Opinion  EC-COI-83-129

Date:	09/13/1983
Organization:	State Ethics Commission

Facts

You are an employee of ABC, Inc. (ABC) and you own more than 1% of that company's stock. You are performing services full-time for state agency DEF pursuant to a contract between ABC and DEF concerned with certain data for state agency GHI. At the time this contract was awarded, this particular work was handled by DEF, rather than within the GHI. You are the "Project Leader" on this contract, and its terms require that DEF grant prior written consent to any replacement of you as Project Leader. DEF may cancel the contract if ABC does not seek and receive this consent. Following a response to a Request for Proposals (RFP), ABC has been awarded a contract with the GHI.

Question

1. Are you a "state employee" for purposes of the state conflict of interest law, G.L. c. 268A?
2. If so, may you own stock in ABC while it has a contract with the GHI?

Answer

1. Yes.
2. No.

Discussion

1. Status as a State Employee

The conflict of interest law defines "state employee," in relevant part, as "a person performing services for or holding an office, position, employment or membership in a state agency, whether by election, appointment, contract of hire or engagement, whether serving with or without compensation, on a full, regular, part-time, intermittent or consultant basis." G.L c. 268A, § 1(q). This definition is generally not interpreted to include an employee of a corporation or vendor which contracts with the state.  See, e.g., EC-COI-83-94. However, both the Commission and the Attorney General have held that such an employee is covered by the definition if the terms of the contract indicate that a specific individual's services are being contracted for. In Attorney General Conflict Opinion No. 854, a 50% stockholder in a corporation was specifically named in a contract between that corporation and a state agency. The state agency could cancel the contract if he failed to perform the duties designated. The Attorney General concluded that under these circumstances the individual was a state employee for the purposes of G.L. c. 268A. In Commission advisory opinion EC-COI-80-84, the Commission concluded that the partners in a law firm were "state employees" because the contracting state agency specifically contemplated that each of the firm's partners would work on the project for the state.

In your case, DEF specifically contemplates that you will be Project Leader for this contract. The terms of the contract require that ABC obtain written approval from DEF before replacing you. In fact, before accepting you as Project Leader, DEF required that you come in and demonstrate your abilities. All factors considered, you must be considered a "state employee" for the purposes of the conflict law.

2. Stock Interest in ABC

Section 7 of G.L. c. 268A prohibits a full-time state employee from having a financial interest in any contract made by a state agency. Your stock ownership in ABC creates a financial interest for you in the firm's contact with the GHI. Unless you qualify for one of the exemptions in § 7, this financial interest is prohibited. A recent amendment to the conflict law states that § 7 will not apply: to a state employee other than a member of the general court who is not employed by the contracting agency or an agency which regulates the activities of the contracting agency and who does not participate in or have official responsibility for any of the activities of the contracting agency, if the contract is made after public notice or where applicable, through competitive bidding, and if the state employee files with the state ethics commission a statement mailing full disclosure of his interest and the interests of his immediate family in the contract, and if in the case of a contract for personal services;

1. the services will be provided outside the normal working hours of the state employee,
2. the services are not required as part of the state employee's regular duties, the employee is compensated for not more than five hundred hours during a calendar year, and
3. the head of the contracting agency makes and files with the state ethics commission a written certification that no employee of that agency is available to perform those services as a part of their regular duties.

Although you would satisfy most of the requirements of this exemption, your work for the DEF involves computer processing of GHI data. GHI is the "contracting agency" on the contract in which you have a financial interest. As a result, you "participate in or have official responsibility for [some] of the activities of the contracting agency." Therefore, you do not qualify for this exemption, and unless you either divest yourself of your stock interest or eliminate your state employee status, you will be in violation of §7.^[1]

End Of Decision 

^[1] Other exemptions within §7 would appear to be inapplicable. Inasmuch as the size of your stock interest exceeds 1% of ABC's stock, your financial interest would not qualify for an exemption which is limited to ownership interests of less than 1% of the stock of a corporation. See, G.L. c. 268A, § 7 ¶ 2. Further, even if you were regarded as a special state employee under § 1(o), you would not be eligible for a § 7(d) exemption because your financial interest would be with a state agency (GHI) which also employs you. But see, G.L c. 268A. § 7(e).