Opinion  EC-COI-84-47

Date:	04/17/1984
Organization:	State Ethics Commission

A state employee negotiating employment with a private firm that consults with companies who receive payments based on cost reports prepared by the firm and which are reviewed and approved by the state employee is advised that § 23(b)(3) of the conflict of interest law requires him to abstain from participating in rate determinations and field audit determinations based on cost reports prepared by the firm but that he could participate in rate determinations and field audit determinations where the cost report was not prepared by the firm.

 

Facts

You are an employee of a state agency and you participate in the approval of the rates of payment from the state to certain private businesses providing services to the state. As part of the approval process, each business submits a cost report to the agency containing the business' expense and revenue. The report is made by your agency to calculate the rate of payment to be made to the businesses.   You will be leaving state employment shortly, and you are currently negotiating future employment with a firm (the Firm) which, among other things, prepares the cost reports submitted by the private businesses to your agency. The Firm will customarily meet with staff members of your agency to discuss the report.
 

Question

1. While you remain an agency employee, does G.L. c. 268A permit your participation in the rate approval process for private businesses whose requests are based on the Firm's cost reports?

2. While you remain an agency employee does G.L. c. 268A permit your participation in the rate approval process for the private businesses whose requests are not based on the Firm's cost reports?

Answer

1. No.

2. Yes.

Discussion

As a state employee, you are subject to the standards of conduct contained in G.L. c. 268A, § 23 which, in relevant part prohibit you from, by your conduct, giving reasonable basis for the impression that any person can improperly influence or unduly enjoy your favor in the performance of your official duties, or that you are unduly affected by the kinship, rank, position or influence of any party or person. G. L. c. 268A, § 23 ¶ 2(3). A major purpose of this section is to avoid situations where employees engage in conduct which raises questions about the credibility and impartiality of their work as state employees. The Commission has consistently applied the § 23 ¶ 2(3) prohibitions whenever public employees have had private financial dealings with the same parties with whom they deal as public employees. See, Commission Advisory 83-1.

Issues under this section will inevitably arise if you are called upon to approve the rate for a private business which retains the Firm and for which the Firm has prepared the cost report forming the basis of your agency's rate approval. By approving the rate, or by determining whether to have a field audit of the Firm's cost report while you are negotiating or have an arrangement for future employment with the Firm, you would be creating reasonable basis for the impression that your agency decisions might be unduly affected by your private employment prospects. To avoid creating this impression, you should disqualify yourself from participating in both the agency rate approval process and any field audit determination for those businesses for which the Firm has prepared the cost report.^[1] You should also avoid making personnel decisions or evaluations which are based on the performance of agency's employees with respect to the Firm's cost reports.^[2]

On the other hand, the fact that you are negotiating with a firm which consults to certain of the private businesses does not outright prohibit your participating as an agency employee in those rate determinations and field audit determinations which do not involve the Firm. By such participation, there is no reasonable basis created for the impression that your agency decisions with respect to these other businesses will be unduly influenced by your negotiations with the Firm. The risk of competing loyalties to which § 23 is addressed would not come into play merely by your negotiating with a firm which consults to these businesses as well as other clients. Nonetheless you should keep the principles of § 23 ¶ 2(3) in mind when making agency decisions affecting businesses other than those to which the Firm consults. ^[3]

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End Of Decision 

^[1] You indicate that the agency staff can identify in advance and keep separate at agency meetings those businesses whose cost reports have been prepared by the Firm.

^[2] In view of the Commission's conclusions under G.L. c. 268A, § 23. it is unnecessary to determine whether the Firm would have a financial interest in each cost report which is submitted by the private businesses to the agency. See, G.L. c. 268A, § 6. It would appear, however, that the consultant relationship between the Firm and such private businesses would not, without more, give the Firm a financial interest in the agency rate determination process.

^[3] You should also be aware that § 23 ¶ (3) prohibits your disclosure to the Firm of confidential information which you have acquired as an agency employee.