Opinion  EC-COI-86-3

Date:	03/25/1986
Organization:	State Ethics Commission

A state employee at the Secretary of State's office is considering a real estate venture that may seek limited partners which is overseen by the Secretary of State's office. Permissible but restrictions apply under sections 4, 5(d), 6 and 23.

Facts

You are an employee in the office of the Secretary of State. You and your spouse, jointly and/or separately, are considering becoming general partners in a real estate venture. The partnership may solicit limited partners. Massachusetts has adopted the Uniform Limited Partnership Act, G.L. c. 109, which requires certain filings with the Secretary of State. These filings include, for example, certificate of limited partnership, an amendment to the certificate, and cancellation of the certification. Certain partnerships which make public offerings are subject to the Uniform Securities Act, G.L. c. ll0A. Under G.L. c. 9, §10A your office is responsible for the administration and enforcement of the sale of securities.  These responsibilities include, for example, the authority to ­conduct investigations and issue subpoenas to determine violations of the Act and the authority to seek injunctions in court.

Question

1.  Does G.L. c. 268A prohibit the proposed real estate venture? If the answer to question 1 is no:
2.  Will you be subject to limitations on your private activities?
3.  Will you be subject to limitations on your official duties?
4.  Will your partners be subject to restrictions on their activities?

Answer

You may proceed with your proposed venture, but you will be subject to the following limitations on your official and private activities. Your partners will also be subject to restrictions.

Discussion

As an employee in the office of the Secretary of State you are a state employee as defined in the conflict of interest law, G.L. c. 268A, §1 et. seq,. The sections of that law which are applicable to your question are §§4, 5(d), 6, and 23.

Section 4 (c) prohibits you from acting as agent or attorney for anyone other than the commonwealth or a state agency in connection with any particular matter[1] in which the commonwealth or a state agency is a party or has a direct and substantial interest. This restriction would prohibit you, for example, from acting as the partnership's attorney in connection with any funding application, grant proposal, the filing of a financial report, or generally any submission, application, or filing with any state agency. For example, a submission by a partnership to the MHFA in response, to a request for proposals is a particular matter, and therefore you would be prohibited from acting as agent or attorney in such a matter.

The limitation of the §4 (c) restrictions reflects a concern over potential influence which a state employee could exercise in personal or face-to-face dealings with state agencies. The potential for such influence is avoided, however, if the partnership were to have an independent attorney or representative to deal with any particular matter before other agencies; in the case of a paid independent attorney, there would be no violation of  §4(c).

Section 4(a) of the conflict of interest law prohibits a state employee from receiving compensation from anyone other than the commonwealth or a state agency in relation to any particular matter in which the commonwealth or a state agency is party or has a direct and substantial interest. As a general partner in the real estate venture, you may contemplate being paid for your time and services in connection with the activities of the real estate venture. Receipt of income for services rendered in connection with a real estate investment venture is compensation within the meaning of the conflict of interest law[2]/. On the other hand, if you do not perform any services, the mere receipt of investment income or reimbursement for out of pocket expenses will not be deemed to be receipt of "compensation".

In general the commonwealth would not have a direct and substantial interest in a privately funded project. EC-COI-­81-11.[3] The commonwealth would have a direct and substantial interest in the real estate, however, if it were owned by, or under the jurisdiction of, any state agency. EC-COI-80-73. This means, based on the assumption the state does not own or have jurisdiction of the property in question, you and your family may purchase the parcel in question.

Whereas §4 may limit your outside activities, §6 restricts what you may do on the job. It recognizes a basic principle of the conflict of interest law - that public employees must not act in their official capacities in matters in which they have a personal financial stake.  Section 6 provides in pertinent part that no state employee may participate[4] as such an employee in any particular­ matter in which he or...a business organization in which he is serving as officer, director, trustee, partner, or employee has a financial interest.  In terms of the practical application to your situation, a limited partnership is likely to have matters before the Secretary of State’s office.  For example, a certificate of amendment may be filed in the office of the Secretary of State, G.L. c. 109, §9, or a certificate of cancellation, §10, or , in the case of a public offering by the partnership, an application for registration, G. L. c. 110A, §202.  Whenever any such particular matter comes before your agency, you must abstain from participation.

Section 5(d) places restrictions on partners of state employees. These restrictions apply equally to limited and general partners. A partner of a state employee may not act as agent or attorney for anyone other than the commonwealth in connection with any particular matter in which the commonwealth is a party or has a direct and substantial interest and in which the state employee has participated as a state employee or which is the subject of his official responsibility.[5] On the other hand a partner, such as your wife, could appear before state agencies other than the Secretary of State's office because you have no official responsibility over the activities of other state agencies. The hiring of an independent representative to act as agent or attorney before the Secretary of State's office will avoid problems under this section.

Finally, you should be aware of the provisions of §23[6]/ In general, this section prohibits a state employee from using or attempting to use his official position to obtain unwarranted privileges for himself or engaging in conduct which gives a reasonable basis for the impression that the partnership in which you are associated will unduly enjoy your agency's favor.  You should keep these principles in mind whenever any discussion of policy or procedure comes up in your office which may specifically impact upon the partnership.  Further it is important to take steps to assure that there is no basis for the impression that any application, submission or filing on behalf of the partnership is given favorable treatment. The person in your office who makes decisions regarding any partnership submissions should base those decisions on objective criteria.  For example, a decision whether to deny, suspend, or revoke registration of the partnership's securities under G. L. c. 110A, §305, must be based on objective criteria without regard to the fact that you are employed in the same office.[7] /

[1]/ G.L. c. 268A, §1(k) defines "particular matter" as "any judicial or other proceeding, application, submission, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, decision, determination, finding, but excluding enactment of general legislation by the general court."

[2]/ Commonwealth v. Cannon, 373 Mass. 494 (1977).

[3]/   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 office.

[4]/   "Participate," participate in agency action or in a particular matter personally and substantially as a state, county, or municipal employee, through approval, disapproval, decision, recommendation, the rendering of advice, investigation or otherwise. 

[5] / "Official responsibility", the direct administrative or operating authority, whether intermediate or final, and either exercisable alone or with others, and whether personal or through subordinates, to approve, disapprove or otherwise direct agency action.

[6]/ 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 only to provide guidance to you.

7/ Issues under section 7 of G.L. c. 268A would also come into play if your partnership received funding from state agencies such as MHFA. EC-COI-85-79. Because your partnership is in its initial stages and its funding plans have not been determined, it would be premature to anticipate hypothetical issues under §7. If your partnership does choose to seek funding from state agencies you should renew your advisory opinion request. Additionally, this opinion is limited to a discuss ion of G. L. c. 268A. There may be additional statutory restrictions outside of the Commission's jurisdiction. See e.g. G. L. c. 11OA, §406 which prohibits the secretary from using for personal benefit any information which is not made public. You should consult with the agency counsel regarding any additional restrictions.