STATE OF NEW YORK
STATE ETHICS COMMISSION

Advisory Opinion No. 90-2:

Application of §§73 and 73-a of the Public Officers Law to the members of the board of trustees of the Interest on Lawyer Account Fund and its employees.

INTRODUCTION

The following advisory opinion is issued in response to an inquiry as to whether the members of the Board of Trustees of the Interest on Lawyer Account (IOLA) and its employees are subject to the provisions of §§73 and 73-a of the Public Officers Law.

Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by §94(15) of the Executive Law, the Commission hereby renders its opinion that the members of the Board of Trustees of IOLA may be subject to the provisions of §73-a of the Public Officers Law if they are designated as serving in policy-making positions and, if so subject, would become subject to §73(3)(b) of that law. The members of the Board of IOLA are not otherwise subject to §73. The employees of IOLA are subject to §73 and, if they earn in excess of the filing rate required for the filing of an annual statement of financial disclosure or are designated as serving in a policy-making position, are subject to §73-a and must file an annual statement of financial disclosure.1

BACKGROUND

The IOLA Fund was established by §97-v of the State Finance Law, in which the composition of the Fund and the duties of its Board of Trustees are set forth. Subdivision 1 of §97-v reads as follows:
1. There is hereby established in the custody of the State Comptroller a fiduciary fund to be known as the New York interest on lawyer account (IOLA) fund. A board of trustees shall be appointed to administer the New York IOLA Fund.
There are fifteen members on the Board of Trustees of IOLA. The members, at least eight of whom must be attorneys admitted to practice in New York, are appointed by the Governor. Six members are appointed upon recommendation: two each as recommended by the Temporary President of the Senate and the Speaker of the Assembly2 and one each as recommended by the minority leader of each house of the Legislature. Additionally, two members, each of whom must be attorneys, are appointed on recommendation of the New York Court of Appeals. The Governor designates one of the members as chair of the Board.

The duties and responsibilities of the members of the Board of Trustees of IOLA include receiving, holding and managing money and property received from any source. IOLA distributes the interest on these funds as grants to not-for-profit tax exempt entities for the delivery of civil legal services to those in need. Only 75% of the funding available must be used for such purpose. Remaining funds may be allocated for the improvement of the administration of justice, including distribution to groups underserved by legal services; e.g. the elderly and the handicapped. To carry out its duties, the Fund may hire personnel, for whom no more than 10% of the IOLA funds may be expended.

Section 97-v specifically provides that the members of the Board of IOLA are considered employees of the State for purposes of §17 of the Public Officers Law.3 The members of the Board serve without compensation and only receive actual and necessary expenses to perform their services.

1985 ATTORNEY GENERAL OPINION

In 1985, the IOLA Board asked the New York State Attorney General whether the officers and employees of IOLA were subject to §73 of the Public Officers Law.4 The Attorney General determined that the then §73 did not apply to officers and employees of IOLA, since IOLA did not meet the definition of a State agency.5 Section 73, then, defined State agency as:
. . . any state department, or division, board, commission, or bureau of any state department or any public benefit corporation or public authority at least one of whose members is appointed by the governor. (emphasis added)
In his Opinion, the Attorney General pointed out the restrictions on State officers and employees on sales of goods or services to State agencies, on appearances before such agencies and the Court of Claims and on post-employment activities (the "revolving door") contained in §73. He found that §97-v of the State Finance Law was silent as to whether IOLA was a State department or a division, board, commission or bureau of a State department and that IOLA was not designated as a public benefit corporation or public authority. Since IOLA was established with the intention that individuals active in the private sector would serve as members of the IOLA Board and the statute creating IOLA did not state whether IOLA was a State department or part of a State department, the Attorney General concluded that it did not appear that it was the intent of the Legislature to subject the IOLA Board members to the restrictions of §73 as it appeared in 1985. Therefore, he concluded that the IOLA officers and employees were not subject to the then §73 of the Public Officers Law.

DISCUSSION

The Ethics in Government Act of 1987 substantially amended §73 of the Public Officers Law and added §73-a, which requires those covered by it to file annual statements of financial disclosure. Because the Formal Opinion issued by the Attorney General on the application of §73 to the members and employees of the IOLA Board interpreted the former §73 before the 1987 amendments, the Commission must compare the language of the amended §73 with the prior section to determine if that Formal Opinion can be followed today. In other Advisory Opinions issued by the Commission, we have adopted previous Attorney General interpretations of §73 where we have found that the language or the application of the section did not change as a result of the 1987 amendments to the law. As a result of the amendments to §73 and the addition of §73-a to the Public Officers Law, we must reach a different conclusion than did the Attorney General in 1985.

The §73 definition of "state agency", as applied by the Attorney General, did not materially change after the 1987 amendment. The amendment to that definition reads as follows:

(g) the term "state agency" shall mean any state department, or division, board, commission, or bureau of any state department [or], any public benefit corporation [or], public authority or commission at least one of whose members is appointed by the governor, or the state university of New York or the city university of New York, including all their constituent units except community colleges and the independent institutions operating statutory or contract colleges on behalf of the state.6
The question as to whether particular State officers or employees are covered by §73 is not resolved by the definition of "state agency." We must look further to determine whether the Board members and employees IOLA Fund is covered by the provisions of §§73 and 73-a. Under §73(1)(i)(iii), prior to July 1, 1989, the term "state officer or employee" is defined as:
. . . (iii) officers and employees of state departments, boards, bureaus, divisions, commissions, councils or other state agencies . . . .
Section 73-a(1)(c)(ii) currently defines "state officer and employee" as follows:
. . . officers and employees of statewide elected officials, officers and employees of state departments, boards, bureaus, divisions, commissions, councils or other state agencies, who receive annual compensation in excess of the filing rate established by paragraph (l) of this subdivision or who hold policy-making positions, as annually determined by the appointing authority . . .
To determine whether the members and employees of the IOLA Board are subject to the Ethics in Government Act of 1987, we must look at the definitions of State officer and employee and not only at the definition of State agency. Whether one is a State officer or employee does not depend on whether the IOLA Board is a State agency as that term is defined in either §§73 or 73-a. The critical distinction is whether, under the definition of State officer and employee, the IOLA Board is a State department, board, bureau, division, or other State agency. If the IOLA Board is one of the entities contained in the definition of State officer and employee, its members and employees would be covered by the Ethics in Government Act. Although §97-v of the State Finance Law may not specifically state whether the IOLA Fund is a State department or a division, board, commission, or bureau of a State department for the purposes of the definition of "state agency," we conclude that the IOLA Board of Trustees is a State board for the purposes of the definition of State officer and employee.7 The members of the Board are appointed by the Governor, eight of the members of the Board are designated by public officials of the Legislature and Court of Appeals, the Board employees are State employees and the function of the Board to dispense interest earned in the IOLA account to appropriate legal service organizations in the State is a public function.8

In creating IOLA, the Legislature specifically defined IOLA members as employees of the State for purposes of §17 of the Public Officers Law.9 The IOLA Board of Trustees was given express authority to hire employees to carry out its functions.10 No specific statutory provision was made for these employees, as was provided for the members, to be subject to §17 protection--the right to indemnification and defense of State officers and employees. We cannot find that the Legislature intended to provide §17 coverage for the Board members and to exclude such coverage for the Board employees. We must conclude that the Legislature was aware that the IOLA Fund employees would be covered by §17 because they met that section's statutory definition of covered employees.11 In addition, the IOLA Fund employees are on the State payroll, participate in the State retirement system, and receive the same fringe benefits as State employees. For all purposes, these employees are treated as State employees.

The IOLA Board has the power, under §97-v(3)(d), to issue rules and regulations and, specifically, must act in accordance with Article 2 of the State Administrative Procedures Act (SAPA). According to Article 2 of SAPA, all agencies must follow the standards contained therein at a minimum. Although, as the Attorney General pointed out in his Formal Opinion, no express language characterized the Board as a State department or component of a State department, we find that the specific application of Article 2 of SAPA to the rule-making activity of the IOLA Board was a recognition by the Legislature that the Board was the category of "agency" intended to be covered.12

As the Legislature expressed in its statement of intent at the time SAPA was enacted,

(i)t is further found that in the public interest it is desirable for state agencies to meet the requirements imposed by the administrative procedure act. Those agencies which will not have to conform to this act have been exempted from the act, either specifically by name or impliedly by definition.13
In our view, the Legislature determined that the IOLA Board was a State agency and assured that its rule-making activities were in accordance with those provisions. Further, no implied exception can be drawn because another provision of §97-v specifically restricts access to the IOLA Board's papers and records.14 Rather, the Commission concludes that the specific exception for the Board from any statute or rule requirement to disclose its records was enacted to assure that the Board was not subject to the Freedom of Information Law.15

It is clear that the statutory framework establishing the IOLA Board was enacted in recognition that the Board exercised State authority, that its employees were in State service, that it should be exempt from statutes which required certain State agencies to disclose records and that it clearly was an agency for the purposes of rule-making.

When the definitions of "state officer and employee" under §§73 and 73-a are examined, the language contained therein is different than the language of former §73 as interpreted by the Attorney General. The limitations on conduct under present §73 and the requirements to file financial disclosure statements under §73-a are based on one's status as a State officer and employee of a State board--and not solely on the definition of "state agency."16

The conclusion that the IOLA Board is a State board under §§73 and 73-a does not end our inquiry. For, the question of application of those sections to the members and employees of the IOLA Board remains.

CONCLUSIONS

Application of §73 to the IOLA Board Members
The IOLA Board members serve without compensation for their services.17 Last year, §73 was amended to provide that officers of State boards who serve on a per diem basis or receive no compensation are not subject to the restrictions on conflict of interest contained in §73.18 Section 73(1)(i)(iii) now reads as follows:
. . . officers and employees of state departments, boards, bureaus, divisions, commissions, councils or other state agencies other than officers of such boards, commissions, or councils who receive no compensation or are compensated on a per diem basis . . . . (emphasis added)
Therefore, the IOLA Board members, as long as they are not compensated or are paid on a per diem basis, are not subject to the conflict of interest restrictions contained in §73.19
Application of §73-a to the IOLA Board Members
Section 73-a requires those covered by it to file Annual Statements of Financial Disclosure with the State Ethics Commission. Under §73-a(1)(c)(ii), officers and employees of State boards who do not earn over a certain amount in annual compensation do not have to file financial disclosure statements unless the positions held by such individuals are designated as policy-making by the appointing authority.

The members of the IOLA Board do not earn any compensation. Therefore, there is no "automatic" requirement for them to file a financial disclosure statement. The Board members will have to file these statements only if they are designated as serving in policy-making positions by their appointing authority.20 Therefore, these Board members will be required to file Annual Statements of Financial Disclosure if the Commission is notified by the appointing authority that these positions are policy-making.

Application of §73 to the IOLA Board Employees
The IOLA Board employees are subject to §73 of the Public Officers Law. They are State employees and, as such, are employees of a State board as defined by §73(1)(i)(iii).
Application of §73-a to the IOLA Board Employees
The IOLA employees, who meet the definition of State employees under §73-a, are subject to filing a financial disclosure statement if they either earn over a certain amount of annual compensation or are designated as serving in policy-making positions by their appointing authority.21

The IOLA employees who earn over the threshold in annual compensation and whose positions have not been designated as policy-making may apply for an exemption from filing a financial disclosure statement. Under §95(9)(k) of the Executive Law, such an exemption may be granted by the Commission if it is in the public interest and the duties of the individual do not include the negotiation, authorization or approval of, for example, contracts or leases, the purchase of goods or services or contracts for such, the obtaining of grants of money or loans or the adoption or repeal of rules or regulations having the force and effect of law. An employee who earns over the threshold in annual income cannot receive an exemption from filing a financial disclosure statement if his or her position is designated as policy-making.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the IOLA Board members and employees, unless material facts were omitted or misstated in the request for the opinion.

All concur:

Elizabeth D. Moore, Chair

Angelo A. Costanza
Norman Lamm
Robert B. McKay, Members

Dated: February 15, 1990

ENDNOTES

1. In 1990, an individual who earns in excess of $53,171 would be required to file an Annual Statement of Financial Disclosure unless otherwise exempted. See §73-a(1)(c)(ii) and (l). In 1989, an individual who earned in excess of $30,000 in annual compensation was required to file an annual statement.

2. Of the two recommendations by each official, one must be an attorney.

3. Section 17 provides for the defense and indemnification of State employees in civil actions or proceedings. No mention of such protection for IOLA Fund employees is made in §97-v of the State Finance Law, although §97-v(3)(e) permits the Board of IOLA to employ personnel as needed. Special provision, apparently, was made for the Fund members, who are not paid employees, to assure such coverage.

4. The Attorney General was requested to consider application of §73 as it existed in 1985. As discussed below, the Ethics in Government Act of 1987 substantially amended §73; the amended section was not addressed by the Attorney General.

5. See Formal Opinion 85-F4 (attached).

6. The underlining indicates the new language; the bracketed material was removed. See §2 of Chapter 813 of the Laws of 1987.

7. In our view, the Formal Opinion of the Attorney General narrowly draws the definition of State agency. Since the Fund performs a public purpose, is appointed by public officials, has State employees on staff, is covered by the indemnification provisions of the Public Officers Law and has its funds in the custody of the State Comptroller, one could conclude that IOLA is a State agency. In fact, for certain purposes of the State Finance Law, the State Comptroller has so concluded. However, the definition of "State agency" is not controlling in our determination of whether the members or employees of the IOLA Fund are State officers or employees for the purposes of §§73 and 73-a of the Public Officers Law. Further, under the definition of State officer or employee, the reference is to State departments, boards, bureaus, etc., or other State agencies. It could be interpreted, from that language, that the intent is to recognize State boards, bureaus and divisions as other State agencies, even though the definition of State agency does not precisely so state.

8. In its legislative findings and intent when enacting §97-v, the Legislature stated that ". . . (it) finds that the availability of civil legal services to poor persons is essential to the due administration of justice. The purpose of this act is to provide funding for providers of civil legal services in order to ensure effective access to the judicial system for all citizens of the state to the extent practicable within the means available for that purpose."

9. See State Finance Law, §97-v(2)(c).

10. See State Finance Law, §97-v(3)(e).

11. Section 17(1)(a) of the Public Officer Law defines "employee" as ". . . any person holding a position by election, appointment or employment in the service of the state, whether compensated or not . . . ." One could find, from this definition, that the members of the Board, who serve without compensation, were also covered by §17 without the specific statutory provision contained in §97-v.

12. Section 102(1) of SAPA defines "agency" as ". . . any department, board, bureau, commission, division, office, council, committee or officer of the state . . . ."

13. SAPA, §100.

14. Section 97-v(3)(g) specifically provides that all records and documents of the Board are confidential, ". . . notwithstanding any statute or rule to the contrary . . . ."

15. Otherwise, the Board could be construed to be an "agency" under the Freedom of Information Law. Section 86(3) of the Public Officers Law defines "agency" as ". . . any state or municipal department, board, bureau division, commission, committee, public authority, public corporation, council, office or other governmental entity performing a governmental or proprietary function for the state . . . ."

16. Based on our reading the definition of "State agency" in conjunction with the definition of "State officer and employee" contained in the amended §73, we do not believe that we can reach the distinctions rendered by the Attorney General in his Formal Opinion. Part of his Opinion was based on the fact that private individuals would be discouraged from volunteering for public service because of the former restrictions contained in §73. Section 73, as we point out later in this Opinion, was amended in 1989 to exclude the very type of individuals who serve on the IOLA Board from the restrictions contained in §73. Therefore, the basis for much of the Attorney General's concern for individuals, particularly attorneys, participating on the IOLA Board has been removed. However, the Legislature has made it clear, in the enactment of §73-a, that even individuals in the private sector who perform a public service must comply with financial disclosure where their positions are designated as policy-making.

17. State Finance Law, §97-v(2)(c).

18. Section 1 of Chapter 242 of the Laws of 1989.

19. If the members of the IOLA Board are determined to serve in policy-making positions, then they would be subject to the restrictions contained in §73(3)(b), limiting appearances in the Court of Claims concerning IOLA Fund matters. In this subdivision, the term "State agency" is used as the entity against whose interest one could not appear in the Court of Claims while employed by or affiliated with it. Reading the definitions together, the limitations contained in §73 and 73-a concerning the activities of State officers and employees of State boards and the definition of State agency, we conclude that a fair reading of the State agency definition in this subdivision must refer to the IOLA board.

20. The appointing authority, in this case, is the Governor.

21. The appointing authority of IOLA Board employees is the Board. An employee, regardless of income, whose position is designated as policy-making by the IOLA Board must file a financial disclosure statement.