Opinion

Opinion EC-COI-85-23

Date: 04/02/1985
Organization: State Ethics Commission

Employees of the Executive Office of ABC may not purchase stock in a corporation whose product is being tested by ABC agency employees until the product testing is complete and the general public has access to the same information as the ABC employees.

Table of Contents

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

Facts

You are the Secretary of an Executive Office of Public Safety (EOPS). The Department of Public Safety (Department) within EOPS has entered into an agreement to test and operate an anti auto theft system produced by a Massachusetts corporation (Corporation). The Corporation has designed a system  to locate stolen vehicles through a combination of computer-activated transmitters installed in protected vehicles and radio tracking and detection devices  to be operated by law enforcement agencies. The Corporation has donated equipment to The Criminal History Systems Board (Board), also an agency within EOPS, for field testing of the system by the Department. To date, certain employees of EOPS have participated in product testing and/or public information activities or the Corporation's private promotional activities. You have been advised that a number of EOPS employees are considering purchasing Corporation stock, or may have already done so.

Question

Does G.L. c. 268A permit EOPS employees to purchase Corporation stock at this time?

Answer

No. However, EOPS employees will not be precluded from purchasing such stock once the testing phase is completed and the general public has access to the same information about the system.

Discussion

EOPS employees are state employees within the meaning of G.L. c. 268A and are therefore subject to the restrictions of that law. Section 23(¶2)(2) prohibits state employees from using or attempting to use their official positions to secure unwarranted privileges for themselves or others. The Commission has previously applied § 23(¶2)(2) to prohibit a state employee from using his access to state officials and information that is unavailable to the general public, as well as his ability to direct certain state activities, to benefit his immediate family members or his private business. EC-COI-84-1.[1] This section also prohibits state employees from using state supplies or facilities not available to the general public for use in the preparation or delivery of a paid presentation. See, e.g. EC-COI-84-135; 84-115; 84-95. The purpose of § 23(¶2)(2) is to prevent state employees from taking advantage of their state positions to further their private interests.

On the basis of the information which you have provided, the Commission advises you that EOPS employees would violate § 23(¶2)(2) by purchasing Corporation stock themselves or giving to anyone else information which would lead them to purchase such stock during the testing phase. EOPS employees, especially the Department and Board employees who have participated directly in the testing of the system or the attending promotional activities, are in a unique position by virtue of their state employment to assess the utility and the potential of such a system before it becomes actively marketed by the Corporation. These employees, as well as any other EOPS employees who know about the system through work, who take advantage of inside information for their private gain, would be securing an unwarranted privilege in violation of § 23(¶2)(2). See EC-COI-82-17 (state photographer prohibited by § 23(¶2)(2) from privately selling reprints of photographs he took on the job where those negatives are neither generally available to the public nor catalogued in a manner which would permit public access to the negatives under his custody).

EOPS employees who have already purchased Corporation stock are presently in violation of § 23(¶2)(2) and would secure an unwarranted privilege in any sale of such stock in which they realized a profit. They should therefore sell their stock back to the Corporation for no more than the price they originally paid for it. Only after the testing of the system is complete, and the general public has access to the same information about the system, would EOPS employees be free to purchase Corporation stock.[2]

 

End Of Decision

[1] These citations refer to previous advisory opinions issued by the Commission. Copies of these and all other advisory opinions may be obtained at the Commission's offices.

[2] While outside the jurisdiction of this Commission, the facts you present also raise potential "insider trading" issues under Rule 10b-5 of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. and section 101 of the Massachusetts Uniform Securities Act, G.L c. 110A, § 101 et seq.

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