Settlement  Disposition Agreement in the Matter of Noah Karberg

Date:	07/26/2023
Organization:	State Ethics Commission
Docket Number:	23-0013
Location:	Boston, MA
Referenced Sources:	G.L. c. 268A, the Conflict of Interest Law, as Amended by c. 194, Acts of 2011

Disposition Agreement

The State Ethics Commission (“Commission”) and Noah Karberg (“Karberg”) enter into this Disposition Agreement pursuant to Section 3 of the Commission’s Enforcement Procedures. This Agreement constitutes a consented-to final order enforceable in the Superior Court, pursuant to G.L. c. 268B, § 4(j). 

On November 17, 2022, the Commission initiated a preliminary inquiry, pursuant to G.L. c. 268B, § 4(a), into possible violations of the conflict of interest law, G.L. c. 268A, by Karberg.  On March 23, 2022, the Commission concluded its inquiry and found reasonable cause to believe that Karberg violated G.L. c. 268A, § 23(b)(3).

The Commission and Karberg now agree to the following findings of fact and conclusions of law:

Findings of Fact

1. Karberg is the manager of Nantucket Memorial Airport (“the Airport”), having been appointed to that position by the Airport Commission effective January 1, 2023.  Karberg was hired in 2013 as environmental coordinator by the prior Airport manager, who promoted him to assistant manager in 2017.  In each of these positions, Karberg has been a municipal employee of the Town of Nantucket.  At all times relevant to this matter, Karberg was assistant manager, an avid boater and fisherman, and a customer of Nantucket Marine, Inc.
2. Nantucket Marine, Inc. (“Nantucket Marine”) is a recreational marine vessel sale, service, and storage business located at 14 Sun Island Road in Nantucket.  John Sullivan and Sergey Chumak are the co-owners of the company.  Karberg views Chumak as a friend, and is friendly with both men, but does not socialize with either of them.   
3. As assistant manager, Karberg conceived of leasing an approximately one acre parcel of undeveloped Airport land (the “Parcel”), located at 10 Sun Island Road adjacent to the Nantucket Marine boatyard at 14 Sun Island Road.  The Parcel was inaccessible by public right-of-way because it was bordered by restricted airport property to the North and East, by town-leased ball fields to the West, and by Nantucket Marine to the South. 
4. Karberg had Nantucket Marine in mind as the potential lessee of the Parcel from the outset.  In August 2019, Karberg approached both the Airport manager and Nantucket Marine with the concept.  He used his personal cell phone to text Chumak about the idea that Nantucket Marine could use the Parcel for boat storage and followed up by drafting and emailing him a template letter by which Nantucket Marine could express to the Airport manager its interest in leasing Airport land for that purpose. 
5. That same month, Karberg discussed and coordinated with Chumak repairs to be made by Nantucket Marine to a used boat that Karberg had purchased from Nantucket Marine in July 2019.
6. At all relevant times, Karberg received the “local boater” discount on parts and services at Nantucket Marine.  Nantucket Marine provided a similar discount to other year-round residents of the Island.  From December 2019 through March 2022, Nantucket Marine invoiced Karberg for parts, repairs, and services to his boat, totaling approximately $40,000.  The amount invoiced reflected total savings by Karberg of almost $8,000 due to the discount he received as a local boater. 
7. At the request of the then-Airport-manager, Karberg took the lead in drafting the technical language for the Parcel lease request for proposals (“RFP”), including, but not limited to, recommending the minimum price per square foot for any qualifying proposal.  Nantucket’s chief procurement officer designated Karberg as the sole bid reviewer for the Parcel RFP.
8. Karberg disclosed neither his relationship with Nantucket Marine or its owners, nor the $8,000 in local boater discounts he had received from them, prior to accepting either the drafting lead or the sole reviewer role for the Parcel RFP.
9. From at least August 2019 through December 2022, Karberg emailed or texted Chumak periodically about repairs and other services that Nantucket Marine performed on his boat. 
10. Beginning in August 2019, Karberg periodically emailed or texted Chumak with updates and advice as the potential lease of the Parcel progressed through regulatory and permitting processes, and later the RFP process, occasionally serving as Nantucket Marine’s liaison to Airport staff. 
11. In November 2021, while working to secure approval for the lease of the Parcel, Karberg recommended to the Airport manager using an income-based methodology to set the minimum price.  The Airport manager accepted Karberg’s recommendation and directed him to use that methodology.  Applying that methodology, Karberg rejected as too high two professional appraisals received by the Airport, but used those appraisals as a starting point to set the range for, and then specify, the minimum qualifying bid.    
12. In applying that income-based methodology, however, Karberg made a mathematical error in his calculation, leading him to recommend a minimum qualifying bid of $0.84 per square foot, a figure that was significantly lower than the value that the methodology would have produced without the error.  This error came to light during the preliminary inquiry conducted by the State Ethics Commission.   
13. Karberg showed his steps in performing the calculation, including the step with the error identified by the State Ethics Commission, to the then-Airport-manager, the Airport’s office manager, and a compliance and land use specialist at the Federal Aviation Administration, charged with approving the Parcel for non-aeronautical use.  None of these persons identified the mistake and the Airport manager accepted Karberg’s recommended minimum qualifying bid.    
14. As a result, the Airport published the RFP with a minimum bid of $0.84 per square foot for the Parcel. 
15. In August 2022, Nantucket Marine was the sole bidder in response to the RFP.
16. Karberg, as sole reviewer, awarded the Parcel RFP to Nantucket Marine at a rate of $0.85 per square foot on August 17, 2022. 
17. On September 7, 2022, Sullivan signed a 30-year lease for the Parcel on behalf of Nantucket Marine, commencing October 1, 2022.  Article Three of the Lease provides that the Base Rent shall be increased on each five-year anniversary, including by adjustments to fair market value “by [] a qualified independent real estate appraiser.” 
18. Following the preliminary inquiry, Karberg reviewed the error found by the State Ethics Commission and, in so doing, uncovered other mistakes and miscalculations which partially offset the impact of the original error on the minimum price per square foot.  Correcting for just the error uncovered by the State Ethics Commission, the income-based methodology Karberg used would have produced a minimum bid of $1.77 per square foot for the Parcel.  Correcting for all errors, Karberg believes that the methodology would have resulted in a range of $0.72 to $1.40 per square foot and that he would have recommended $1.03 per square foot for the minimum bid.  Had a qualified bidder agreed to pay $1.03 per square foot for the Parcel, the Airport would have received an additional $39,200 in the first five years of the Lease. 
19. Karberg’s counsel reported the errors in his methodology, and the resulting impacts on the Lease valuation for the Parcel, to the Airport Commission’s counsel. 

Conclusions of Law

Section 23(b)(3)

20. Section 23(b)(3) prohibits a municipal employee from, knowingly or with reason to know, acting in a manner which would cause a reasonable person, knowing all of the relevant circumstances, to conclude that anyone can improperly influence or unduly enjoy the employee’s favor in the performance of his official duties or that the employee is likely to act or fail to act as a result of kinship, rank, position or undue influence of any party or person.  The section further provides that it shall be unreasonable to so conclude if the employee has disclosed in writing to his appointing authority the facts which would otherwise lead to such a conclusion.
21. As assistant manager of the Airport, Karberg was a municipal employee as defined in the conflict of interest law and, as such, subject to § 23(b)(3).
22. Karberg’s appointing authority as assistant manager of the Airport was the Airport manager.
23. As set forth above, that Karberg was a regular customer of Nantucket Marine, was friendly with its owners, and, from December 2019 through March 2022, received from them a boater’s discount of almost $8,000 on parts for and work on his boat, are all relevant circumstances relating to his participation in the Parcel RFP process.  
24. As a public employee required to know his obligations under the conflict of interest law, Karberg should have known to disclose the facts of his private relationship with Nantucket Marine and its owners prior to engaging in official Airport business with respect to the lease of the Parcel in which they had a foreseeable interest.  Given all of the relevant facts, a reasonable person would conclude that Nantucket Marine and its owners could improperly influence or unduly enjoy Karberg’s favor in his performance of his official duties as Airport assistant manager, including in the Parcel RFP process, or find that Karberg likely acted, or failed to act in his official capacity, because of his relationship with Nantucket Marine and its owners. 
25. Karberg did not make a disclosure of the relevant facts to his Airport appointing authority prior to acting on the Parcel RFP.  Had Karberg disclosed the relevant details of his private relationship with Nantucket Marine and the company’s owners, to his appointing authority, the Airport manager, the Airport manager could have assigned the Parcel RFP to an employee who did not have a conflict of interest, potentially avoiding the costly error Karberg made in calculating the price for the Parcel.
26. Therefore, by, as described above, knowingly or with reason to know, acting in a manner which would cause a reasonable person, knowing all of the relevant circumstances, to conclude that Nantucket Marine and/or its owners could improperly influence or unduly enjoy Karberg’s favor in the performance of his official duties as Airport assistant manager or that Karberg was likely to act or fail to act as a result of undue influence of Nantucket Marine and/or its owners, Karberg violated Section 23(b)(3).

Disposition

In view of the foregoing violation of G.L. c. 268A by Karberg, the Commission has determined that the public interest would be served by the disposition of this matter without further enforcement proceedings, on the following terms and conditions agreed to by Karberg:

(1)       that Karberg pay to the Commonwealth of Massachusetts, with such payment to be delivered to the Commission, the sum of $4,000 as a civil penalty for violating G.L. c. 268A, § 23(b)(3); and

(2)       that Karberg waive all rights to contest, in this or any other administrative or judicial proceeding to which the Commission is or may be a party, the findings of fact, conclusions of law and terms and conditions contained in this Agreement.

 

By signing below, Karberg acknowledges that he has personally read this Disposition Agreement, that it is a public document, and that he agrees to its terms and conditions.

STATE ETHICS COMMISSION