New York State
ETHICS COMMISSION


Advisory Opinion No. 92-18: Application of Public Officers Law §74 to officers and employees of a State agency who serve on the board of directors of a not-for-profit corporation that contracts with their employing State agency.



INTRODUCTION

The following advisory opinion is issued in response to an inquiry from [a State agency] whether it would be a violation of Public Officers Law §74 for certain [State agency] employees to serve as members of the board of directors of a particular not-for-profit corporation that contracts with [State agency] for training services.

Pursuant to its authority under Executive Law §94(15), the State Ethics Commission ("Commission") hereby renders its opinion that Public Officers Law §74 precludes [State agency] policymakers and those employees directly or indirectly responsible for the contracts from serving on the board of a not-for-profit corporation that contracts with the agency. The Commission finds that State officers and employees may advise and assist the not-for-profit if such activities further a State agency purpose.


BACKGROUND

On April 8, 1992, [the State agency] requested that the Commission consider whether the conflict of interest provisions of Public Officers Law §74 prohibit two [State agency] employees from serving on the board of the Task Force [ ], ("Task Force"), a not-for-profit corporation which contracts with [the State agency]. Another [State agency] employee serves as a Task Force "consultant." All [State agency] employees associated with the Task Force are unpaid.

The Task Force, [ ] was incorporated in 1987. The Task Force operates as a "think tank" that brings together persons from a variety of professional disciplines to serve in an advisory capacity to service providers and the judiciary. The Task Force previously published a bench book containing all applicable laws and regulations for use by [ ] judges in deciding [ ] cases, trained [ ] judges on matters related to [ ], worked to support coordinated court assisted case management programs [ ], and conducted a preliminary study of [ ] relatives. These activities are incidental to the Department's regulatory and programmatic responsibilities in relation to [ ].(1) [State agency] employees have served on the Task Force since its inception. The Task Force By-Laws, adopted by the board on March 26, 1987, state the corporate purpose:

[ ]

The Task Force, which has a 32 member board and a permanent staff of two persons (an executive director and an administrative assistant), receives over three quarters of its annual budget of $171,000 through [State agency] training contracts. Approximately an eighth of the budget is funded by [ ] funds, and the remainder is derived from contributions from board members and other individuals.

Three State policymakers sit on the Task Force board: two [State agency] employees (the agency Counsel and an Associate Commissioner [ ], and a representative from [another State agency] counsel's office.(2) A [State agency] employee, who also serves as a consultant to the board, does not have voting power.

Training contracts

The Task Force was created to identify problems in [ ] and develop solutions. Most of its activities are concerned with training the commissioners of county [ ] departments, [ ] judges and county attorneys. A Task Force subcommittee, which does not include any [State agency] employee, is charged with determining which topics are to be addressed in training sessions. Previous training sessions addressed such issues as [ ]. When the subcommittee establishes its direction, the executive director consults with [the State agency] (because of its programmatic interest and expertise), and with experts (often at [the State agency] suggestion) in the particular field. The Task Force then contracts directly with those persons for lectures, courses, etc. On occasion, some Task Force members have conducted some aspects of the actual training but did not receive compensation.

In 1992, [the State agency] issued a 400-page training Request For Proposal ("RFP") worth several million dollars. [The State agency] selected the Task Force's proposal for certain services valued at $139,900. This sum includes all funding for training, Task Force staff salaries, employee fringe benefits, travel and mailings.(3)

In its correspondence with the Commission, [the State agency] Assistant Counsel [ ] said that:

. . . since the Task Force has performed a valuable function in coordinating efforts to service [ ] in New York State, and since the integral involvement of Department policy would appear to enhance the Task Force's ability to perform such functions, and considering that the Board is eager to retain the participation of its members from this Department while at the same time ensuring compliance with the Public Officers Law, I am anxious to obtain guidance from the Commission before taking any action which would completely separate Department policy makers from the Task Force.

[The assistant counsel] suggested that board membership be deemed permissible if the [the State agency] employees recuse themselves from discussions and votes on matters involving [State agency] contracts. As other alternatives, [the State agency] asked that the Commission consider whether the [State agency] employees could continue to serve on the board of the Task Force if the board agrees to accept no future [State agency] contracts or if the [State agency] employees could serve the Task Force as advisors or consultants rather than as board members.


DISCUSSION

Public Officers Law §74 addresses both actual conflicts of interest and their appearance. 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, often personal, interests.

Public Officers Law §74(2) contains the rule with respect to conflicts of interest:

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.

Public Officers Law §74(3):

. . . .

(c) No officer or employee of a state agency . . . should disclose confidential information acquired by him in the course of his official duties nor use such information to further his personal interests.

. . . .

(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 be engaged in acts that are in violation of his trust.

. . . .

In several opinions, the Commission has addressed the question of policymakers serving on the boards of not-for-profit corporations which either contract with or are regulated or licensed by their State agencies. The most relevant is Advisory Opinion No. 92-4 which the Commission advised that:

[p]olicy-making status demonstrates that a State employee has substantial responsibilities and obligations for his or her agency . . . [the policymaker's] presence on the board of directors could raise suspicion among the public that [the not-for-profit] receives preferential treatment or some other competitive advantage over similarly situated [competitors] because of this individual's position with [the agency]. Every time [the not-for-profit] receives a "benefit" or favorable decision from [the agency], [competitors], as well as the public in general, may conclude such benefit or decision was provided as a result of this individual's influence with and relationship to the [agency] administration.

Thus, the Commission concluded that Public Officers Law §74 prohibits a policymaker whose agency had "significant contacts" with a not-for-profit corporation from serving on the board of that entity.(4)

The Commission's conclusion in Advisory Opinion No. 92-4 is particularly relevant here. In 1992, [the State agency] awarded the Task Force service contracts valued at over $139,000. When [State agency] employees serve on the Task Force board, competitors for such contracts may well question whether those training contracts were awarded fairly and objectively, whether confidential information was acquired from the [State agency] employees in order to secure the contracts in violation of §74(3)(c), or whether those [State agency] board members secured unwarranted privileges for the Task Force in violation of §74(3)(d). It is clear to the Commission that as long as the Task Force is engaged in any contract with [the State agency], standards contained in Public Officers Law §74 prohibit [State agency] policymakers and [State agency] employees, regardless of policymaker status, who are directly or indirectly responsible for the contract process, including oversight, from serving on the Task Force's board.

If the contracts with [the State agency] were to expire and the Task Force did not engage in any further [State agency] contracts, the Task Force's relationship with [the State agency] would be minimal (except, perhaps, for mutual interest in the training provided), and [State agency] employee board membership would be permissible under Public Officers Law §74. Short of that, however, adoption of a recusal policy, as [the State agency] suggested, would not eliminate the appearance problems created by the [State agency] employees' presence on the board. (Recusals could also render the [State agency] participation virtually meaningless, since the majority of the Task Force's funding comes from the agency.) Absent a severance of the contractual relationship, application of §74(3)(h) requires that [State agency] maintain complete neutrality with regard to the Task Force. Therefore, any [State agency] policymakers and any employees involved in contract processes should immediately resign from the Task Force board.

The employee for the [other State agency] should consult with that agency to determine if there are any contracts between the Task Force and the employing agency. If the [other State agency] has a contractual relationship with the Task Force, the [ ] employee should request an opinion from the Commission to determine the extent of permissible participation.

[The first State agency] has asked whether its representatives may serve as "consultants" or "advisors" to the Task Force in the event [the State agency] continues to contract with it. As provided in §74(2), the obligations undertaken by the [State agency] Task Force representatives must not substantially conflict with the State responsibilities. Consequently, such service is permissible so long as the [State agency] employees restrict their participation to providing information on only those issues that are of concern to [the State agency] and as long as [the State agency] makes its employees equally available as consultants or advisors to other not-for-profit corporations if so requested.


CONCLUSION

The Commission recognizes that [the State agency] perceives its employees' participation on the Task Force board as valuable. The issue here, however, is the private nature of the Task Force. Prior to becoming a not-for-profit corporation, the Task Force served as a governmental advisory body and, in such a governmental capacity, [State agency] policymakers might be Task Force members without the issue of conflicts of interest or the appearance of such conflicts arising. Once the Task Force privatized, its character changed. The board members and the Task Force employees no longer serve as public employees/appointees subject to the provisions of the ethics law. It is becoming more prevalent for government to become entrepreneurial through the creation of private entities to carry out its functions. While that may serve the public policy well, it raises a host of ethical questions that must be resolved.

Therefore, the Commission concludes that, while [State agency] employees may participate as advisors and consultants to the Task Force, [State agency] policymakers and those directly or indirectly involved in the contract process, including contract oversight, are prohibited from serving on the Task Force board of directors or in any other decision-making position within the Task Force.

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

All concur:

Joseph M. Bress, Chair

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

Dated: September 8, 1992


Endnotes

1. April 8, 1992 letter from [ ], Assistant Counsel, [State agency].

2. Application of Public Officers Law §74 to [the other State agency] employee is discussed later in the text.

3. The Task Force has performed services pursuant to contracts with [the State agency] in the following amounts: $73,490 for 1989-90; $115,736 for 1990-91; and $121,571 for 1991-92.

4. See also Commission's Advisory Opinion Nos. 90-25 restricting policymakers from serving on the boards of not-for-profits licensed by the employing agency and 91-3 restricting certain non-policymakers from engaging in outside employment with not-for-profits licensed by the employing agency.


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