Related to:

Opinion EC-COI-87-15

Date: 04/27/1987
Organization: State Ethics Commission

Where the brother of a state employee independently operates a business in which the state employee exercises no management or control, the brother's financial interest in his contract with the state will not be imputed to the state employee.


You are a full-time employee of the state Department of
Environmental Management (DEM). You are also the sole owner of ABC,
a log and timber cutting business which you started five years ago.
You are not legally organized as a family partnership. although you
adopted the name ABC to use the goodwill from the name of a former
family dairy farm in the area. You company owns a pick-up truck,
cutting equipment and chain saws. You possess your own cutting
license and personally bear all of the expenses of ABC.

DEM has recently notified your brother that he was the highest
bidder for a contract to clear, cut and remove timber. Your brother
runs the timber cutting business under his own name and possesses
his own tractor, chain saws and cutting license. Your brother's
work customarily involves hay cutting and tree jobs. His business,
which is approximately three years old, is run out of his
residence. Your brother has a separate checkbook for his business
and makes his business decisions independent of you.

Although your brother has not wished to form a business
partnership with you, he and you periodically assist each other in
business activities. He works as a part-time cutter for you on an
as-needed basis. Last year, he performed services for you
approximately one day per week. You periodically permit him to use
your logging truck in his business. Although you and your brother
are financially independent for business purposes, he has lent you
money to buy timber. ABC and your brother have separate business
telephone numbers. Because you have had frequent residential
address changes in the last few years, you use his mailing address

Page 146

for ABC correspondence. Additionally, you occasionally receive ABC
messages which have been left for you at his telephone.


Will your brother's contract with DEM be imputed to you for the
purposes of G.L. c. 268A, s.7 so as to prohibit. DEM from awarding
the contract to him?




As a DEM employee, you are a state employee for the purposes of
G.L. c. 268A. Section 7 prohibits you from having a financial
interest in a contract made by a state agency. For example, you
would violate s.7 by contracting directly with DEM, a state agency.

Your brother who is not a state employee, has an obvious
financial interest in the DEM contract for which he has bid. If you
shared his financial interest in the DEM contract, you would
violate s.7. Based on the facts which you have presented, the
Commission concludes that your brother's financial interest in the
DEM contract should not be imputed to you, and, therefore, his DEM
contract is permissible for the purposes of s.7.

In prior rulings, the Commission has imputed a contractual
financial interest to a state employee who shared in the management
or control of the company which had been awarded a state contract.
See, EC-COI-85-24; 83-125. The Commission has also imputed a
financial interest for s.7 purposes when the state employee has
transferred ownership of a company immediately prior to the
company's receipt of a state contract. See, EC-COI-83-37; 83-111.The
Commission, therefore, does not limit its inquiry solely to the
name and owner of a company but examines the reality of who
controls the company and whether the transaction is, for practical
purposes, designed to evade s.7.

The conclusion that you do not share his financial interest
in the DEM contract is based on two reasons:

1. He runs his business independently of you and without your
input regarding his business management or control. In
particular, he possesses his own equipment and cutting

2. He has expressly refused to organize his business as a
partnership with you and, therefore, there is no reasonable
appearance to the ,..public that you are a partner in your
brother's business. Compare, EC-COI-80-43.

The fact that you have occasionally loaned equipment to your
brother for use in his business does not give you a financial
interest in his business, inasmuch as you have no other input into
his business. The facts do suggest that he has a financial interest
in your business, in view of his employment by and loan of money
to your company, his allowing you to use his business address for
your business correspondence, and your company's business name. It
does not follow, however, that you have a financial interest in
your brother's business merely because he has a financial interest
in your business.[1]

[1] The Commission's conclusion is based on the facts as you have
presented them. Should any of those facts change with the result
that you are not entirely independent of the management or control
of his business, then the Commission's conclusion under s.7 will
be different.


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