New York State
Ethics Commission


Advisory Opinion No. 91-21: Interpretation of whether Public Officers Law §74 applies (1) to prohibit a State agency from contracting for services with a sibling of [a high-ranking] employee of that agency and (2) to limit that employee's role in awarding such a contract.

Introduction

The following advisory opinion is issued in response to an inquiry from [an employee] of [a State agency] concerning whether there would be a violation of the Public Officers Law were [the State agency] to engage in a no-bid consulting contract with [] a firm owned and operated by her brother.(1)

Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by Executive Law §94(15), the Commission hereby renders its opinion that it is not a violation of Public Officers Law §74 for an agency to award a no-bid consulting contract to a firm owned and operated by the sibling of a senior manager of that agency, designated as a policymaker, as long as (1) the manager has no interest, financial or otherwise, in the sibling's firm; (2) the manager's regular job duties do not encompass the selection of the consultant or the review or oversight of the consultant contract, or, if the job duties involved encompass such involvement, the manager is completely screened out from the consideration and appointment of such a firm or contract; (3) the manager makes full disclosure to [the State agency's] staff of her relationship to the firm's principals and recuses herself from any role in consideration or approval of a contract to the firm; and (4) should the firm be selected for a contract, the manager's supervisor approves the selection of the contract on its merits.

Background

[The State agency] provides capital project management services to acquire, plan, design, construct, renovate and equip public facilities.(2) Principal clients are [ ]. The [State agency's] board consists of five directors: [ ].(3)

[The State agency] is authorized to make and execute contracts and all other instruments or agreements necessary or convenient for the exercise of its corporate powers or the fulfillment of its corporate purposes. The corporation may engage the services of construction, engineering, architectural, legal and financial consultants, surveyors and appraisers, on a contract basis or as employees, for professional services and technical assistance and advice. The law provides that the [State agency] may:

[D]elegate to one or more of its directors, officers, agents or employees, such powers and duties as the directors may deem proper, provided however, that all contracts involving an estimated expense of fifty thousand dollars or more shall be approved prior to execution by no less than three directors of the corporation.(4)

The [employee] (who requested the opinion) has oversight responsibilities for the acquisition, design and construction of [ ]. At the direction of the Executive Director, she is responsible for general management oversight of all areas of the corporation and certain operational responsibilities which include reporting to the [State agency] Board of Directors. Should the Executive Director so request, she may be required to review and approve large [State agency] contracts.(5) [The State agency] designated her as serving in a policy-making position.(6)

The architectural firm [ ], whose principals are the [employee's] brother and sister-in-law, wishes to perform architectural or interior design work and feasibility studies for the [State agency], mostly on a small contract basis. The [employee] has no financial interest in [the company] and has indicated that she would recuse herself from any consideration of a contract involving that company. Nevertheless, she could not "guarantee" that her staff would not consider her relationship with [the company], either positively or adversely, in making their recommendations.

The consultant procurement process

[The State agency's] policy for the procurement of architectural, engineering, surveying and construction management services is based on Public Authorities Law [ ]. In a strict sense, [the State agency] does not competitively bid consultant contracts because they are considered professional services. The procedure requires selection of at least three firms capable of executing the project, negotiating contract terms with the firm considered most qualified and, if unsuccessful, negotiating with the next most qualified firm until a successful negotiation is achieved. In the procurement of such services for the capital programs of its State client agencies, the corporation is "unilaterally and totally responsible for the ultimate and final selection of architectural, engineering, surveying and construction management firms."(7)

The primary responsibility for selecting [State agency] consultants rests with the [agency's] development administrators, the agency's first line professional staff. Final approval, except with very large contracts, rests with the [employees] who are one and two levels subordinate to the position of [the employee requesting this opinion].

According to the practice at [the State agency], if a particular concern over the selection of a particular contractor is raised, the Executive Director, the staff or the client agency may request that the [employee] review the selection decision. [The employee] also may be involved in the final review and approval of [agency] contracts. Unless a particular concern is raised, however, or she has been specifically requested to become involved, the [employee's] role in the awarding of [agency] consulting contracts is minimal.(8)

Applicable Statute

The Code of Ethics found in Public Officers Law §74 provides minimum standards against which State officers and employees are expected to gauge their behavior. The Code addresses the conflict between the obligation of public service and private, and often personal financial, interests. The rule with respect to conflicts of interest is provided in Public Officers Law §74(2):
No officer or employee of a state agency . . . should have any interest, business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest.

Following the rule with respect to conflicts of interest, Public Officers Law §74(3) provides standards of conduct which address not only actual but apparent conflicts of interest. The standards which are relevant to your inquiry are found in paragraphs (d), (f) and (h). Those paragraphs provide, in relevant part, the following:

  1. No officer or employee of a state agency, . . . should use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others.

    . . . .

  2. An officer of a state agency . . . should not by his conduct give reasonable basis for the impression that any person can improperly influence him or unduly enjoy his favor in the performance of his official duties, or that he is affected by the kinship, rank, position or influence of any party or person.

    . . . .

  3. An officer or employee of a state agency, . . . should endeavor to pursue a course of conduct which will not raise suspicion among the public that he is likely to be engaged in acts that are in violation of his trust.

Section 74(3)(d) precludes any State officer or employee from using his or her official position to secure privileges, influence or other favorable treatment for himself or others. Section 74(3)(f) and (h) precludes State officers and employees from giving the impression that unwarranted privileges or exemptions are being provided.

Discussion

The [requesting employee's] willingness to recuse herself from any consideration of a project involving her brother's firm obviates the applicability of §74(3)(d) with respect to her.(9) However, the question of "appearance" of a conflict remains. It is not necessary that an actual conflict be present before a violation of Public Officers Law §74 can occur. Rather, §74 prohibits acts that, by their nature, may lead to a conclusion that an appearance of such a conflict of interest could occur.

The Commission must determine whether the [employee's] presence and position in the corporation alone will raise the suspicion of the public that the selection of her brother's firm to contract with [the State agency] is based on their relationship and not on the firm's qualifications.

As [high-ranking] State employee at [the State agency] and as a policymaker, the [employee] has substantial responsibilities and obligations. She is in a position where she could have contact with those [agency] employees who have direct responsibility for selecting companies for [agency] contracts; in most instances, she supervises the supervisors of those employees. She is in a position where she can influence the actions of other [agency] employees, whether on behalf of her brother's firm or not.

Should her brother's firm receive an [agency] consulting contract, her presence as a high-ranking employee could raise suspicion among the public that the firm received preferential treatment or some other competitive advantage over others. Each time [the company] receives a "benefit" or contract from [the agency], other potential contractors, as well as the public in general, may conclude such benefit or decision was provided as a result of the brother's influence with and relationship to the [employee].

However, the Commission cannot conclude that there is a conflict of interest for the [employee] per se if [the company] performs services for [the agency]. A conflict of interest does not exist simply because a senior manager's sibling's firm is conducting business with a State agency. A violation of §74(3)(f) is found only if there is a reasonable basis for the impression that a State employee is affected by the kinship or influence of any party or person. Section 74(3)(h) requires a State employee to pursue a course of conduct that does not raise suspicion among the public that she is likely to be engaged in acts in violation of her trust. The Commission concludes that, absent circumstances beyond that of a sibling relationship, the fact that the [employee] has no interest in and receives no compensation from the firm, she plays no role in the selection process where this firm is a contender, and in light of the [agency's] contracting guidelines in place, no reasonable basis can be found for the impression that the [employee] would use her official position to obtain a contract for her brother or that she conducted herself in violation of her trust.(10)

The fact that the possibility remains that [agency] staff involved in consultant selection, despite the precautions, will be influenced one way or the other because of the sibling relationship which exists, does not justify a different conclusion. The [agency] guidelines, adopted pursuant to the Public Authorities Law, are designed (among other reasons) to weed out any number of extraneous or improper considerations in contract awards. If adhered to, the guidelines appear to be able to do just that.

The Commission's conclusion not to categorically bar contracts between a State agency and a sibling of a senior manager is consistent with the position of the federal government. Federal law precludes participation by a government employee in matters in which "he, his spouse, his minor child, partner, organization in which he is serving as officer, director, trustee, partner or employee . . . has a financial interest."(11)

The federal Office of Government Ethics ("OGE") applied the federal law to the question of whether an employee should be ordered to recuse himself from participating in a matter in which his brother's law firm was representing a company with a substantial stake in the outcome of the matter. OGE found that, although the interests of siblings are not covered under 18 U.S.C. §208(a), in such a situation the federal "appearance" standards "generally require the employee to recuse himself from taking official action on that particular . . . application." (OGE Informal Advisory Letter 85x14).

The New York State Attorney General has reached a similar conclusion in circumstances involving spouses. Addressing the question of whether a county legislator should take part in executive sessions to negotiate a contract with the bargaining unit that includes his wife's position, the Attorney General held that "these are matters in which the legislator has a distinctly personal, as opposed to governmental interest. We believe that the husband/wife relationship may compromise the legislator's ability to make an impartial judgment and at least creates an appearance of impropriety that must be avoided." (see Op. Atty. Gen. No. 86-101; Op. Atty. Gen. No. 88-34). The Attorney General found that the county legislator "should recuse himself from taking any actions with respect to the salary and terms and conditions of employment of his spouse with county government."

A comparable determination is found in Op. Atty. Gen. No. 88-34, where a town supervisor sought to take part in the determination of the town highway department budget where his brother was the superintendent of highways. The superintendent of highways' salary was determined annually by the town board. The Attorney General found that "the familial relationship may compromise the supervisor's ability to make an impartial judgment and at least creates an appearance of impropriety that must be avoided." The Attorney General concluded that the supervisor must recuse himself from participating in the determination of the salary of his brother, the town superintendent of highways.

Conclusion

The Commission determines that it is not a violation of Public Officers Law §74 for a State agency to consider and award a no-bid consulting contract to a firm owned and operated by a sibling of a senior manager at that agency, as long as: (1) the manager has no interest, financial or otherwise, in the sibling's firm; (2) the manager's regular job duties do not encompass the selection of the consultant or the review or oversight of the consultant contract, or, if the job duties involved encompass such involvement, the manager is completely screened out from the consideration and appointment of such a firm or contract; (3) the manager makes full disclosure to [agency] staff of her relationship to the firm's principals and recuses herself from any role in consideration or approval of a contract to the firm; and (4) should the firm be selected for a contract, the manager's supervisor approves the selection of the contract on its merits.

While the Commission does not intend to disadvantage close relatives of State employees from ever doing business with New York State agencies, we believe it is necessary to impose procedural safeguards against the reality or appearance of a conflict of interest. All State agencies should periodically review its list of contractors to insure that selection of a single firm or firms to perform certain services or provide certain goods is not inappropriate.

The Commission further recommends that [the agency] adopt a conflict of interest/disclosure and recusal policy governing its employees in such situations. Commission staff is available to advise and assist [agency] staff in this endeavor.

All concur:

Joseph M. Bress, Chair

Angelo A. Costanza
Norman Lamm
Donald A. Odell, Members

Dated: July 29, 1991


Endnotes

1. The Commission notes that the surname of the [employee] and her brother are the same, a fact which heightens the likelihood that [agency] employees and the public would associate the two as related. As a result, the public is more likely to suspect a breach of trust if [the employee] were to exercise influence in [the agency] to obtain a contract for her brother or if a subordinate were to award a contract to [the employee's] brother to indirectly win her favor, than if their names were different and their sibling relationship not known.

2. See Unconsolidated Laws [ ]. For purposes of Public Officers Law §§73 and 74, [the agency] is a "state agency" and its directors are officers of the agency.

3. Unconsolidated Laws [ ].

4. See Unconsolidated Laws [ ]. The authorization to increase from [ ] the estimated expense of contracts which must be approved by three of the directors of the [State agency] prior to execution was signed by the Governor [ ].

5. Information provided by the requesting individual.

6. Policymakers must file an annual statement of financial disclosure pursuant to Public Officers Law §73-a and are subject to Commission regulations governing outside activities.

7. [State agency], Guidelines for Engaging the Services of [ ] Consultants. To bring in "the broadest range of potential consultants," the Guidelines provide for an annually updated "computerized consultant resource file" to increase competition. See Attachment A for an outline of the procedures in place for selecting consultants.

It is the Commission's strong recommendation that each State agency include in the information it requires of bidding contractors whether any executives, principals or members of the boards of directors of such bidders are related to any personnel at the State agency letting the contract. The agency should evaluate such information to assess whether any potential conflicts of interest exist and proceed accordingly. The Commission will forward this recommendation to the Governor's office for consideration of statewide implementation.

8. Information provided by the [requesting employee].

9. Although, if a subordinate approved a contract with [the company] outside the [agency] guidelines, §74(3)(d) could apply to that subordinate.

10. The Commission underscores that the requesting individual must not only recuse herself from the contract process but must not disclose confidential information concerning the contract process, or a specific project to her brother or his firm, which information would be useful to him in securing the contract for services with the agency.

11. The Commission notes that 18 U.S.C. §208 specifically addresses certain family members and that the State of New York does not have a statute containing similar language. The purpose of this opinion is to address the specific issue of siblings. The Commission does not address here the possible conflict arising were a State agency to do business with immediate family members, i.e., a spouse, child or parent of a senior employee.



URL: http://www.nysl.nysed.gov/edocs/ethics/91-21.htm