Decision  In the Matter of John P. O'Brien, Docket No. 371

Date:	09/06/1989
Organization:	State Ethics Commission
Docket Number:	371

Disposition Agreement

Introduction

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This Disposition Agreement (Agreement) is entered into between the State Ethics Commission (Commission) and John P. O'Brien (Mr. O'Brien) pursuant to Section 11 of the Commission's Enforcement Procedures. This Agreement constitutes a consented to final Commission order enforceable in the Superior Court pursuant to G. L. c. 268B, s. 4(j).

On January 11, 1989, the Commission initiated a preliminary inquiry into possible violations of the Financial Disclosure Law, G.L. c. 268B, by Mr. O'Brien.^[1] The Commission concluded its inquiry and, on June 19, 1989, found reasonable cause to believe that Mr. O'Brien violated G.L. c. 268B, s. 7 by falling to disclose certain real estate transactions and loans on his 1986 and 1987 Statements of Financial Interests (SFIs).

The parties now agree to the following findings of fact and conclusions of law:

Facts

1. Mr. O'Brien is the elected Hampden County Register of Probate. As such, he is a state employee as that term is defined in G.L. c. 268A, s. 1(q) and is required to file an annual Statement of Financial Interests (SFI) pursuant to G.L. c. 268B, s. 5.

2. Mr. O'Brien has conducted a real estate business under the name of O'Brien Real Estate for 28 years. Up until 1986, he was engaged through O'Brien Real Estate in the listing and selling of real estate.

In 1987 Mr. O'Brien joined with Audrey O'Connor in the business of O'Brien & O'Connor Real Estate, which conducted a real estate brokering business at 42 Harkness Street, East Longmeadow, Massachusetts. During the reporting period that followed, O'Brien Real Estate concentrated in renovating dilapidated homes.

3. On April 15, 1987, Mr. O'Brien timely filed his 1986 SFI.^[2]  He failed to identity the following transactions:

(A) his purchase (with James A. O'Connor) of 72 and 86 Lancaster Street in Springfield from Charlotte A. Carlson, Executrix of the Estate of Emma Carlson, and the assessed values by category of these properties. This information was reportable under section K.2 (Investment and Rental Properties) and section K.3 (Real Property Transfers);

(B) six loans with values ranging from $1,000 to $10,000.  Information pertaining to these loans was reportable under section L. (Other Creditor Information).

4. On March 15, 1988, Mr. O'Brien timely filed his 1987 SFI.  Mr. O'Brien failed to report:

(A) his ownership ad resale of 72 and 86 Lancaster Street;

(B) his son's purchase of 64 Carnavon Circle from Robert Bonetti, Executor of the Estate of Mary Bransfield.^[3]

(C) his son's purchase of 37 Pennsylvania Avenue from Benedict Nowakowski, Executor of the Estate of Jane Haggerty;

(D) his purchase of 160-162 Alden Street from David Burgess;

(E) two 90-day notes from the Chicopee Cooperative Bank, each valued in Category F, ($60,000 - $100,000). This information was reportable under section K.4 (Mortgage Loan Information) which requires identification of each mortgage loan, including second mortgage loans and home equity loans, greater than $1,000 outstanding on December 31, 1987 for which the filer or a family member was obligated.

(F) four loans secured by various life insurance policies, three with values in Category A ($1,001 - $5,000), and one valued in Category B ($5,001 - $10,000). This information was reportable under section L. (Other Creditor Information), which requires that filers report each debt, loan or other liability greater than $1,000 owed by the filer or a family member on December 31, 1987. The filer must report the original amount of the loan, the amount owed as of the end of the reporting year, the loan collateral, and terms of repayment.

5. Mr. O'Brien did not prepare his 1986 and 1987 SFIs personally, but delegated this task to his executive assistant.  Mr. O'Brien instructed the assistant to use the previous year's SFI in preparing

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the current SFI. Mr. O'Brien, however, did not provide the assistant with the documents or other information necessary to fully complete the 1986 and 1987 SFIs.

6. On December 29, 1988, Mr. O'Brien amended his 1986 SFI and reported his purchase of 72 ad 86 Lancaster Street from the Estate of Emma Carlson. He reported himself and James P. O'Connor as the Record Owner(s) of these properties and their respective assessed values by category.^[4] Under section L. (Other Creditor Information), Mr. O'Brien reported a 90-day loan from the Chicopee Cooperative Bank valued in Category A ($1,001 - $5,000). This loan was outstanding as of December 31, 1986 and was, therefore, reportable under section L. as a "debt, loan or other liability in excess of $1,000 owed by you or any FAMILY MEMBER" on December 31st of the reporting year.

7. Mr. O'Brien also amended his 1987 SFI on December 29, 1988.  He reported his purchase of 160-162 Alden Street from David Burgess. He also reported his son's purchases of 37 Pennsylvania Avenue and 64 Carnavon Circle and identified the Estate of Jane Haggerty and the Estate of Mary Bransfield as the sellers of these respective properties. He also reported two 90-day notes from the Chicopee Cooperative Bank with values in Category F ($60,001 - $100,000). These loans were used to finance John Peter's purchases of 37 Pennsylvania Avenue and 64 Carnavon Circle.

8. On May 9, 1989, Mr. O'Brien filed supplemental amendments to his 1986 and 1987 SFIs which disclosed certain loans with values in the smaller categories (i.e., Category A ($1,001 - $5,000) and Category B ($5,001 - $10,000), which were not identified by the prior amendments. By this amendment, Mr. O'Brien corrected each nondisclosure identified above.

Discussion

9. General Laws, chapter 268B, s.7 prohibits the filing of a false SFI. A false Filing need not be willful nor intentional to violate G.L. c. 268B, s.7. The statute requires commitment to a reasonable degree of care and diligence in filing SFIs. See In the Matter of Louis Logan, 1981 SEC 40, 49. The question of whether a filer has exercised a reasonable degree of care and diligence must be decided on the facts of each case.

10. In a private compliance letter issued to former Senator Martin Rellly by the Commission on or about July 20, 1987,^[5] the Commission stated its intent to impose public sanctions for negligent SF I filings.

A memorandum accompanied the 1987 SFI instructions which states,

"FILERS ARE RESPONSIBLE FOR EXERCISING CARE AND DILIGENCE TO ENSURE THAT THE INFORMATION PROVIDED IN THEIR SFIs IS COMPLETE AND ACCURATE. SIGNIFICANT OMISSIONS AND/OR INCORRECT INFORMATION CAN RESULT IN THE IMPOSITION OF BOTH CIVIL AND CRIMINAL PENALTIES."

This memorandum accompanies all SFI forms and instructions when the Commission mails them each year.

11. Certain omissions are minor and, as such, are best handled through the amendment process without any sanction. In effect, the public suffers little or no harm from the absence of this information on the form. Thus, for example, if a mortgage loan is identified, including the creditor, amount owed, and the terms of repayment, but the filer neglects to also indicate the original amount owed, that is a minor oversight which should be dealt with by an amendment. The Commission is satisfied to have these dealt with through the amendment process.^[6]

12. Omissions which will be deemed to reflect a lack of reasonable care and ordinary diligence, and thus, warrant a public sanction, are omissions which (1) involve a party or transaction over which the filer could exercise official responsibilities as a public employee; (2) are total omissions in that there is no way to identity the transaction from the information appearing on the SFI form; or (3) in number and amount, are material to the filer's overall real estate holdings. Reilly Compliance Letter, July 20, 1987.^[7]

13. The omissions of reportable information relating to Mr. O'Brien's purchases of 72 and 86 Lancaster Street and 160-162 Alden Street and his son's purchases of 37 Pennsylvania Avenue and 64 Carnavon Circle were material because (1) each involved a purchase from a probate estate pending in Hampden County, over which Mr. O'Brien was in a position to exercise official responsibilities,^[8]  (2) the omissions were total in that there was no way to identity these transactions from other information on the SFI forms, (3) the number and amount of these omissions are material to Mr. O'Brien's overall real estate holdings. Thus, the omissions establish negligence in the filing of Mr. O'Brien's 1986 and 1987^[9].

14. Mr. O'Brien's delegating the task of preparing his SFIs to an assistant, without giving that assistant the means to properly prepare them nor the full and complete information required to be reported on the

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SFIs, is further evidence of his failure to exercise a reasonable degree of care and diligence in filing his 1986 and 1987 SFIs.^[10]  Moreover, in reviewing and signing the SFIs, Mr. O'Brien failed to identify the omissions.

15. The Commission has found no evidence that Mr. O'Brien intentionally violated the Financial Disclosure Law. Mr. O'Brien cooperated fully with the Commission's preliminary inquiry.

Conclusion

Based upon the foregoing facts, the Commission has determined that the public interest would be served by the disposition of this matter without further enforcement proceedings on the basis of the following terms agreed to by Mr. O'Brien:

1. that he pay to the Commission the amount of five hundred dollars ($500.00) as a civil penalty for violating G.L c 268B s.7 by negligently filing his 1987 SFI,^[11] and

2. that he waive all rights to contest the findings of fact, conclusions of law, and terms and conditions proposed under this agreement in this or any related administrative or judicial civil proceeding in which the Commission is or may be a party.

DATE ISSUED:  September 6, 1989

^[1] The Commission did not initiate a preliminary inquiry into alleged violations of G.L. c. 268A, the Conflict of Interest Law, because insufficient facts were  reported in support of the allegations. Compare, In the Matter of Fred Langone, P.E.L. 84-1, 1985 SEC 187.

^[2] Elected officials must file their SFIs for the previous year by May 31st.

^[3] The SFI form and instructions require that filers report the investment and rental properties, and real property transfers of "family members," which include, among others, "dependent children" who reside in the filer's household and receive more than half of their support from the filer. Where Mr. O'Brien's son, John Peter, was identified as a dependent child on Mr. O'Brien's 1987 51,1, all real estate transfers and investments in John Peter's name were reportable. See footnote 10, infra.

^[4] The SFI form requires filers to report categories of value for their income and investments, and does not require specific dollar values to be identified. Thus, Mr. O'Brien reported the assessed value of 72 Lancaster Street as Category B ($5,001 - $10,000) and the assessed value of 86 Lancaster Street in Category E ($40,001 - $60,000).

^[5] While compliance letters are private resolutions, under the Commission's regulations, "should the subject make a public disclosure concerning the disposition of an inquiry or staff review by the Commission, the Commission, may confirm the existence of the inquiry or staff review and, in its discretion, make public any documents which were issued to the subject or which stated the resolution of the matter." 930 CMR 3.01(7). Numerous newspaper reports of the Commission's action in the Reilly case indicate that Mr. Reilly held a press conference publicizing the results of the Commission's  investigation on July 21, 1987. See Springfield Union News, July 22, 1987, August 6, 1987; Jewish Weekly News, July 30, 1987; Transcript Telegram, July 22, 1987. Accordingly, the Commission will treat the confidentiality accorded to the Reilly Compliance Letter as having been waived.

^[6] Thus, Mr. O'Brien had reported partially his purchases of 138,139 and 140 Marsden Street when he first filed his 1987 SFI, and was contacted by the Commission's Financial Control Analyst in July, 1988 and asked to amend the 1987 SFI to identify the name and address of the transferor of these properties. As the transaction was partially reported, the omission of the identity of the seller was minor, and remedied through the amendment process without sanction.

^[7] None of these factors standing alone is necessarily dispositive. The Commission considers the cumulative effect produced by the extent of each factor's applicability to a given situation, analyzing each factor in light of the purpose of the Financial Disclosure Law.

^[8] The Financial Disclosure Law complements the Conflict of Interest Law in that it is the purpose of the former to identity potential violations of the latter. In the Matter of John R, Buckley, 1982 SEC 2. Toward that end, an SFI omission may be deemed material if the information is potentially indicative of a c. 268A violation, even if the Conflict of Interest Law has not, in fact, been violated. Neither the original allegations, nor the evidence adduced during this inquiry, establish a violation of the Conflict Law.

^[9] The total omissions of smaller loans from section L. (Other Creditor Information) are further evidence of negligence.

^[10] During the course of this preliminary inquiry,

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Mr. O'Brien argued that his son's transactions were not reportable on his 1987 SFI because John Peter filed tax returns as a non-dependent for tax year 1987, and Mr. O'Brien did not claim a deduction for John Peter for that tax year.

This issue should have been raised before Mr. O'Brien filed his 1987 SFI. It is the filer's responsibility to ensure that the SFI is complete and accurate and to raise any questions concerning whether certain information is reportable before filing the SFI.  The Commission's Chief Financial Officer and the members of the Commission's Legal Division are available to advise filers on any questions they may have regarding their SFIs.

The evidence adduced during this inquiry indicated that John Peter resided with Mr. O'Brien and did not pay room or board during the relevant time period, and that Mr. O'Brien financed the real estate transactions John Peter engaged in. However, in 1987, John Peter was employed and filed tax returns as an independent. The Commission staff routinely advises filers that they need only report the transactions of family members who are claimed as dependents on the filer's tax returns. Where the evidence in this case raises a question as to whether that test is appropriate under all circumstances, the Commission will issue regulations or clarifying instructions addressing this question in the future.  Thus, the Commission declines to impose a sanction for Mr. O'Brien's failure to report John Peter's transactions. It is unnecessary to determine whether John Peter was a dependent.

^[11] Where Mr. O'Brien filed his 1986 SFI before the Commission issued the Reilly Compliance Letter, the Commission declines to impose a fine for the 1986 omissions.