You have recently withdrawn from your law partnership (Firm) and
began employment with state agency ABC. Upon your withdrawal from the Firm, you were entitled to certain partnership profits which
reflected work performed prior to your departure. Your share of the
profits was not given to you upon your withdrawal, but will be
distributed to you in installments over the next twelve months. The
distribution calculation will be based entirely on work performed
prior to the date on which you became a state employee, and will
not include profits received by the Firm for services performed
after that date. Your prior services for the Firm included your
serving as special counsel to a state agency as well as
representing private clients in state matters.
Although you have withdrawn from your partnership in the Firm,
you have retained your membership in a venture capital fund,
(Fund). The Fund is organized as a separate voluntary partnership,
independent of the Firm, and is comprised of individual Firm
partners who wish to participate in the Fund, Withdrawal from the
Fund is permissible following the consent of a majority of the
participating partners.
The Firm requires all partners to have the Firm prepare and
complete, at no charge, their personal income tax returns for each
calendar year in which they serve as a partner. The Firm's
arrangement also extends to former partners who have withdrawn
during a calendar year. You are eligible for this service for
calendar year 1987.
You also serve as an unpaid member of the board of directors of
DEF, a citizens' group concerned with certain public issues. DEF
receives funding from state agencies.
1. Does G.L. c. 268A permit your deferred receipt of partnership
profits for services performed for the Firm prior to your becoming
a state employee?
2. Does G.L. c. 268A permit you to retain your partnership in
the Fund while you serve as a state employee and, if so, what
limitations will G.L. c. 268A place on your official state
activities?
3. Does G.L. c. 268A permit you to receive from the Firm at no
charge the preparation and completion of your 1987 personal income
tax returns?
4. Does G.L. c. 268A permit you to remain as a member of the
board of directors of the Council?
1. Yes.
2. Yes; by virtue of your retention of fund partnership,
however, you must abstain from participation as a state employee
in matters affecting your partners financial interests.
3. Yes.
4. Yes, subject to certain limitations.
Upon your commencement of duties with ABC, you become a state
employee within the meaning of G.L. c. 268A, s.1(q). The
application of G.L. c. 268A to each of your questions will be
discussed in turn.
1. Deferred Compensation
The receipt by a state employee of additional compensation
attributable to state contracts or fees for representing clients
in state-related matters ordinarily raises concerns under both G.L.
c. 268A, s.s.7 and 4. See, EC-COI-87-20. Where the additional
compensation reflects solely services which an individual performed
prior to becoming a state employee, it has been well
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established that neither s.4 nor s.7 would be violated by the
deferred receipt of such compensation. See, EC-COI-87-20; 79-27.
Attorney General Conflict Opinion Nos. 104,147; Buss, The
Massachusetts Conflict of Interest Law: An Analysis, 45 B.U.L. Rev.
299,325(1965). This conclusion is supported both by the statutory
emphasis in the definition of "compensation"[1] on the rendering
of services, as well as on sound policy. Newly appointed state
employees may not practically be able to receive the complete
payment of fees owed as of their final date of work in their
private employment. It would, therefore, be unreasonable to place
such newly appointed state employees in immediate violation of
s.s.4 or 7 because of a compensation timing which they do not
control.
These precedents will apply to your situation as well. As long
as the distribution of Firm profits to you reflects solely services
performed prior to your becoming a state employee, your deferred
receipt of such profits does not violate s.s.4 or 7.
2. Fund Partnership
Nothing in G.L. c. 268A inherently prohibits your retention of
your partnership in the venture capital Fund inasmuch as investment
in the Fund was an opportunity which you acquired and exercised
prior to becoming a state employee.[2]
By virtue of your retention of status as a Fund partner, however,
the abstention requirements of s.6 will come into play.
Specifically, s.6 requires your abstention from participation as
an ABC employee in any decision, determination, lawsuit or other
particular matter[3] in which, in relevant part, a partner has a
financial interest. The abstention requirements apply not only to
matters specifically relating to the Fund, but also to all matters
affecting the financial interests of your Fund partners. Because
your Fund partners are also Firm partners, s.6 prohibits your
participation in matter affecting the Firm partners and, for
practical purposes, in all matters involving the Firm's financial
interest. See, Buss, supra, at 357("... even a partner's financial
interest, growing out of a matter having nothing to do with the
partnership affairs, is attributed to the state employee by
statute."); Braucher, "Conflict of Interest in Massachusetts" in
Perspectives of Law essays for Austin Wakeman Scott 3, at 24(1964)
("it seems inadmissible to restrict the coverage of the financial
interest of a partner to cases where the interest relates to
partnership business").
Therefore, absent your receipt of a gubernatorial exemption from
s.6, you must abstain from participation in all cases in which the
Firm partners have a financial interest. We presume that this would
include the great bulk of cases represented by the Firm's partners
or associates. The abstention requirements apply to your direct
participation as well as supervision of such cases, and will
continue to apply as long as you retain your partnership in the
Fund.
3. Tax Return Service
The receipt by a state employee of a free service from an
organization which has frequent dealings with the state ordinarily
raises concerns under both s.3 and s.23(b)(2). See, Commission
Advisory No. 8. EC-COI-87-7; 86-14. Based upon the facts you have
presented, however, neither section would be violated. Even
assuming that the Firm's free tax preparation service is something
of substantial value, the service is not being offered to you for
or because of your new status as state employee. To the contrary,
the same service is customarily available to all partners who
depart during a calendar irrespective of their subsequent
employment destination. The purpose of the service is not related
to your state employment but is rather a service which allows the
Firm to prevent inadvertent tax errors by Firm partners, thereby
protecting the Firm's reputation.
For similar reasons, your receipt of the tax service would not
constitute the use of your position to secure an unwarranted
privilege. See, G.L. c. 268A, s.23(b)(2). This conclusion rests on
the fact that the service is available to all former partners
similarly situated and is a benefit which you acquired by virtue
of your partnership, as opposed to your state employment. Were the
free tax service to continue perpetually, however, we would need
to examine the extent to which this privilege had been made
available to other former partners. Compare, EC-COI-86-14
(substantial discount limited to certain public employees and not
available to other public employees or to the general public
violates s.23(b)(2).
4. DEF Directorship
Should you retain your unpaid membership on the DEF board of
directors, three sections of G.L. c. 268A will apply:
(a) Section 6
This section prohibits your participation as a state employee
in any contract, decision or other particular matter in which DEF
has a financial interest This prohibition would come into play if
DEF's applications for state grants are subject to review or
oversight by your office. Absent your receipt of an exemption from
your appointing official, you would be required to abstain from
participation in such matters.
(b) Section 23(b)(3)
This section prohibits your acting in a manner which would cause
a reasonable person to conclude that
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the Council will unduly enjoy your favor in the performance of your
official duties. Issues under this paragraph may arise if your
office is asked to participate in controversies or issues in which
DEF has taken a position. To dispel such an impression, you must
publicly disclose in writing to your appointing official "the facts
which would otherwise lead to such a conclusion." G.L. c. 268A,
s.23(b)(3). Alternatively, you may avoid the prohibited perception
of s.23(b)(3) by abstaining from participation as a state employee
in any controversy or issue in which DEF has taken a position. If
you were to resign from your DEF directorship, you would no longer
be subject to s.23(b)(3) or s.6 in connection with DEF-related
matters.
(c) Section 4(c)
This paragraph places certain limitations on your DEF
activities. Specifically, s.4(c) prohibits your acting as DEF agent
in relation to any application, contract, decision or other
particular matter in which the commonwealth or a state agency is
a party or has a direct and substantial interest, For example, you
could not contact state agencies on behalf of the DEF to request
favorable consideration of DEF's grant application. On the other
hand, you would not be acting as a DEF agent by your participation
in general discussions of state-related issues at meetings of the
DEF board of directors. See, EC-COI-83-145.
