Opinion EC-COI-89-26

Date: 08/29/1989
Organization: State Ethics Commission

A former member of a committee which supervises investments for certain state agencies is prohibited by section 5(b) from appearing for one year before any state agency in connection with an investment in an annuity contract over which he had official responsibility as a committee member, even if he had not previously participated in that matter.

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Until recently, you served as a member of a committee (Committee), which is generally responsible for the supervision of investments for certain state agencies.

You are currently a Vice President at a firm XYZ and you held this position while you served on the Committee. XYZ provides investment management services to institutional investors. One of the services offered by XYZ is an annuity contract. The state agencies are considering hiring XYZ as a money manager for such an annuity contract. The annuity contract assets would be held in an investment account which is managed by XYZ. XYZ would manage the investment account with the goal of providing a return at a higher yield than the bond market index. The funds for this annuity contract will be derived from cash reserves which are currently uninvested state agency funds. You state that you did not participate in or approve any decision made by other state officials to invest these funds into any annuity contract for which XYZ may be considered.

The evaluation of applicants to manage the state agency funds is conducted by state officials. Submissions of prospectus are evaluated by the officials year round. If a proposal meets certain criteria, the company is invited to interview with the officials. Each member rates the company's interview and a file is maintained for each interviewee. As the need arises, the officials will select a company. All potential companies selected to manage state agency funds are referred to an independent company for its evaluation and opinion of the proposed investment product. If a positive report is received, a contract is issued to the company.

Advisors from XYZ were interviewed by these state officials as a potential money manager for the state agencies. The state agencies were considering whether to invest funds into the XYZ product prior to your resignation from the Committee.


If XYZ is selected to be money managers for the state agencies' annuity contract, may you participate in the management of the agencies' funds?


Yes, subject to the restrictions of s.5(b).


As a former member of the Committee, you are considered a former state employee for the purposes of G.L. c. 268A. Accordingly, the provisions of s.s.5 and 23(c) presently apply to you.

Section 5

Section 5(a) prohibits a former state employee from knowingly acting as an agent or attorney for, or receiving compensation directly or indirectly from anyone other than the commonwealth or a state agency,[1] in connection with any particular matter[2] in which the commonwealth or a state agency is a party or has a direct and substantial interest and in which he participated while he was a state employee. If you approved an investment decision made by other state officials, you "participated" in that decision for the purposes of s.5. More than one person may participate in a particular matter. See, EC-COI-86-23. Furthermore, as a Committee member, your active oversight of and tacit approval of any of the state officials' actions regarding the state agency's funds may be considered personal and substantial participation in those matters. See, EC-COI-89-7. On the other hand, mere authorization given by the Committee to answer a letter may not constitute personal and substantial participation. Id. Additionally, the prohibitions of s.5 extend only for the duration of the particular matter in which you participated. See, EC-COI-81-114; 88-14. For example, if, as a Committee member, you approved or recommended that a certain amount of uninvested state agency funds be invested into an annuity contract, that approval or recommendation would be considered a particular matter. Under s.5(a), as a former state employee you could not then be paid by or act as a representative of XYZ in connection with that recommendation. See, EC-COI-88-14.

Under s.5(a), we conclude that you would not be precluded from acting as a money manager for XYZ on a potential annuity contract for the state agencies. We base this conclusion on your representations that you did not participate in any Committee approval or determination in connection with the state officials' decision to invest those cash reserves.

Section 5(b), on the other hand, pertains to

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particular matters which were the subject of your official responsibility as a Committee member. Section 5(b) prohibits you as a former state employee, for one year after leaving state service, from personally appearing on behalf of someone other than the commonwealth before any court or state agency in connection with any particular matter in which the state is a party or has a direct and substantial interest where the particular matter was under your official responsibility[4] within the two years preceding your termination from state service. Your official responsibility as a Committee member would include particular matters which the Committee delegated to others to perform. See, EC-COI-85-50; 89- 7. The Commission has previously stated that the "keynote of official responsibility is the 'potentiality' of directing agency action and not the actual exercise of power." See, EC-COI-87-17 (discussing the application of official responsibility under s.4). Thus, matters under your official responsibility would include particular matters which the Committee has delegated others to perform. See, EC-COI-85-50; In the Matter of Donald Zerendow, 1988 SEC 352 (disposition agreement under s.5(b)). For the purposes of this section, a personal appearance would include any telephone calls or correspondence made by you on behalf of to any state agency in connection with the investments which were pending under your official responsibility during the last two years of your Committee position. See, EC-COI-87-27; 89-7.

The decision as to whether the state agencies should invest in XYZ's annuity contract was under consideration while you were a Committee member. Even though you did not participate in the process leading to this decision, by statute you nonetheless had official responsibility for that particular matter. See, s.23(d). Since this matter was pending under your official responsibility, you are barred under s.5(b) from appearing, for one year, before any state agency in connection with the XYZ annuity contract. While s.5(b) would not preclude you from working for XYZ on in- house matters on the annuity, you may not make personal phone calls or write letters concerning that investment. See, EC-COI-88-17; 85-21. If the restrictions placed on you by s.5(b) cannot be implemented practically, then you may not act as the money manager for the state agencies funds.

In addition, the provisions of s.23(c) apply to you as a former state employee. That section prohibits you from disclosing or using confidential information which you learned in your Committee position to further your personal interests. For the purposes of this section, confidential information is that which is exempted from the definition of a public record under G.L. c. 4, s.7.

While under these facts you are not prohibited under s.5 from contacting your former state agency on other matters, you should be aware of the fact that your former Committee colleagues and individuals who remain state employees are prohibited under s.23 from granting you any preferred or favored treatment in their dealings with XYZ.

In addition, the members of the state agencies are subject to the provisions of s.23(b).[5] Therefore, if the state officials make a determination to invest in this product they should comply with the s.23(b)(3) requirements by filing a public disclosure. By doing so, they would remove any inference of undue favoritism or improper influence affecting their decision.


[1] "State agency," any department of a state government including the executive, legislative or judicial, and all councils thereof and thereunder, and any division, board, bureau, commission, institution, tribunal or other instrumentality within such departments and any independent state authority, district, commission, instrumentality or agency, but not an agency of a county, city or town.

[2] "Particular matter," 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 and petitions of cities, towns, counties and districts for special laws related to their governmental organizations, powers, duties, finances and property.

[3] "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.

[4] "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.

[5] Section 23(b)(3) states: "No current officer or employee of a state, county or municipal agency shall knowingly, or with reason to know: (3) act in a

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manner which would cause a reasonable person, having knowledge of the relevant circumstances, to conclude that any person can improperly influence or unduly enjoy his favor in the performance of his official duties, or that he is likely to act or fail to act as a result of kinship, rank, position or undue influence of any party or person. It shall be unreasonable to so conclude if such officer or employee has disclosed in writing to his appointing authority or, if no appointing authority exists, disclose in a manner which is public in nature, the facts which would otherwise lead to such a conclusion.