Settlement  In the Matter of John DeRosa

Date:	03/27/2019
Organization:	State Ethics Commission
Docket Number:	19-0002

The Commission approved a disposition agreement in which Former North Adams City Solicitor John DeRosa admitted that he violated section 17, 19, and 23 of the conflict of interest law by representing and doing compensated legal work for parties other than the city in connection with proposed North Adams redevelopment projects while he was City Solicitor, and by advising the city on those projects as City Solicitor during that same time. DeRosa paid a $7,500 civil penalty.

Disposition Agreement

The State Ethics Commission ("Commission") and John DeRosa ("DeRosa") 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 May 18, 2017, the Commission initiated, pursuant to G.L. c. 268B, § 4(a), a preliminary inquiry into possible violations of the conflict of interest law, G.L. c. 268A, by DeRosa. On November 16, 2017, and March 29, 2018, the Commission amended the preliminary inquiry. On April 19, 2018, the Commission concluded its inquiry and found reasonable cause to believe that DeRosa violated G.L. c. 268A, §§ 17, 19, 20, and 23.

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

1. DeRosa, a resident of North Adams, was at all relevant times the City Solicitor of North Adams and, as such, a municipal employee of the City.
2. The North Adams Mayor ("Mayor") appoints the City Solicitor.
3. Western Gateway Heritage State Park ("Heritage Park" or the "Park") is a 7 acre property consisting of several historic railroad buildings located in the business section of North Adam.
4. Heritage Park is owned by the North Adams Redevelopment Authority ("NARA"). NARA is a City agency whose purpose is to engage in urban renewal projects.
5. Heritage Park tenants pay rent to NARA, except the Department of Conservation and Recreation ("DCR") that operates a visitor center in the Park, and the North Adams Historic Commission that operates a local museum of science and history in the Park.
6. The Massachusetts Museum of Contemporary Art ("MASS MoCA"), a nonprofit corporation, is a museum housed in a converted factory building complex, that was a public/private economic development project funded in 1988 by a special act of the Legislature in the amount of $35,000,000.
7. MASS MoCA is also a commercial landlord, which leases and rents space to tenants. In 2018, the lease and rental payments accounted for a little more than ten percent of the museum's eleven-million-dollar operating revenue.
8. MASS MoCA is located less than one half mile from Heritage Park.
9. At all relevant times, DeRosa was the Clerk of MASS MoCA's Board of Trustees (the "MASS MoCA Board") and its legal counsel. During the years 2011, 2012 and 2014, he was also the MASS MoCA Board's Treasurer.
10. At all relevant times, MASS MoCA compensated DeRosa for his legal services by providing him with a significant annual credit against his total rent for office space he leased in a MASS MoCA building.
11. In 2001, DeRosa, as MASS MoCA's legal counsel formed the North Adams Development Trust, Inc. ("NADT"), a nonprofit corporation to acquire real estate for MASS MoCA. NADT's Articles of Organization state, in part, that its purpose is "to exclusively support and operate for the benefit of MASS MoCA.
12. From its creation in 2001 until November 5, 2012, DeRosa and Joseph Thompson, Director of MASS MoCA ("Thompson") served as directors and officers of NADT. During that period MASS MoCA did not acquire real estate.
13. In 2011, the City was responsible for the Park's upkeep and operating expenses Heritage Park which had few tenants and had fallen into disrepair.
14. In or before 2011, Mass MoCA was interested in the redevelopment of Heritage Park. As MASS MoCA's legal counsel, DeRosa was aware of this interest.
15. In 2011, DeRosa, as City Solicitor, advised the Mayor regarding the disposition of Heritage Park. DeRosa discussed with the Mayor asking MASS MoCA to redevelop the Park, and if the Museum was not interested, the idea of the Museum soliciting its friends to invest in the Park.
16. In 2011, DeRosa, with Thompson and Mary Grant, President of MCLA, formed the North Adams Partnership ("NAP"), a nonprofit corporation whose mission was to enhance the economy of North Adams and to carry out the revitalization, development and redevelopment of the neighborhoods in North Adams, particularly the neighborhoods that adjoin and impact the Museum.
17. From 2011 to 2015, DeRosa served as an officer of NAP. In 2011 and 2012, DeRosa was also a NAP director.
18. According to tax records, NAP paid DeRosa $57,481; $52,000; and $6,000 in fiscal years 2014, 2015 and 2016^[1], respectively.
19. From September to December 2011, two MASS MoCA employees, Thompson and the Head of Real Estate and Development Blair Benjamin ("Benjamin") drafted an RFP to be issued by NARA to find a private entity to redevelop Heritage Park ("the Park RFP").
20. DeRosa, as Mass MoCA's legal counsel, reviewed a draft of the Park RFP and provided legal advice to Thompson and Benjamin. At the time that DeRosa reviewed the Park RFP, DeRosa was aware that MASS MoCA had an interest in responding to the Park RFP.
21. DeRosa then submitted the draft RFP to Mike Nuvallie ("Nuvallie"), the City's Director of the Office of Community Development, for review.
22. On December 8, 2011, at the request of the Mayor, DeRosa, as City Solicitor, appeared at a NARA meeting with the Mayor, and advised the NARA members that the Park RFP should be issued to find a private entity to redevelop Heritage Park.
23. On December 15, 2011, DeRosa appeared at a NARA meeting with the Mayor and advised the NARA members that the Park RFP was complete and that, if NARA did not receive acceptable responses, NARA could re-issue the Park RFP.
24. On December 15, 2011, NARA approved the Park RFP and it was issued with a deadline of February 2, 2012.
25. Between December 2011 and January 2012, Thompson and Benjamin drafted a response to the Park RFP on behalf of MASS MoCA. DeRosa reviewed and revised the response as Mass MoCA's legal counsel.
26. On January 22, 2012, there was a meeting of the MASS MoCA Board during which the Board discussed MASS MoCA's interest in redeveloping Heritage Park and considered the Response to the Park RFP. DeRosa was present at the meeting in his role as MASS MoCA Trustee. The Board was concerned about the effect that the redevelopment of Heritage Park project would have on MASS MoCA's limited resources and decided not to submit the Response.
27. DeRosa, as MASS MoCA legal counsel, gave legal advice to Thompson regarding the legal structure that the Museum might use should it decide to purchase the Park. DeRosa suggested that the Museum might create a separate LLC and DeRosa provided a sample prototype operating agreement to Thompson.
28. DeRosa as MASS MoCA's legal counsel, also advised Thompson that MASS MoCA could utilize its existing corporation, NADT, to respond to the Park RFP. DeRosa discussed with Thompson the idea that a volunteer group might file the response using NADT.
29. On or about February 1, 2012, DeRosa, as MASS MoCA's legal counsel, amended the Articles of Organization of NADT. This amendment changed the name of the corporation but did not change the officers.
30. As of February 2012, DeRosa and Thompson were the sole officers of NADT.
31. In or about February 2012, the Response was modified by Thompson and the MASS MoCA staff to be submitted by MASS MoCA through NADT. DeRosa, as MASS MoCA's legal counsel, reviewed the modified response ("NADT's Proposal").
32. Neither Thompson, MASS MoCA, nor NADT, submitted NADT's Proposal to the Park RFP in February 2012.
33. On February 2, 2012, the City received one response to the Park RFP from an unrelated party. The Mayor, unsatisfied with the response, asked DeRosa whether the City could issue a second Park RFP.  DeRosa advised the Mayor that a second Park RFP could be issued.
34. On February 13, NARA approved the issuance of a second Park RFP.
35. From February 2012 to March 2012, DeRosa, as City Solicitor, revised the second Park RFP. During this time, DeRosa was aware that MASS MoCA, through NADT, had an interest in responding to the second Park RFP.
36. On March 25, 2012, DeRosa sent a revised draft of the second Park RFP to City Community Development Director Nuvallie. Responses to the second Park RFP were due on June 1, 2012.
37. On March 26, 2012, DeRosa, as City Solicitor, met with DCR regarding Heritage Park.
38. On March 26, 2012, DeRosa was aware that MASS MoCA, through NADT, had an interest in responding to the second Park RFP.
39. On April 19, 2012, the second Park RFP was presented to NARA. DeRosa, as City Solicitor advised the NARA members on the expected steps to be taken after a proposal was accepted. The second Park RFP was issued on May 2, 2012.
40. In or about May 2012, DeRosa, as MASS MoCA's legal counsel, revised and reviewed NADT's Proposal to the second Park RFP.
41. On May 30, 2012, NADT filed a Proposal to the second Park RFP ("NADT's Second Proposal") with the City. NADT's Second Proposal was signed by Bruce Grinnell as Chairman of NADT. As of this date, DeRosa was an officer of NADT.
42. Thompson and DeRosa discussed how the Museum might divest itself of its relationship with NADT. DeRosa, as MASS MoCA's legal counsel, advised Thompson that he and Thompson resign their positions, and DeRosa should file a change of officers and directors form with the Secretary of State's office.
43. A Certificate of Change of Directors for NADT which named Grinnell, Malcolm Smith, and Duncan Brown as officers of NADT was signed on November 2, 2012 and received by the Secretary of State's office on November 5, 2012.
44. At the June 19, 2012 NARA meeting, NADT's Proposal was reviewed. At the end of the meeting, NADT's Proposal was accepted by NARA pending approval from state agencies.
45. NADT's Second Proposal stated that the redevelopment project would work under contract and in collaboration with Mass MoCA.  Mass MoCA would receive financial compensation for the work.
46. At the June 19, 2012 NARA meeting, DeRosa, answered questions about NADT's Second Proposal.
47. DeRosa advised the Mayor that because the park property was part of an Urban Renewal Plan, it was not subject to the procurement provisions of Chapter 30B; but that the Mayor could issue a request for proposals (RFP) under the provisions of Chapter 30B.
48. On June 24, 2013, more than a year after NADT submitted its Second Proposal, DeRosa filed a Disclosure of Conflict of Interest under c. 268A, Section 23(b)(3). In the disclosure, he stated that he did not draft the RFP. The disclosure did not address DeRosa's role as legal counsel for MASS MoCA.
49. In the fall 2013 and in February 2014, DeRosa, as president of NAP, attended meetings with DCR regarding Heritage Park.
50. In the spring of 2015, the Heritage Park Project was abandoned.
51. Shortly after, DeRosa suggested to the Mayor that he and DeRosa speak with Thomas Krens ("Krens"), the founder of MASS MoCA in the 1980s.
52. In March 2015, DeRosa and the Mayor approached Krens regarding the redevelopment of Heritage Park. Krens proposed creating the Extreme Model Railroad and Contemporary Architecture Museum ("EMRCA Museum"). It was estimated that the EMRCA Museum would generate rent payments of over half a million dollars a year to the City through NARA.
53. In October 2015, Krens requested $100,000 from NAP for a Concept Development Study to advance the EMRCA Museum project. NAP provided $50,000 to Krens through his company, Global Cultural Asset Management ("GCAM") for the Concept Development Study.
54. In December 2015, the City began to provide rent-free office space at Heritage Park to GCAM to advance the development of the EMRCA Museum.
55. In January 2016, DeRosa, on behalf of Krens, drafted and filed corporate documents for EMRCA.
56. In January 2016, DeRosa, as City Solicitor, and on behalf of the City, edited and reviewed a Memorandum of Understanding ("MOU") between the City, NAP, and GCAM regarding the EMRCA Museum.
57. On January 8, 2016, the Mayor and Krens signed the MOU.
58. In April 2016, DeRosa, in his role as NAP director, participated in drafting a solicitation email to potential investors regarding the EMRCA project.
59. In July 2016, when GCAM staff contacted the Mayor regarding issues raised as tenants of the park, the Mayor directed the GCAM staff to contact DeRosa, as City Solicitor, for assistance.
60. In September 2016, NAP agreed to lend $200,000 to EMRCA. An attorney, on behalf of EMRCA, sent a convertible note subscription agreement and promissory note regarding this loan to DeRosa, and asked DeRosa whether he agreed with the terms of the documents.
61. In November 2016, DeRosa participated as City Solicitor by reviewing an RFP for the City regarding architectural services for the EMRCA Museum.

Conclusions of Law

62. As City Solicitor, DeRosa, was a municipal employee as that term is defined in G.L. c. 268A, §1(g).

Section 17(a)

63. Section 17(a) of G.L. c. 268A prohibits a municipal employee from, otherwise as provided by law for the proper discharge of official duties, directly or indirectly receiving compensation^[2] from anyone other than the municipality in relation to a particular matter in which the municipality is a party or has a direct and substantial interest.
64. Contracts and decisions relating to the redevelopment of Heritage Park were particular matters.
65. North Adams had a direct and substantial interest in particular matters involving Heritage Park because the property is owned and managed by the City, through the NARA.

Compensation from MASS MoCA

66. By receiving an annual credit against the total cost of his rent for office space in exchange for performing legal work for MASS MoCA including reviewing, and revising drafts of the Park RFP as written by MASS MOCA employees, and reviewing and revising drafts of the responses to the Park RFP, DeRosa received compensation from someone other than the City in relation to particular matters, in which the City had a direct and substantial interest. DeRosa's receipt of this compensation was not as provided by law for the proper discharge of his official duties as City Solicitor. By doing so, DeRosa violated § 17(a).

Compensation from the NAP

67. By receiving compensation from the NAP for work performed for the partnership, including meeting with DCR on behalf of NAP, DeRosa received compensation from someone other than the City in relation to a particular matter, the City's decision to pursue the redevelopment of Heritage Park in which the City had a direct and substantial interest. DeRosa's receipt of this compensation was not as provided by law for the proper discharge of his official duties as City Solicitor. By doing so, DeRosa violated § 17(a).

Section 17(c)

68. Section 17(c) of G.L. c. 268A prohibits a municipal employee from otherwise than in the proper discharge of his official duties acting as agent for anyone other than the municipality in connection with a particular matter in which the municipality is a party or has a direct and substantial interest.

Acting as Agent for the NAP

69. By representing the interests of the NAP during meetings with DCR regarding the redevelopment of Heritage Park, DeRosa acted as agent for someone other than the City in connection with a particular matter, the City's decision to redevelop the Park, in which the City had a direct and substantial interest. DeRosa's representation of the NAP was not in the proper discharge of his duties as City Solicitor. By doing so, DeRosa violated § 17(c).

Acting as Attorney for Krens

70. The decision to enter the MOU regarding EMRCA Museum was a particular matter.
71. North Adams had a direct and substantial interest in the particular matter because the EMRCA Museum would potentially provide half a million dollars in rent to the City via NARA.
72. By, in January 2016, drafting and filing corporate documents on behalf of EMRCA, DeRosa acted as attorney for someone other than the City in connection with particular matters in which the City was a party and/or had a direct and substantial interest. DeRosa's representation of EMRCA was not in the proper discharge of his duties as City Solicitor. By doing so, DeRosa violated § 17(c).

Section 19

73. Except as otherwise permitted,^[3] § 19 of G.L. c. 268A prohibits a municipal employee from participating^[4] as such an employee in a particular matter^[5] in which, to his knowledge, he, an immediate family member ^[6] his partner or a business organization in which he is serving as an officer, director, trustee, or employee has a financial interest.^[7]
74. Decisions related to the redevelopment of Heritage Park were particular matters.
75. DeRosa participated in these particular matters as a City Solicitor by:

        a.  reviewing and revising the Park RFP from September to December 2011;
        b.  reviewing and revising the second Park RFP from April 2012 to May 2012;
        c.  advising the Mayor and NARA regarding the Park RFPs from December
             2011 to June 2012; and
        d.  discussing the Heritage Park redevelopment plan at meetings with DCR
             in the fall of 2013 and February 2014.

76. MASS MoCA is a business organization^[8] because its activities involve regularly organizing and presenting exhibitions of art and performing arts events; and renting space to commercial tenants. These activities generate income for the support of the museum.
77. MASS MoCA, a business organization in which DeRosa, as compensated legal counsel, was an employee and, as Treasurer, was a board member, had a financial interest in the above-listed particular matters, as MASS MoCA would benefit financially from the successful redevelopment of Heritage Park.
78. At the time of his participation as City Solicitor, DeRosa knew that MASS MoCA, had a financial interest in the above-listed particular matters.
79. Accordingly, by participating as City Solicitor in the above-listed particular matters concerning the redevelopment of Heritage Park, DeRosa violated § 19.

Section 23(b)(3)

80. Section 23(b)(3) of G.L. c. 268A prohibits a municipal employee from knowingly, or with reason to know, acting in a 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. The section further provides that 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, discloses in a manner which is public in nature, the facts which would otherwise lead to such a conclusion.
81. From 2011 through 2017, by participating as City Solicitor regarding the redevelopment of Heritage Park while having private relationships with MASS MoCA, NAP, and Krens, DeRosa knowingly or with reason to know, acted in a manner which would cause a reasonable person, having knowledge of all the relevant circumstances, to conclude that MASS MoCA, NAP, and/or Krens could unduly influence or enjoy DeRosa's favor in the performance of his official duties. DeRosa did not file a disclosure that was sufficient to dispel this appearance of undue influence and favoritism. In so acting, DeRosa violated G.L. c. 268A, § 23(b)(3).

Resolution

In view of the foregoing violations of G.L. c. 268A by DeRosa, 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 DeRosa:

1. that DeRosa pay to the Commonwealth of Massachusetts, with such payment to be delivered to the Commission, the sum of $7,500.00 as a civil penalty for violating G.L. c. 268A, §§17, 19, and 23; and
2. that DeRosa 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.

[1] The payment in fiscal year 2016 occurred on or about July 2015.

[2] ''Compensation" means any money, thing of value or economic benefit conferred on or received by any person in return for services rendered or to be rendered by himself or another. G.L. 268A, § 1(a).

[3] None of the exemptions applies.

[4] "Participate" means to 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. G.L. c. 268A, § 1(j).

[5] "Particular matter" means 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. G.L. c. 268A, § 1(k).

[6] "Immediate family" means the employee and his spouse, and their parents, children, brothers, and sisters. G.L. c. 268A, § 1(e).

[7] "Financial interest" means any economic interest of a particular individual that is not shared with a substantial segment of the population of the municipality. See Graham v. McGrail, 370 MASS. 133 (1976). This definition has embraced private interests, no matter how small, which are direct, immediate, or reasonably foreseeable. See EC-COI-84-98. The interest can be affected in either a positive or negative way. EC-COI-84-96.

[8] In determining whether a non-profit organization is substantially engaged in business activities, the Commission has considered the following factors: (1) whether the organization's activities involve commerce, trade, the sale of goods or the provision of services in exchange for fees (or other compensation) or any other activities, including professional activities, that are commonly understood to be business activities; (2) whether the organization's business activities are engaged in for its support or profit; (3) whether the organization's business activities are continuously or regularly engaged in; and (4) whether the organization's business activities constitute a significant rather than a de minimus portion of the total activities of the organization. EC-COI-07-2. MASS MOCA is a business organization under this definition because its activities involve the real estate transactions and the sale of goods.