Opinion EC-COI-88-15

Date: 06/15/1988
Organization: State Ethics Commission

A state employee who is also a partner and part owner of a private development company is subject to the following provisions: (1) Under section 4 the employee cannot act as an agent for or receive compensation from the company in relation to any applications for funds from state programs; (2) an exemption under section 7(b) must be filed with the Ethics Commission if the company wishes to apply for funding under state programs; and (3) under section 23(b)(3) the employee must not be unduly influenced by his private business in his official actions.

Table of Contents


You are an employee of state agency ABC. You are also a
partner in a private development company, and have on occasion
represented the development company.

The development company plans to solicit funding from certain
state agencies regarding various funding programs relating to
affordable housing requirements of a project sponsored by the DEF
Redevelopment Authority (DEF), a municipal agency. One such
program, the SHARP new construction program, is funded and
administered by the Massachusetts Housing Finance Agency (MHFA).
Another program, the so-called c. 707 residential rental subsidy
program, is administered by the Executive Office of Communities
and Development (EOCD) and local housing authorities.[1] ABC has
no official responsibility with respect to either the SHARP
program or the 707 program.

Eligibility for finding under the SHARP program involves a
competitive process which is advertised in the real estate
sections often or more newspapers, and legal notices. MHFA
maintains a computerized mailing list of developers, prepares
literature, and conducts a number of public work shops. EOCD also
advertises and maintains a mailing list for the c. 707 program.


Does G.L. c. 268A preclude your company s participation in the
affordable housing funding programs in connection with the DEF


No, but you are subject to certain restrictions discussed

Page 205


In your ABC position, you are a "state employee" within the
meaning of G.L. c. 268A, s.1(q). Three sections of the law are
relevant to your situation.

1. Section 4

Section 4 prohibits you from receiving compensation from or
acting as agent or attorney for a non-state party in relation to
any particular matter which the commonwealth or a state agency is
a party or has a direct and substantial interest. For example, if
your development company were preparing an application to a state
agency, you could neither appear before the agency on behalf of
the entity as an agent or attorney, nor receive compensation for
your services in connection with the application. The
prohibitions of s.4 will apply to your activities on behalf of
the company in connection with the SHARP and c. 707 programs,
inasmuch as the commonwealth is a party to, and has a direct and
substantial interest in, both the SHARP program and the c. 707
residential programs. Because the MHFA is a state agency, s.4
will also prohibit your involvement in matters before the MHFA
relating to the issuance of bonds and other financial

2. Section 7

Section 7 generally prohibits you from having a financial
interest in a contract made by a state agency. As a partner in a
development company. you will be deemed to have a financial
interest for s.7 purposes in any state contracts made by the
company. The Commission has previously concluded that the
arrangement by which MHFA provides programmatic funding pursuant
to the SHARP program, and the arrangement by which EOCD provides
programmatic funding pursuant to the c. 707 program, results in a
contract between the state agency and the development entity for
purposes of s.7. See, EC-COI-87-14.

There is an exemption, however, which would permit the
development company to receive the specific program funding
provided certain conditions are satisfied. Specifically, s.7(b)
permits a state employee to have a financial interest in a state
grant provided that developer selection is made after public
notice and provided further that the state employee files with
the Commission a statement making full disclosure of his interest
and the interest of his immediate family in the funding. In the
SHARP and c. 707 programs, the developer selection process is
sufficiently publicized to result in fair and open competition.
See, EC-COI-83-37; 83-35. Therefore, the development entity may
compete for the funding necessary to make the project financially
feasible, provided that you file a disclosure pursuant to this
section and avoid working for the company in connection with the
funding application.[2]

3. Section 23

Section 23 provides general standards of conduct applicable to
all public employees. Section 23(b) (3), for example, prohibits you
from appearing to be unduly influenced in the performance of your
official actions as an ABC employee as a result of your private
dealings with the development entity. To the extent that you might
have overlapping public and private dealings with DEF, MHFA, or
EOCD officials, you should disclose to your appointing official
your private relationship with the development entity so as to
dispel any appearance of undue influence or favoritism. This
disclosure must be in writing.

Further, s.23(b) (2) prohibits a state employee from using his
official position to secure for himself an unwarranted privilege
or exemption of substantial value. You will comply with this
paragraph by keeping your private development company activities
separate from your ABC work schedule, and by refraining from using
ABC resources for your company's benefit. If you have any questions
as to the applicability of this subsection, or any other subsection
of s.23, you may write to the legal division for further

[1] You state that the company with which you are associated will
not solicit program funds from the Department of Public Welfare or
the Department of Social Services regarding the Operation of
transitional housing and child care components of the DEF project
Since you will not be associated with soliciting of program funds
from these programs, it is unnecessary to discuss the application
of the conflict law regarding these funds. If the situation changes
and your development company intends to solicit such funds, you
should write for further clarification.

[2] We assume that your financial interest under s.7 will accrue
by virtue of your ownership interest in the company. If you plan
to perform personal services under these state contracts,
additional conditions will apply to you under G.L c. 268A, s.7(b).
and you should therefore renew your opinion request with us.


End Of Decision

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