin or grandparent (or
friend or enemy) and be influenced by his or her interest
in a particular matter; but the statute must draw a line
somewhere, and the interests of such persons, who are
less likely to have an identity of interest with the
employee, are not attributed to him.

Id. at 356.

A similar rationale applies to business relationships
addressed in this section. The statutory prohibition extends only
to the specified business relationships, not to all possible
business relationships. For example, the prohibition is not
triggered if a municipal employee's private business employee or
consultant were to have a financial interest in a particular matter
before such municipal employee.

The threshold question here is whether or not, as a
Corporator, you are a "director of a business organization" within
the meaning of s.19 of the conflict of interest law.[6] If you
are, then s.19 applies to you in these circumstances; if you are
not, then s.19 does not apply.

In light of the information provided by you and by others;[7]
our review of the Savings Bank Statute and certain associated
regulations, and the By-Laws and certain practices of the Bank; our
comparison of the roles and functions of Corporators and Trustees
with those of stockholders and directors of business and other
banking corporations; and our holdings in EC-COI-89-15 and 89-12,
all discussed below, we take this occasion to revisit our
determinations in EC-COI-87-10 and 83-40.[8] We conclude that, as
a Corporator, you serve neither by title nor in substance as a
director of the Bank. Accordingly, we further conclude that you
will not be required by s.19 to abstain from participating as an
Authority member in matters in which the Bank has a financial

The term "corporator" is not expressly included among those
relationships, titles or positions that

Page 617

automatically trigger s.19's abstention requirements. That,
however, is not dispositive. As we have indicated in previous
opinions, in determining whether s.19's abstention requirements
apply in a particular case, we will not necessarily be bound solely
by the formal name or title given to a position; rather, we will
examine the substance of the relationship or the "substance of the
position." See EC-COI-89-15 (state employee/member of private
institution's board of overseers not subject to s.6, state
counterpart to s.19); EC-COI-89-12 (state employee/member of
private hospital board of advisers not subject to s.6); 80-43
(partnership relationship imputed to a group of lawyers who create
a public image that they are partners).

Therefore, we will examine and compare the "substance of the
positions" of the Corporators and the Trustees in the operations
and management of the Bank. We will then compare those positions
to those of stockholders and directors in business corporations.

The Bank's Corporators are unpaid, have no ownership
interest[9] in the Bank and reflect various interests in the Town.
They attend annual meetings to elect their fellow-Corporators and
those of the Bank's Trustees and the Bank's president, vice
presidents and clerk who are up for election. The Corporators are
also authorized to amend the Bank's By-Laws and required to approve
major changes in the Bank's structure or existence, such as
mergers, conversions, consolidations and dissolutions.

By contrast, it is the Bank's 20 Trustees and, in particular,
the sub-group of Trustees and president constituting the Bank's
five-member Board of Investment who manage the business of the Bank
at quarterly and weekly meetings, respectively. The Trustees elect
the members of the Board of Investment and the Treasurer, who is
the Bank's day-to-day "boss". The Board of Investment reviews and
decides upon the ongoing business decisions of the Bank relating to
such matters as loan terms, interest rates, foreclosures and

Most current Massachusetts business corporations are governed
by the Business Corporation Law, G.L. c. 156B.

Stockholders of business corporations have ownership interests
in their corporations. They attend annual meetings or vote by
proxy to elect those of the directors, the treasurer and the clerk
who are up for election. They are also authorized to amend the
corporation's articles of organization and by-laws and required to
approve major changes in the corporation's structure or existence,
such as the disposition of all or substantially all of its
corporation's assets, mergers, consolidations and dissolutions.

By contrast, directors manage the business of the corporation.
Directors elect the president, and typically they elect officers
other than the treasurer and the clerk unless the by-laws provide
otherwise. Directors may delegate certain of their powers to an
executive committee elected by and composed of directors.

On the basis of the foregoing analysis and comparison, it
appears to us that the functions and responsibilities of the Bank's
Corporators are in all material respects analogous to those of
stockholders of a business corporation and, correspondingly, that
the functions and responsibilities of the Bank's Trustees are
analogous to those of the directors of a business corporation.[10]
The court's finding in Cosmopolitan Trust Co. v. Mitchell, 242
Mass. 95 (1922) that directors of a trust company, who manage it on
behalf of stockholders, are analogous to the trustees of a savings
bank, who are its managing officers, supports this conclusion.

The Corporators perform the same roles for the Bank as do
stockholders: both choose management, have authority to amend the
governing documents and are required to approve major changes in
the Bank's structure and existence.[11] By contrast, it is the
Bank's Trustees, Board of Investment and/or officers (not the
Corporators) who perform the functions of directors of a business
corporation, to wit, managing the business and affairs of the

In EC-COI-89-12, we wrote about a state employee who was also
a member of a private hospital's board of advisers:

[W]e conclude that your board of advisor responsibilities
are not comparable to those of a corporate officer or
director. This conclusion is based on the fact that
those corporate officer and director functions are
already performed by other individuals, and on the
Hospital's intent to establish the board of advisors as
a community-based sounding board, rather than as a
decision-making management board. Id.

We followed that opinion in EC-COI-89-15, involving a state
employee who was also a member of a board of overseers of a private
institution. We concluded that the board of overseers was
primarily a community-based sounding board and did not perform the
institution's "corporate officer and director functions." Id. at
250. The principles expressed in both opinions are equally
applicable here. The Bank's Corporators are not comparable to
corporate officers or directors, whose functions are already
performed by

Page 618

other individuals, namely, the Bank's Trustees, Board of Investment
and/or officers.

In sum, our conclusion is that the "substance of the position"
of Corporator is not that of a director.[13] Accordingly, s.19
does not apply to your situation. Compare EC-COI-87-5 (under s.6,
the state counterpart to s.19, a state employee who is also a bank
director may not participate in state matters in which the bank has
a financial interest).

2. Limitations on Your Activities

Section 17

Section 17 of the conflict of interest law, in relevant part,
prohibits a municipal employee from acting as agent for anyone
other than the municipality in connection with any particular
matter in which the same municipality is a party or has a direct
and substantial interest. The rationale behind this is that public
employees should be loyal to their public employers, and, where
their loyalty to such public employers conflicts with their loyalty
to a private party or employer, their public employers' interests
must win out. See EC-COI-82-176 (involving a state employee under
s.4, the state counterpart to s.17).

That prohibition applies less restrictively to special
municipal employees. A special municipal employee may not act as
agent in connection with a particular matter (i) in which he at any
time participated as a municipal employee, (ii) which is or has
been the subject of his official responsibility[14] within one year
or (iii) which is pending in the municipal agency in which he
serves. This last restriction applies only to special municipal
employees who serve on more than 60 days[15] during any 365-day

As applied to your circumstances, you should refrain from
representing the Bank's interests or acting on its behalf, formally
or informally, to or before the Authority. For example, during any
audit of the Authority's books, records and accounts, you should
not act as the Bank's representative. See EC-COI-87-5 (state
employee who is also a bank director).

Section 23

Section 23 of the conflict of interest law imposes standards
of conduct that are applicable to all public employees.

Section 23(b)(2) prohibits a public employee from using his
official position to secure for himself or others an unwarranted
privilege of substantial value[16] that is not properly available
to similarly situated individuals. Under the precepts of this
section, you may not, for example, use your Authority title or
position in a newspaper advertisement or a letter to promote the
Bank to Town residents. That would or could give the impression
that the Authority or the Town endorses the Bank.

Section 23(b)(3), the so-called "appearances" section, is most
pertinent to your situation. It prohibits a public employee from
engaging in conduct that gives a reasonable basis for the
impression that any person or entity can improperly influence him
or unduly enjoy his favor in the performance of his official
duties. The section requires the employee to dispel any such
"appearance of conflict" by making a written disclosure of the
relevant facts.

Thus, even though s.19 would not require you to abstain from
participating in the Authority's decisions regarding matters
involving or affecting the interests of the Bank or, for that
matter, the interests of the Bank's business competitors (e.g.,
where, in what amounts and in what types of accounts to deposit the
Authority's monies), before participating in any such matter, you
will be required to file a written disclosure of all relevant facts
with the Town Clerk, and we suggest that you also make a similar
oral public disclosure for inclusion in the minutes of the
Authority's meeting(s) at which such matters are reviewed,
discussed, considered or voted upon.

Furthermore, if you do participate in any such matters, then
under s.23(b)(2), you must take care to follow ordinary and
accepted procedures without deviation. In other words, if you feel
that you will be so biased in favor of the Bank that you will not
be able to act objectively, you should abstain from participating.


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

[1] Other provisions of the General Laws govern the banking
powers and functions of savings banks, cooperative banks, trust
companies and other banking institutions in the Commonwealth. G.L.
c. 167B through 167G.

[2] A quorum consists of the greater of 13 corporators or 25%
of the incorporators, but no more than 50 corporators are necessary
to constitute a quorum. A corporator may forfeit his membership by
failing to attend two consecutive annual meetings. G.L. c. 268,
s.s.9 and 9A.

[3] The president and at least one vice president must be
Page 619

[4] Certain provisions of the conflict of interest law apply
less restrictively to special municipal employees than to other
municipal employees.

[5] "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).

[6] Because you have no ownership interest in the Bank, you
have no personal financial interest within the meaning of s.19.
Furthermore, while we recognize that, as a Corporator, you are
eligible to be elected to serve as a Trustee and that it is
theoretically possible that you could be elected to serve as a Bank
officer (president, vice president, treasurer or clerk), you have
not been so elected and, thus, do not so serve.

[7] We were provided information by the General Counsel for
the Massachusetts Division of Banks, legal counsel for the Bank,
personnel from the Massachusetts Bankers Association and the
Executive Director of the Authority.

[8] In EC-COI-87-10, our conclusion that a particular savings
bank's corporators, in effect, performed the functions of directors
was based on our determination that corporators "elect the
management of the bank" and "make fundamental decisions concerning
the liquidation, dissolution or merger of the Bank." In fact,
in those two respects as well as others, corporators are more like
stockholders than directors. Stockholders, like corporators, elect
much of the management and are involved in approving liquidations,
dissolutions and mergers of their corporations. In our earlier
opinion, we also noted that, upon a conversion of a savings bank
into a stockholder owned corporation, the corporators "would be
treated as directors." In actuality, upon any such conversion, it
is generally the members of the then-existing board of trustees
who, pursuant to a plan of conversion approved by the Commissioner
of Banks and the Corporators, among others, become the initial
board of directors of the converted bank. See 209 CMR 33.00.
Thus, after having undertaken a closer examination and analysis of
the law and the facts, we here reach a different conclusion.

Our opinion in EC-COI-83-40 involved a state employee who was
responsible for depositing state patients' private funds into bank
accounts and who was also a corporator of a bank into which such
funds were deposited. In that case, we implicitly concluded that
nothing in the conflict of interest law "would prohibit outright"
the state employee's simultaneously serving in her state position
and as a bank corporator, but suggested that she nevertheless
engage in specifically prescribed disclosure procedures derived
from a "merger" of the disclosure procedures contained in the
predecessor of s.23(b)(3) (the so-called "appearance" of conflict
provision) and s.6 (state counterpart to s.19) to address the
concerns raised by her dual positions.

[9] In Jefferson v. Cox, 246 Mass. 495, 497 (1923), the court
wrote: "There are and can be no shares of stock in a Massachusetts
savings bank. Such a bank is a purely mutual institution without

[10] For further comparison, we note that co-operative banks
(governed by G.L. c. 170), credit unions (governed by G.L. c. 171)
and trust companies (governed by G.L. c. 172) have a comparable
division of responsibilities between their shareholders, members or
stockholders, as the case may be, on the one hand, and their
directors, on the other.

[11] Comparing the roles of corporators and those of
stockholders, we do not mean to conclude that the two positions are
substantively identical. Indeed, they are not, because, among
other reasons, corporators do not have an ownership interest in
their savings banks whereas stockholders have ownership interests
in their business corporations.

[12] If you were to be elected to serve as a Trustee or an
officer of the Bank, or if the Bank were to convert to a
stockholder owned savings bank and you were chosen or elected to
serve as a director, then, from and after any such event, you would
be subject to the abstention requirements of s.19.

[13] Several provisions of the Savings Bank Statute provide
further support for our conclusion. First, the term "officers" is
used in s.13 of the Savings Bank Statute to refer in the aggregate
to trustees, members of the board of investment, president, vice
presidents, treasurer and clerk of savings banks. It appears that
that designation is used to distinguish that group from the
"operating officers," who do not include the trustees. The fact
that corporators are not included in either group supports our

Second, s.22 of the Savings Bank Statute imposes penalties
(fines and/or imprisonment) on officers, directors, trustees and
employees for their knowing and willful misconduct. It does not
mention corporators. That omission evidences the minimal role that
the Legislature contemplated for corporators of savings banks.

[14] "Official responsibility," the direct administrative or
operating authority, whether intermediate or final, and either
exercisable alone or with others, and whether personal or through
subordinates, to approve, disapprove or otherwise direct agency
action. G.L. c. 268A, s.1(i).

We note that "[o]fficial responsibility turns on the authority
to act, and not on whether that authority is exercised." EC-COI-
Thus, by abstaining, a public employee will not remove a
particular matter from his official responsibility.

[15] For purposes of calculating the 60-day limit, (i) a day
is not counted unless the public employee serves his agency on such
day and (ii) any part of a day on which the public

Page 620

employee so serves will be counted as a whole day. See EC-COI-85-

[16] Anything valued having a value of $50 or more is "of
substantial value." EC-COI-93-14; Commonwealth v. Famigletti, 4
Mass. App. Ct. 584, 587 (1976); Commission Advisory No. 8 (Free

Page 621

End of Opinion