Opinion

Opinion  EC-COI-86-6

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

A state board member who is also president of a real estate development, contracting and property management company with matters that may come before the board is subject to the restrictions in §§ 4, 6, 7 and 23 of the conflict of interest law.

Table of Contents

Facts

You are one of nine members of a state board ("Board"). Your principal occupation is President of the ABC Company ("Company"), which is involved in real estate development, general contracting and property management. As a result, the Company maintains a variety of relationships with real estate partnerships and financial institutions, which in turn may have a direct or indirect relationship with the Board.

Question

What limitations does G.L. c. 268A, the state's conflict of interest law, place on your serving as Board member and Company president?

Answer

You will be subject to the limitations set forth below.

Discussion

As a Board member, you are considered a state employee for the purposes of G.L. c. 268A. In view of your unpaid status, you are also a "special state employee", which means that the conflict law will apply to you less restrictively under certain circumstances. See G.L. c. 268A, 1(o). The sections of the conflict law relevant to your situation are sections 4, 6, 7 and 23.

1. Section 4

This section prohibits you from acting as agent or attorney for, or receiving compensation from, ABC Company or anyone else other than the state in relation to any particular matter[1] in which the state is a party or has a direct and substantial interest. Acting as an agent for ABC Company includes signing its contracts, acting as its advocate in application processes, submitting its applications, presenting support information on its behalf to any state agency or representing it in any way before a state agency. As a special state employee, these restrictions only apply to you in relation to particular matters which within one year have been a subject of your official responsibility,[2] or in which you have participated as a Board member.[3] For example, § 4 would prohibit you from signing a contract with the Board on behalf of ABC Company, or sharing in ABC Company's receipt of compensation for services from an ABC Company venture funded by the Board. Because in your case the § 4 restriction only applies to Board matters, you would not be prohibited from acting as ABC Company's agent before any other state agencies. Likewise, the fact that the Board has invested funds in an entity which has a joint venture with ABC Company does not, in and of itself, prohibit your involvement in the joint venture as ABC Company's representative. The § 4 restriction would apply to you if the Board specifically invested funds in the entity's joint venture with your Company, or the joint venture constitutes a majority of that entity's business (making the Board's investment with the entity rise to the level of a direct and substantial interest in the joint venture). Because the application of §4 in your case includes matters within your official responsibility as well as matters in which you participate on the Board, your abstention in a matter as a Board member would not exempt you from the provisions of § 4.

2. Section 6

This section prohibits your participation as a Board member in any particular matter in which, in relevant pare you or an organization in which you serve as an officer has a financial interest. The purpose of this provision is to eliminate in advance the pressure that otherwise might be brought to bear on public employees when faced with situations where there are competing public and personal considerations.[4] The Commission has previously held that any financial interest, no matter how small, is enough to trigger §19 (the municipal equivalent to § 6). See EC-COI-84-98.[5] However, that financial interest must be direct and immediate, or at least reasonably foreseeable. Id. Obviously, if the Board were to consider making an investment through ABC Company, you would be disqualified by § 6 from participating in the decision or vote.[6] This restriction on your participation would also extend to any Board investment decision in a group trust or partnership which involves a reasonably foreseeable financial interest on the part of ABC Company. Thus, if ABC Company is contemplating or actually negotiating a joint real estate venture with an entity in which the Board is considering investing funds, you would be precluded from participating as a Board member in that matter. Participation includes not only voting but also involvement in discussions relating to the decision or vote. When such matters arise, the safest course would be for you to leave the room. See Graham v. McGrail, 370 Mass. 133, 138(1976).

In addition to your disqualification from participating in the matter, you are subject to further requirements under G.L. c. 268A, § 6. Section 6 requires you to disclose in writing to your appointing authority and the Commission the nature of the matter before the Board and ABC Company's financial interest in the matter.[7]

3. Section 7

Section 7 prohibits state employees from having a financial interest, directly or indirectly, in a contract made by a state agency. Investments of the Board constitute contracts within the meaning of § 7. See EC-COI-84-58; 83-113. Notwithstanding these restrictions, however, the enabling statute creating the Board expressly allows the board to make investments in which you have an interest or involvement. Therefore, the Board's investment of funds with an entity with which ABC Company has a relationship would not place you in violation of § 7.

4. Section 23[8]

Finally, section 23 contains standards of conduct applicable to all state employees. This section provides that a state employee shall not:

  1. accept other employment which will impair his independence of judgment in the exercise of his official duties;
  2. use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others;
  3. by his conduct give 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;
  4. accept employment or engage in any business or professional activity which will require him to disclose confidential information which he has gained by reason of his official position or authority;
  5. improperly disclose materials or data within the exemptions to the definition of public records as defined by section seven of chapter four, and were acquired by him in the course of his official duties nor use such information to further his personal interests. For example, you would violate this section if you used to your personal advantage confidential information submitted to the Board. In borrowing from, depositing funds in, or maintaining investment relationships with banks, financial institutions or insurance companies, either personally or on behalf of ABC Company, you must take great care to abide by these standards whenever the Board has a relationship with such an entity. Any use of your Board membership to gain preferential treatment on ABC Company's or your own behalf, from such an institution would constitute a violation of § 23.[9]

The standards of conduct enunciated in s.23 extend beyond single actions which constitute conflicts and address both courses of conduct raising conflict questions and appearances of conflicts. Issues arising under § 23 normally involve a balancing of concerns and are fact specific.

A number of your questions raised potential § 23 issues on which the Commission finds it cannot advise you without specific facts before it. You are therefore encouraged to renew your opinion request at a later time when faced with a specific situation.


End Of Decision

[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, or finding.

[2] "Official responsibility" is defined as 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. G.L. c. 268A. s.1(i).

[3] G.L. c. 268A, § 1(j) defines "participate" as to participate in agency action or in a particular matter personally and substantially as a state, county and municipal employee, through approval, disapproval, decision, recommendation, the rendering of advice, investigation or otherwise.

[4] See Buss, The Massachusetts Conflict of Interest Statute: an Analysis, 45 B.U.L. Rev 299,301 (1965).

[5] This citation refers to a previous Commission conflict of interest opinion including the year it was issued and its identifying number. Copies of advisory opinions (with identifying information deleted) are available for public inspection at the Commission office.

[6] See also the discussion of § 7, infra.

[7] A copy of the disclosure form is enclosed. By virtue of the restrictions in G.L. c. 32, §23(2A)(b), no further action would be required by your appointing official.

[8] 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 solely to provide guidance to you. You should also be aware that § 23 is enforceable at the agency level. The PRIM Board is currently drafting its own Code of Conduct pursuant to § 23. You should consult that Code once it is promulgated to identify any further restrictions applicable to your activities.

[9] If such preferential treatment was received because of official actions you had taken or might take as a Board member, you would also violate G.L. c. 268A. § 3, which prohibits a public employee from receiving or requesting an item of substantial value for himself for or because of his official actions. See In the Matter of William A. Burke, Jr., 1985 Ethics Commission (October 15, 1985).

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