Opinion  EC-COI-84-13

Date:	01/30/1984
Organization:	State Ethics Commission

Without a gubernatorial exemption, a consulting physician with the Mass. Rehabilitation Commission who is a special state employee would violate § 7 of the conflict of interest law by also having a financial interest in his wife’s consulting arrangement with the MRC because he owns the business and building where his wife’s medical practice is located and she pays a portion of her earnings to the business.

 

Facts

You are a part-time consulting physician to the Disability Determination Services branch of the Massachusetts Rehabilitation Commission (MRC). In that capacity you review applications for disability which have been referred to MRC by the United States Social Security Administration. The referrals are initially assigned to an MRC disability determination examiner who utilizes the services of a consulting physician in determining the completeness of the medical documentation. In those cases where further documentation is necessary, the consulting physician will authorize appropriate medical consultative examinations and tests. The authorization does not include specifying who will conduct the examination or the location. Following the consulting physician's authorization, the MRC Placement Department will review a standing list of physicians who are qualified to provide the appropriate medical consultative examinations and tests in the applicant's geographic area. Following the Placement Department's assignment and examination and testing of the applicant, the physician will submit a report to the original Disability Determination examiner. After review of the report, the examiner and consulting physician will determine whether the applicant has satisfied the criteria for disability and will submit their determination to the Social Security Administration.

Your wife is also a physician on the standing list of physicians qualified to perform medical consultative examinations. Until recently, she was assigned by the MRC Placement Department to serve as consultative physician on a large number of cases, and approximately eighty percent of her total income as a physician has been derived from her contracts with MRC.

You and your wife are the sole incorporators, officers, directors and shareholders of ABC. You are the majority shareholder and serve as president of ABC. Following the receipt of consultative physician contract funds from MRC, your wife deposits all of these funds into the account of ABC. ABC, in turn, uses a portion of these funds (approximately ten percent) to pay for the expenses of the office which she uses to conduct the MRC consultative examinations. You own the office with another party and also share the use of the office with your wife. Approximately twenty-five percent of the corporation's income is derived from your wife's contribution.

Question

Assuming that you remain a consulting physician to MRC, would you be in violation of G.L. c. 268A, § 7 if your wife resumed her consultative physician status with MRC under the arrangement described above.

Answer

Yes.

Discussion

As a consulting physician to MRC, you are a state employee for the purposes of G.L. c. 268A, § 1(q). In view of your part-time status, you qualify for classification as a "special state employee" under § 1(o)^[1] and are subject to certain less restrictive provisions in G.L. c. 268A in addition to other prohibitions which you share equally with full-time state employees.

The principle section of G.L. c. 268A which would apply to your situation is § 7. As a special state employee, absent a gubernatorial exemption, you are prohibited by § 7 from having a financial interest in another contract made by the MRC.^[2] On the basis of the information which you have provided, the Commission concludes that you would have a financial interest in your wife's consultative contracts with MRC if she were to resume that role under the arrangement described above.

In general, § 7 does not prohibit both a husband and wife from serving as state employees, even with the same agency. While the husband obviously benefits from his wife's income, (and vice-versa) the husband does not, strictly speaking, have a financial interest in his wife's employment contract. Both the Commission and Attorney General have concluded that, absent special circumstances, the wife's financial interest in her contract with the state is not automatically imputed to the state employee husband. See, EC-COI-80-105; 80-25; 79-77; Attorney General Conflict Opinion No. 849. However, where the husband shares in the management and control of his wife's business, or when the husband has a formal ownership interest in the proceeds of the wife's contract, the financial interest of the wife will be attributed to the husband for the purposes of § 7. For example, in EC-COI-83-111, the Commission concluded that a husband state employee retained a financial interest in his wife's sale to his state agency of land which until recently they had owned jointly. See, also EC-COI-83-125; 83-37. The key question in each case is whether the state employee can fairly be said to have a financial interest in his wife's contract with the commonwealth. See, Buss, The Massachusetts Conflict of Interest Statute: An Analysis, 45 Boston University Law Review 299, 375 (1965). Cf. Starr v. Board of Health of Clinton, 356 Mass. 426(1969). In your situation, you are the majority shareholder in a corporation (ABC) and, by virtue of that ownership interest, would violate § 7 if the corporation contracted directly with MRC. Although the corporation does not directly contract with MRC, the corporation does have a financial interest in your wife's contracts with MRC. This conclusion is based off the fact that your wife distributes the proceeds from her MRC contracts to the corporation, and the corporation, in turn, pays for the office expenses which she incurs while conducting examinations under the MRC contracts.

To avoid a violation of § 7, there are three alternative courses available to you:

1. request and obtain an exemption from the governor, with approval of the executive council under § 7(e);
2. restructure your wife's arrangement with ABC so that ABC does not receive, directly or indirectly, the proceeds from your wife's contracts with MRC and thereafter use those proceeds to pay for the MRC examinations^[3]; or
3. resign from your MRC consulting physician position.

 

End Of Decision

^[1] Section 1(o) defines special state employee, in relevant part. as a state employee:

(2) Who is not an elected official and

(a) Occupies a position which, by its classification in the state agency involved or by the terms of the contract or conditions of employment, permits personal or private employment during normal working hours, provided that disclosure of such classification or permission is filed in writing with the state ethics commission prior to the commencement of any personal or private employment, or

(b) In fact, does not earn compensation as a state employee for an aggregate of more than eight hundred hours during the preceding three hundred and sixty-five days. For this purpose, compensation by the day shall be considered as equivalent to compensation for seven hours per day. A special state employee shall be such a status on days for which he is not compensated as well as on days on which he earns compensation. Because your consultant position involves your receipt of compensation for more than eight hundred hours during the preceding one-year period, you are not automatically a special state employee. Rather your appointing official must file a statement with the Commission pursuant to Section 1(o)(2)(a) confirming that your part-time employment arrangement permits personal or private employment during normal work hours.

^[2] Section 7 provides in relevant part as follows:

A state employee who has a financial interest, directly or indirectly, in a contract made by a state agency, in which the Commonwealth or a state agency is an interested party, of which interest he has knowledge or has reason to know, shall be punished by a fine of not more than three thousand dollars or by imprisonment for not more than two years, or both... This section shall not apply... (d) 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, or (e) to 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.

^[3] For example, in EC-COI-83-173, the Commission advised an MRC consulting physician that he would not violate G.L. c. 268A by leasing his office space on an occasional basis to a consultative physician where the consulting physician's lease arrangement was independent of the MRC contract with the consultative physician.