New York State
ETHICS COMMISSION


Advisory Opinion No. 92-11: Application of Public Officers Law §74 to a member of a State public benefit corporation's board with whose firm that corporation intends to contract.




INTRODUCTION

The following advisory opinion is issued in response to an inquiry from the [job title] of [a public benefit corporation] who inquired whether there would be a conflict of interest under Public Officers Law §74 were the [public benefit corporation] to retain a law firm, one of whose partners is a member of the board of directors ("member") of the [public benefit corporation].

Pursuant to the authority vested in it by Executive Law §94(15), the Commission hereby renders its opinion that the [public benefit corporation] may retain a firm, where one of its members is a partner, without the member's having a conflict under the code of ethics contained in Public Officers Law §74, provided that the member makes full disclosure of that relationship to the law firm to the entire [public benefit corporation] board of directors, takes no part in [public benefit corporation] decisions involving the selection of the law firm or the firm's work performed for [the public benefit corporation], does not share in the "net revenues" generated from the law firm's [public benefit corporation] work, and abides by the other conditions set forth in this opinion.


BACKGROUND

Pursuant to Public Authorities Law §1263, the [public benefit corporation] is a public benefit corporation whose board consists of a chairperson and sixteen other members appointed by the Governor by and with the advice of the New York State Senate. The chairperson and the first vice chairperson are entitled to salaries in amounts determined by the [public benefit corporation] board of directors. The other members of the board are entitled to a fee of $150 per day when rendering services as members not to exceed $15,000 in one fiscal year. These per diem members of the board of [the public benefit corporation] are not subject to Public Officers Law §73.(1)

According to [the public benefit corporation], his office recently advertised for proposals from law firms to provide legal services in nine categories of legal specialization to [the public benefit corporation] and its affiliated agencies.(2) The [public benefit corporation] referred the 201 proposals it received to various committees of [public benefit corporation] employees organized by subject matter area. After interviews and evaluations with the firms, the committees selected 52 law firms with which the [public benefit corporation] will enter into retainer agreements, subject to the approval of the entire [public benefit corporation] board.

Subsequent to the [public benefit corporation] solicitation and receipt of proposals, the board member in question joined, as partner, a law firm which had responded to the request for proposals in the subject matter area of condemnation law.(3) The pertinent selection committee determined that the member's firm, as well as several other law firms, should be retained to perform legal services in this area.

According to [the public benefit corporation], the member does not practice condemnation law and had no involvement in either making the law firm's presentation to the selection committee or in the selection committee's decision to recommend the member's law firm to the entire [public benefit corporation] board. [The requesting individual] has requested that the Commission render an opinion on the propriety of the [public benefit corporation] entering into a retainer agreement with the member's law firm, and on what precautions should be taken to ensure that a conflict of interest or an appearance of a conflict does not develop with respect to the execution of the retainer agreement, in the assignment of work to the firm by the [job title] of the [public benefit corporation] and its affiliated agencies and the supervision of the law firm's work throughout the course of the retainer.


APPLICABLE STATUTES

Public Officers Law §74 contains the Code of Ethics for State officers and employees. It is concerned with both actual conflicts of interest and the appearance of conflicts. The rule with respect to conflicts of interest contained in §74(2) provides:

No officer or employee of a state agency . . . should have any interest, financial or otherwise, direct or indirect, or engage in any 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.

Standards set forth in §74(3) which further explain and define the above-mentioned rule and which pertain to the present circumstances include:
a. No officer or employee of a state agency . . . should accept other employment which will impair his independence of judgment in the exercise of his official duties.

b. No officer or employee of a state agency . . . should accept employment or engage in any business or professional activity which will require him to disclose confidential information which he has gained by reason of his official position or authority.

. . . .

d. 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.

e. No officer or employee of a state agency . . . should engage in any transaction as representative or agent of the state with any business entity in which he has a direct or indirect financial interest that might reasonably tend to conflict with the proper discharge of his official duties.

. . . .

h. 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 engage in acts that are in violation of his trust.

. . . .


DISCUSSION

Concerns associated with the member's simultaneous service as [a public benefit corporation] board member and partner in a law firm chosen to do work for the [public benefit corporation] or any of its affiliates include:

should a dispute ever arise between [the public benefit corporation] and the law firm, the member may not be able to place his duty of loyalty to the [public benefit corporation] over that to his law firm;

that the member might furnish the law firm with confidential or "insider" information, giving the law firm an advantage over other law firms in obtaining a retainer agreement or renewal with [the public benefit corporation] and in receiving assignments over other selected law firms from the [public benefit corporation];

that the member might influence other [public benefit corporation] officers and employees to give his law firm preferential treatment through the course of the retainer agreement;

that the member's economic interest in seeing that the law firm receives as much [public benefit corporation] business as possible conflicts with his responsibilities as a board member; and

that, due to all of the above, the public could reasonably perceive that the member, as a partner in the selected law firm, is engaged in acts in violation of the member's public trust to the [public benefit corporation].

Moreover, since the member joined the law firm as a partner at approximately the same time that the [public benefit corporation] was evaluating the proposals to provide legal services, there could be the appearance, or the reality, that the member exerted influence on the selection committee, that the member conveyed to the law firm his ability to influence or even deliver the contract, or that the selection committee was influenced by the association of the member with the law firm.

Notwithstanding such concerns, the Commission has permitted certain activities that might otherwise violate Public Officers Law §74, provided the State agency or the affected State officer or employee take safeguards to prevent or diminish the appearance of, or potential for a conflict of interest.(4) In the instant case, §74 concerns are ameliorated if the following conditions are met relative to all contracts between the [public benefit corporation], or any of its affiliated agencies and the member's law firm:(5)

the member fully discloses in writing the member's relationship to the law firm to the entire [public benefit corporation] board of directors prior to the board's vote on whether to enter into any contract with the firm or renewal thereof;

the member takes no part in preparing the law firm's proposal to provide legal services to the [public benefit corporation];

the member does not communicate with any [public benefit corporation] officer or employee concerning the merits of the member's law firm and takes no part in reviewing or voting upon the member's law firm's proposal, or the proposal of any other law firm in the category of legal specialization for which the member's law firm has submitted the proposal, either before the selection committee or the entire [public benefit corporation] board of directors;

the member does not communicate with any [public benefit corporation] officer or employee concerning the assignment of work to the law firm (or any other law firm retained in the area of condemnation law) or the supervision of the law firm's work performed during the course of the retainer agreement;

the member performs no services for the law firm relative to the [public benefit corporation] contract;

the member does not communicate with any partners or employees of his law firm concerning [public benefit corporation] matters;

the member does not share in the "net revenues"(6) generated by the contract; and

[the public benefit corporation] establishes a written policy to guide the evaluation and selection of law firms by the public authority and the assignment of work to the selected firms and include steps to insure against conflicts of interest in the selection of contractors, negotiation of terms and conduct of work assignments.


CONCLUSION

The Commission concludes that it would not be a violation of Public Officers Law §74 if the [public benefit corporation] enters into a retainer agreement with the member's law firm provided that the safeguards set forth in this opinion are followed.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the requesting individual who acted in good faith, unless material facts were omitted or misstated by the persons in the request for opinion.

All concur:

Joseph M. Bress, Chair

Barbara A. Black
Angelo A. Costanza
Donald A. Odell, Members

Dated: July 2, 1992


Endnotes

1. See Laws of 1989, chapter 242, §1 (effective July 1, 1989) which excepted from the definition of State officers and employees to whom Public Officers Law §73 applies, members of public benefit corporations who receive no compensation or who are compensated on a per diem basis.

2. Affiliated agencies of the [public benefit corporation] include [].

3. According to the [public benefit corporation], the member's law firm comprises 80 attorneys, 35 of whom are partners.

4. For example, in Advisory Opinion No. 91-21, the Commission permitted 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 provided (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 of the oversight of the consultant contract or 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 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 supervisors approve the selection of the contract on its merits. The Commission also recommended that the State agency adopt a conflict of interest/disclosure and recusal policy governing its employees in such situations.

5. The Commission notes that while several of these conditions were already met in this specific instance prior to the request for an opinion, the [public benefit corporation] should abide by these conditions whenever a board member has an interest in any entity conducting business with the [public benefit corporation] and its affiliates.

6. See Advisory Opinion No. 90-14.


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