|Advisory Opinion No. 94-11:||Application of Public Officers Law §74 to non-paid board members serving in a policy-making capacity.|
Pursuant to the authority vested in it by the Executive Law §94(15), the State Ethics Commission ("Commission") hereby renders its opinion on the application of Public Officers Law §74 to each of the requesting individual's specific inquiries.
The Board is responsible for acting on funding applications for two major programs. The first, [program A], was established [ ] pursuant to orders issued by [a State agency].(1) County, town and city governments, school districts, fire districts and other local governmental entities are eligible for [program A] funding. [The State agency] staff has established an application procedure; it reviews all applications and makes recommendations to the Board. [The State agency] states:
Since the statute contemplates [program A] awards to all eligible projects, the Board has operated on the premise of providing reimbursement to all eligible entities, holding applications over for the next year after the full appropriation has been used in a given year. If a Board disapproves an application, the reasons for their actions are stated in the minutes of the meeting.(2)
[the State agency] reports that at the beginning of the program, [program A] received an appropriation of approximately [ ]. Appropriation levels have since declined [ ].
The second funding program on which the Board acts is [program B].
The procedure for this program requires that the Board issue a Request for Proposal, solicit grant applications, and evaluate the applications received in three phases. In Phase I, [the State agency] staff evaluates the applications and assigns a technical merit score, utilizing award criteria set forth in the regulations. In Phase II, [the State agency] staff forwards its ratings to a Board subcommittee for review and additional rating. In Phase III, the subcommittee makes its recommendations to the full Board, which then makes the final decisions. [The State agency] staff must monitor the use of the money by grantees and report to the Board if a grantee violates the term of a contract, recommending any actions necessary.(3)
Funding for [program B] grants and the program's administration is derived from an assessment on [ ] payments. [ ].
In addition to passing on funding applications, the Board is authorized to recommend to the Commissioner of [the State agency] the promulgation of certain [ ] standards where federal standards do not exist or are insufficient to address conditions found at State [ ] sites.(4)
The [requesting individual] has asked a number of questions regarding the parameters within which Board members must operate to avoid conflicts of interest or the appearance of conflicts in carrying out their official duties. The Commission will address these questions in turn.
Areas of Inquiry
(1) If a member's employment with [an organization] ended one and a half years ago, is there a conflict of interest for the member if he or she considers that [organization's] grant proposal? If a member ended representation of a client six months ago and does not currently anticipate receiving business from the same client in the immediate future, does this pose a conflict of interest for the member acting on the former client's grant proposal? . . . [A]t what point does a prior employment or direct business affiliation no longer present a direct conflict of interest for a Board member?
(2) Where a prior affiliation was not employment but was a lawyer-client relationship, a consultant-client relationship or other temporary business relationship, even though the relationship has clearly ended, does the mere possibility of a future business relationship preclude a member from participating in an activity involving the person or entity with whom the prior relationship existed? . . . .
(3) A member sat on the board of trustees of a [ ] pension and welfare fund, which serves several employers and [organizations]. The member's duties included overseeing the finances of the fund and making sure that payments from the fund were made appropriately. Given the independent nature of such boards, would a grant application from one of the [organizations] or employers served by the fund have presented a conflict of interest for the member? . . . .
(4) Two members are employees of the [orgainization]. They have recused themselves from discussions and voting on the [organization's] grant applications. The [organization's] member [groups] often apply for education and training grants, as specifically provided by the statute. Except for those [groups] of which they are members or officers or [ ] programs in which they have been involved directly, is there a conflict of interest for these [board] members in dealing with grant applications of [groups] affiliated with the [organization]? . . . .
(5) One member is a vested member of a pension plan in which the member's employer of eight years ago participates, but which is a separate and distinct entity from the employer. The former employer is an [organization]. There is no current relationship with the former employer. Does the pension plan membership present a conflict for the Board member when the former employer applies for a grant? If an affiliated [organization] of the former employer applies for a grant, is there a conflict? . . . .
(6) One member is a lawyer who represents [a branch of an organization]. The [branch] belongs to a State Council of the International [organization], with which the member's firm has no relationship. May the member vote on a grant for the State Council which will not be used by the [branch]? . . . .
Public Officers Law §74, the Code of Ethics, provides the 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, financial interest. The rule with respect to conflicts of interest is as follows:
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.
Following the rule with respect to conflicts of interest, Public Officers Law §74(3) provides standards of conduct which address actual as well as apparent conflicts of interest:
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The Commission recognizes the importance of public-spirited citizens from the private sector serving the government and the people of New York State. These individuals lend their time, knowledge and expertise to the State, often without compensation. While it is not the intention of this Commission to dissuade involvement of such individuals or place an undue burden on such persons in the performance their official State duties, it is equally important to recognize that those who engage in public service, whether compensated or not, are entrusted with a unique duty and responsibility to analyze, develop, and execute the policies and programs of the State of New York, often allocating public resources in the process. It is because of this important responsibility that such individuals take all appropriate measures to avoid even the appearance of impropriety.
Under the Code of Ethics, as contained in §74, State officers and employees, including those who serve in unpaid or per diem status, must avoid a conflict between their private interests and their public duties. In this opinion, the Commission is asked to address a variety of relationships in which the private and public positions of the Board members could give rise to a conflict of interest.(7)
Generally, prior employment or past business relationships may affect a board member's judgment in his or her State position.(8) Questions may be raised
Whether a conflict of interest results from a Board member's acts must be determined on a case-by-case basis. However, certain factors are considered in reaching such a determination.
First, the Commission examines how recently the Board member had the relationship. In considering the time elapsed, the Commission looks to Public Officers Law §73(8) for guidance. That provision absolutely prohibits former State officers and employees from appearing or practicing or receiving compensation for services rendered on a matter before their former agency for two years after termination from State employment. The underlying assumption is that the opportunity to improperly profit from a former employee's State service is greatest during that time period. The two year period was chosen by the Legislature based upon what it believed to be reasonable.
The Commission concludes that a similar, though not identical, rule should be applied to Board members' past employment and business relationships. The Commission believes that, lacking a statutory basis, it cannot impose an absolute rule forbidding Board members from acting on applications from former employers or those with whom they had business relationships within two years of the severing of their employment or relationship. However, given the Legislature's decision that two years is a period when judgments may be problematical, the Commission is prepared to presume that actions within two years creates the potential for a conflict. Thus, the Commission adopts a presumption that action by a member of a board concerning a former employer or business that he or she left within the last two years is a violation of §74.
Such a presumption could be rebutted by looking at other factors, such as the nature and duration of the relationship. For example, the Commission would weigh
It is not necessary that an actual conflict be present before a violation of Public Officers Law §74 can occur. Rather, §74 prohibits actions that, by their nature, may lead to a conclusion that an appearance of such a conflict could occur.(9) The Attorney General has previously held:
Officers and employees of State agencies must conduct themselves so as not to raise suspicion among the public that they are engaged in acts that are in violation of the public trust (Public Officers Law §74[h]). Under this provision, State officers and employees must avoid even the appearance of impropriety.(10)
Applying these principles, the Commission now responds to the specific questions.
(1) When does prior employment or a direct business relationship no longer present a conflict of interest?
The Commission is presented with two situations by the requesting party: (1) may a Board member who has ended his or her employment with [an organization] one and one-half years ago consider a grant proposal submitted by the [organization] ? (2) if a member ended representation of a client six months ago and does not currently conduct business with the client, is there a conflict if the Board member acts on the former client's proposal?
Based on the standards identified above, a conflict of interest would be presumed if a Board member were to vote on an application for a grant of money in the situations described. The Board member's vote could raise suspicion among the public that the action constituted inappropriate behavior in violation of his or her trust. Moreover, questions would likely emerge as to the Board member's motivation for voting to either approve or disapprove the grant award. Further, he or she may still be in a position to be influenced by the former employer or client, thereby raising further suspicion concerning the Board member's action.
Accordingly, the Board members described above must disclose to the Board any prior employment or business relationship with an applicant within the last two years, and, unless there are special factors surrounding the prior relationship, recuse themselves from participating in any Board action.(11)
(2) Does a prior attorney-client or consultant-client relationship preclude a Board member from considering a grant application made by the former client if the possibility of a future business relationship exists?
Assuming the Board member were not barred by the two year presumption described above, the question is whether the possibility of a future relationship would act as a bar to his or her participation. Here, again, each case must be considered on its facts. The fact that a Board member may have had a "temporary" business relationship with a grant applicant would be one factor to be considered. However, if the Board member has entered into negotiations regarding future services to be rendered to an applicant, he or she must disclose that information to the Board and refrain from participating in any Board action involving the applicant.
(3) May a Board member who was a former trustee of a pension fund act on an application from an [organization] or employer served by the fund?
As described earlier, a factor to weigh in the recusal decision is the applicant's nexus with the entity for which the Board member worked or with which he or she was affiliated. In answering this question, the Commission determines that it would not violate §74 if a Board member who previously sat on the board of trustees of an [ ] pension and welfare fund in which several employers and [organizations] participated, considered a grant application from one of the employers or [organizations] served by that fund. No violation would occur even if the Board member had left less than two years before the application was considered.
Since the Board member's former duties were limited to overseeing the finances of and distributions made by the pension fund, he or she would not have been involved in the operations of the [organizations] or businesses served by the fund. Thus, the Board member would have had little, if any, interaction with their officers and employees. There would have been no significant opportunity to develop close relationships or associations with these individuals. Accordingly, the opportunity for improper influence or the appearance of impropriety is minimal.
(4) May Board members who are employed by the [organization] vote on the application of affiliated [groups]?
As in question (3), whether Board members who are employed by the [organization] may consider grant applications of [organization] affiliates depends on the nature of the relationship between the members, their employers and the applicants.(12)
In Advisory Opinion No. 93-16, the Commission ruled that an individual serving as an uncompensated member of a State board had to recuse himself from voting on applications submitted by the participating members of two organizations, each of which employed the board member as its second-highest ranking officer. The Commission held that based on the nature of the individual's employment and his position on the State board "it is foreseeable that the public might suspect that he is favorably disposed toward [the two entities'] applicants when making [ ] determinations."(13)
In the situation presented, the Commission does not have sufficient facts to make a determination. The relationship between the [organization] and the particular [affiliate] involved would have to be made known, as would the relationship between the Board member and the [organization]. In addition, the determination could turn on the position of the Board member in the [organization]. Given the Commission's lack of specific facts, it is unable to provide an opinion on this part of the request.
(5) May a Board member with vested pension rights act on an application of his former employer, which he left eight years ago?
One Board member is vested in a pension plan in which his former employer, which he left eight years ago, participates. In this instance, the Commission finds that there would be no conflict of interest for the Board member to consider an application submitted by his former employer, an [organization]. As more than two years have lapsed since the termination of the employer-employee relationship, there is a presumption that §74 would not be violated. The passage of time has allowed relationships to wane, allegiances to fade and insider information to become stale.
In addition, although the Board member retains a vested right in a pension plan in which a former employer participates, his or her vote on an application for a grant could not bestow a benefit to the Board member, nor would it have any impact on the solvency of the pension fund or the ability of the employer to contribute to the pension plan.
(6) May a lawyer who represents a [branch of an organization] vote on an application submitted by the State Council of the International to which the [branch] belongs?
One Board member is a lawyer who represents a [branch of an organization] affiliated with an [organization]. The [branch] belongs to a State Council of the International [organization]. The Board member's law firm has no relationship to the State Council.
The Commission determines that the Board member may vote on an application submitted by the State Council provided the grant sought will not be used by or inure to the benefit of the [branch]. The analysis here is similar to that applied in question (3), and the Commission assumes that the lawyer does not have any role in the operation of the State Council nor does he interact with its members other than the local he represents.
As the Attorney General stated in his opinion No. 83-F20, [on the application of §74 to members of the Temporary State Commission on Banking, Insurance and Financial Services]
. . .The knowledge and experience which Commission members bring from the various sectors enumerated in the creating statute must be devoted to the advancement of the public good and not the private interests from which the members come. In accepting a public office and the opportunity to shape public policy, the Commission members and employees assume an obligation to adhere to the standards of conduct which the public rightfully expects of those holding a public trust. Those standards are expressed in section 74 of the Public Officers Law . . .
In this opinion, the Commission, in responding to the various inquiries, has set forth the guidelines to be considered in determining whether a conflict of interest or the appearance of a conflict exists when a part-time State officer or employee whose primary activity is in the private sector has the authority to affect his or her private sector interests.
This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person 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.
Joseph M. Bress, Chair
Barbara A. Black
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell, Members
Dated: June 21, 1994
1. [ ].
2. Request letter from [the State employee].
4. [ ].
5. Public Officers Law §74(1).
6. The Board's members are not subject to Public Officers Law §73, (except §73(3)(b) relating to appearances against the State's interest in the Court of Claims) because that section exempts officers of boards "who receive no compensation or are compensated on a per diem basis" [§73(1)(i)(iii)]. No similar exemption is contained in §74.
7. The impact of current employment relationships and the necessity for appropriate disclosure and possible recusal have been discussed in previous Commission Opinions. See, e.g., Nos. 92-11, 90-5, 93-5.
8. If a current business relationship exists with an applicant, there is no question that the Board member must disclose and recuse himself or herself from participating in any Board action to avoid a conflict of interest under §74.
9. See Advisory Opinion No. 90-21.
10. Op. Atty. Gen. No. 86-F6 (1986).
11. It should be noted that there are aspects of a lawyer-client relationship which continue to exist despite the termination or completion of a particular business transaction (e.g., maintaining client secrets and confidences). Lawyers who serve as State officers should consult the Code of Professional Responsibility regarding confidentiality issues, when appropriate.
12. In question 3, the Board member's former employer was considered, while here it is the member's current employer. However, the analysis in both situations is the same.
13. Advisory Opinion No. 93-16.