Opinion

Opinion EC-COI-85-77

Date: 10/08/1985
Organization: State Ethics Commission

An individual who serves for two hours per month on an unpaid basis for a municipal community development corporation business committee is subject to G.L. c. 268A as a "municipal employee" because he provides services to a municipal agency. In view of his unpaid status, his position qualifies for designation by the city council as a "special municipal employee" and makes him eligible for several exemptions under the conflict of interest law. He is not required to file an annual statement of financial interests because G.L. c. 268B does not cover municipal employees.

Table of Contents

Facts

You are an independent certified public accountant in municipality ABC. You are also a member of the business committee of the Community Development Corporation (ACDC) in that same municipality.

A Community Development Corporation (CDC) is defined in G.L. c. 40F, § 1 as a "quasi-public nonprofit corporation organized under the General Laws to carry out certain public purposes...", namely investing monies in community development projects in substandard or blighted areas in the CDC's designated area. One of the principal ways ACDC helps finance the development of certain areas within ABC is through participation in the Small Loan Guarantee Program. Under this program, ACDC receives a loan from the Massachusetts Community Development Finance Corporation (CDFC). ACDC uses the proceeds of that loan to provide a cash collateral guarantee to a lender on behalf of a borrower for up to one-half the amount of the borrower's loan.

The business committee of ACDC reviews financial information submitted by parties seeking loan guarantees from ACDC and recommends to the ACDC board of directors whether a guarantee should issue. The six members presently on the business committee are being requested to serve two unpaid hours per month at business committee tasks.

 

Questions

1. Are ACDC business committee members municipal employees for the purposes of G.L. c. 268A?

2. If so, what restrictions will G.L. c. 268A place on you?

3.  Are members of the ACDC business committee subject to the financial disclosure requirements of G.L. c. 268B?

Answers

1. Yes.

2. You will be subject to the limited restrictions discussed below.

3. No.

Discussion

1. Status of ACDC Business Committee Members as Municipal Employees

Municipal employee is defined in the conflict law as a person performing services for or holding an office, position, employment or membership in a municipal 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, but excluding (1) elected members of a town meeting and (2) members of a charter commission established under Article LXXXIX of the Amendments to the Constitution. G.L. c. 268A, § 1(g). Whether you will be considered a municipal employee by serving on the ACDC business committee therefore depends on (1) whether ACDC is a municipal agency and (2) whether your limited service on the ACDC business committee qualifies as municipal employment

The Commission has previously found that a city's CDC is a municipal agency for Chapter 268A purposes. See EC-COI-83-74.[1] That opinion rested on the decision-making function the CDC performed in the expenditure of public funds in "carrying-out certain public purposes," including projects in partnership with CDFC, which is specifically stated to be performing "an essential governmental function." G.L. c. 40F, § 2. These indicia of public status, together with the fact that the CDC's operating area coincided with the city's political boundaries, resulted in the CDC's municipal status for Chapter 268A purposes. For similar reasons, the Commission concludes that ACDC is a municipal agency. See also G.L. c. 121 B, § 7 (housing and redevelopment authorities, which are also quasi-public entities, are treated as municipal agencies for Chapter 268A purposes). 

The second part of the jurisdictional question is whether your two hours per month unpaid service on the ACDC business committee rises to the level of municipal employment. The breadth of the municipal employee definition clearly includes uncompensated, part-time service. G.L. c. 268A, § 1(g). The Commission does recognize that people in government should be free to solicit information from and opinions of, individuals in the private sector without the result being that those individuals who are willing to help are made subject to Chapter 268A. EC-COI-82-54. For example, individuals merely rendering informal, temporary and general advice to state officials (EC-COI-79-12), or presenting the views of individuals or groups affected by some state action (EC-COI-80-49), have not been deemed state employees. However, such is not the case here. The advice given by business committee members is neither informal nor general. It is anticipated that the business committee will meet once a month to review the credit information submitted by applicants seeking ACDC loan guarantees and will make specific recommendations to the ACDC board of directors as to which applications warrant the issuance of a guarantee. Thus, the business committee will be operating as more than an ad hoc advisory committee and will be substantively involved in the ACDC decision making process concerning the issuance of loan guarantees. Generally, someone in the private sector who is performing services for state government and "actually performing the tasks and functions that might ordinarily be expected to government employees" will be deemed a state employee. EC-COI-80 49. The Commission follows that precedent here, and finds that ACDC business committee members are municipal employees for the reasons discussed above.

2. Application of G.L. c. 268A provisions to you

Traditionally, city employee positions for which no compensation is provided are designated as "special municipal employee" positions by the city council. This designation means that the conflict law applies less restrictively to such individuals under certain circumstances, to enable government to attract qualified people in part-time capacities without unduly restricting the outside activities of such individuals. Because ACDC business committee members are unpaid that position is eligible for "special" status.[2]

The four sections of the conflict law relevant to your situation are §§ 17, 19, 20 and 23. Section 17 prohibits a municipal employee from acting as agent or attorney for, or receiving compensation from anyone other than the same city in relation to any particular matter in which the same city is a party or has a direct and substantial interest. However, a special municipal employee in your situation[3] is only subject to these prohibitions in relation to a particular matter (a) in which he has participated as a municipal employee or (b) which within the past year has been a subject of his official responsibility. This section does not appear to restrict you in any significant way. What it would prohibit you from doing is working for a business on a loan application to ACDC.

Section 19 prohibits a municipal employee from officially participating in a particular matter in which he, his immediate family or partner, a business organization in which he is serving as officer, director, trustee, partner or employee, or any person or organization with whom he is negotiating or has any arrangement concerning prospective employment has a financial interest. Section 19(b) provides an exemption from this section if the municipal employee first advises his appointing official of the nature and circumstances of the particular matter and makes full disclosure of such financial interest, and receives in advance a written determination made by that official that the interest is not so substantial as to be deemed likely to affect the integrity of the employee's municipal services. Thus, § 19 would require you to abstain from participating as a business committee member in the consideration of a loan application from any of the above listed parties, unless you received a prior § 19(b) exemption from the ACDC Executive Director.

Section 20 prohibits a municipal employee from having a financial interest, directly or indirectly, in a contract made by a municipal agency of the same city. Because of the breadth of this prohibition, there are a number of exemptions. For example, if the business committee position were designated "special" as described above, you would be eligible for a § 20(c) exemption if you filed a statement with the city clerk disclosing your financial interest in the other municipal contract and the contract was with a municipal agency whose activities you neither participated in nor had official responsibility for. Section 20(d) allows a special municipal employee to have a financial interest in an additional contract with his very own agency if he files the requisite disclosure statement with the city clerk and the city council approves the exemption. Alternatively, absent "special" status, you may still be eligible for the § 20(b) exemption if you meet the listed criteria. If and when you are confronted with a potential financial interest in a municipal contract, you should raise the issue with your municipal counsel pursuant to G.L. c. 268A s. 22.

Finally, § 23[4] states that no municipal employee shall:

  1. accept other employment which will impair his independence of judgment in the exercise of his official duties [§ 23(¶ 2)(1)]; 
  2. use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others [§. 23(¶ 2)(2)];
  3. by his conduct give a reasonable basis for the impression that any person can improperly influence or unduly enjoy his favor in the performance of his official duties, or that he is unduly affected by the kinship, rank, position or influence of any party or person [§. 23(¶ 2)(3)]; or
  4. accept employment or engage in business activity which will require him to disclose confidential information he has gained in his official position, nor use such information to further his personal interests [§ 23(¶ 3)]. For example, you would violate § 23(¶ 3) by using the financial information you have access to as a business committee member in order to benefit a business' competitor or yourself. Similarly, you would violate § 23(¶ 2)(3) if your prior relationship with a business unduly influenced your decision making processes as a business committee member. You should bear these § 23 guidelines in mind in pursuing your duties as a business committee member to avoid even the appearance of a conflict.

3. Status of ACDC Business Committee Members under G.L. c. 268B

There are two reasons why ACDC business committee members are not subject to the G.L. c. 268B filing requirements. First, they are unpaid. G.L. c. 268B requires all individuals who qualify as "public employees" under G.L. c. 268B, § 1(o), to file a statement of financial interests with the Commission. Excluded from the definition of "public employee" is "any person who receives no compensation other than reimbursements for expenses." G.L. c. 268B § 1(o). 930 CMR 2.02(15). Accordingly, as long as members of the ACDC business committee remain unpaid (other than for expense reimbursement), the financial disclosure requirements of G.L. c. 268B will not be applicable to them. EC-COI-80-2; EC-COI-83-30.

Secondly, G.L. c. 268B currently requires only state and county officials/employees who qualify as public employees to file. Because ACDC business committee members are municipal employees, they would not be required to file statement of financial interest even if they were paid.[5]

 

End Of Decision

[1] This citation refers to a prior Commission conflict of interest opinion including the year it was issued and its identifying number. Copies of this and all other advisory opinions are available with identifying information deleted for public inspection at the Commission offices.

[2] It should be noted that special municipal employee status is not automatic. The City Council must specifically designate the position of ACDC business committee member (i.e.. not the individual) as a special municipal employee position pursuant to G.L. c. 268A. § 1(n).

[3] This assumes that you do not serve as a ACDC business committee member for more than 60 days in a 365-day period. See § 17(¶ 5) clause c.

[4] On July 9, 1985, the Supreme Judicial Court ruled that the Commission does not possess the jurisdiction to enforce G.L. c. 268A § 23. The discussion contained above is based on prior Commission rulings and is intended to provide guidance to you.

[5] By special act, the City of Marlborough is also subject to the disclosure requirements of G.L c. 268B St. 1983. c. 102. ABC has not sought similar coverage.

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