New York State
Ethics Commission


Advisory Opinion No. 95-1: Determination of "former agency" for purposes of the application of the post-employment restrictions of Public Officers Law §73(8).

INTRODUCTION

The following advisory opinion is issued in response to an inquiry from two employees of the Liquidation Bureau of the State Insurance Department concerning the application of the post-employment restrictions of Public Officers Law §73(8)(a). [ ]. Specifically, the Commission is asked to determine whether the "former agency" of these individuals for purposes of the two year bar is only the Liquidation Bureau or the entire State Insurance Department.

Pursuant to its authority under Executive Law §94(15), the Commission hereby renders its opinion that the former agency of the requesting individuals for purposes of Public Officers Law §73(8)(a) is only the Liquidation Bureau. The individuals are therefore prohibited from appearing, practicing or rendering services for compensation on any matter before the Bureau for a period of two years from termination of their State service, but they may during that period engage in those activities before the State Insurance Department.

BACKGROUND

The State Insurance Department ("Department") has statutory powers to control and regulate the insurance industry. It grants and revokes licenses of insurance companies and approves charter amendments of companies; it conducts examinations of insurance companies to ascertain their financial condition and to review their practices. In addition, all insurance companies are required to file annual statements, which are audited by the Department. The Department licenses agents, brokers and adjusters. It is authorized to approve certain policy forms and certain advertisements, and to investigate unfair methods of competition and deceptive acts and practices. It checks the actuarial computation of policy reserves of all domestic life insurance companies and regulates the rates of property and casualty companies. In addition, the Department is authorized to issue regulations, which have been described as encompassing virtually the entire field of insurance in all respects.

The Insurance Law, in a separate article, deals with the rehabilitation, liquidation, conservation and dissolution of insurers. Under Article 74 of that law, the Superintendent may apply to State Supreme Court for an order to liquidate an insurer which is insolvent. If the order is granted, the Superintendent is appointed Liquidator of the company and is vested with title to all of the property, licenses, corporate charter, contracts and rights of action of the company. Under Article 74, the Superintendent is authorized to appoint special deputy superintendents and assistant special deputy superintendents as his or her agents, and to employ such counsel, clerks and assistants as he or she may deem necessary (Insurance Law §7422[a]). The compensation of these special deputy superintendents, assistant special deputy superintendents, counsel, clerks and assistants and the expenses of conducting the Article 74 proceeding are paid out of the funds or assets of the insurer, as fixed by the Superintendent and approved by the court (Insurance Law §7422[b]). Employees of the Liquidation Bureau are the individuals who are appointed as such special deputies or assistant special deputies upon the issuance of a court order, or are employed as counsel, clerks or assistants.

APPLICABLE LAW

Public Officers Law §73(8)(a) provides that:

No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm,corporation, or association in relation to any case, proceeding or application or other matter before such agency.

DISCUSSION

This provision is part of what is generally referred to as the "revolving door" statute, which sets forth the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their employment with a State agency. The above-quoted paragraph contains a two year absolute bar which prohibits a former State officer or employee from appearing, practicing or rendering services for compensation in any matter before his or her former agency. The issue before the Commission in the instant case is to determine what is the "former agency" of the employees of the Liquidation Bureau.

It is the position of the requesting individuals that their former agency for purposes of the two year bar is the Liquidation Bureau, rather than the Department as a whole. They note that their appointments as agents of the Liquidator are individual to each failed insurance entity and are ratified by the court supervising the administration of the failed entity. Their compensation is fixed by the Liquidator, subject to court approval, and is paid from the assets of each company in liquidation. The civil service system does not apply and there are no State budget implications. According to the requesting individuals, there is no movement of employees between the Liquidation Bureau and the Department. To further support their position, they note that the State's Attorney General, who represents the Department, plays no role with respect to the Liquidator and will not defend him or her if sued. Moreover, the Court of Claims, which has jurisdiction to hear claims against the Department, has no jurisdiction with regard to claims against the Bureau, which are heard in State Supreme Court.

The Commission had occasion to consider similar circumstances in Advisory Opinion No. 90-18. The issue in that case was whether the Division of Tax Appeals was a separate entity from the State Department of Taxation and Finance for purposes of the two year bar. The Commission concluded that it was a separate entity for such purposes:

The Division of Tax Appeals is an independent entity within the Department. The Division has a Tax Appeals Tribunal, which consists of three commissioners appointed by the Governor for a term of nine years. The tax appeals tribunal has the power of appointment and removal of its employees and prepares and submits a budget to the Commissioner of the Department which cannot be revised in any manner by the Commissioner. It is clear, from both the legislative intent contained in §2000 of the Tax Law and the provisions of Article 40, that the Division of Tax Appeals is a separate entity from the Department. Therefore, appearing or practicing before or receiving compensation related to a matter before the Division would not violate the two year bar . . . [for a former employee of the Department].

In the instant case, the Liquidation Bureau, like the Tax Appeals Tribunal, is an independent entity within the Department. It maintains offices separate from the Department. The Liquidation Bureau, like the Tribunal, has the power of appointment and removal of its employees, and has a separate funding source from the Department.

Indeed, the courts of this State have recognized that there is a distinction between the Superintendent of Insurance acting as Liquidator and the Superintendent acting as the State officer charged with regulating the industry.(1) For example, in Matter of Ideal Mut. Ins. Co. (140 AD2d 62), it was held that since the Superintendent as Liquidator of an insurance company occupies a legal persona separate and distinct from the Superintendent as regulator of the industry, negligent acts committed by the Department in the exercise of its regulatory function could not be charged against the Superintendent as Liquidator of a company. The Appellate Division stated that, "when acting as statutory liquidator of an insolvent insurer, the Superintendent is essentially a court-appointed private trustee who for all practical purposes takes the place of the insolvent insurer and stands in its shoes". Since the Superintendent acts in distinct roles, the employees who serve under him in his two different capacities are distinct. In sum, the Liquidation Bureau and its employees are separate from the Department and its employees.

The Commission, therefore, determines that only the Liquidation Bureau should be deemed to be the former agency of the requesting individuals for the purposes of the two year bar. They may not appear or practice before the Liquidation Bureau or render services for compensation on a matter before the Bureau for a period of two years from their separation from State service. They may, however, during that time, appear or practice before the Department or render services for compensation on matters before the Department, as long as the lifetime bar is not violated.

CONCLUSION

Pursuant to its authority under Executive Law §94(15), the Commission hereby renders its opinion that the former agency of the requesting individuals for purposes of Public Officers Law §73(8)(a) is the Liquidation Bureau. The individuals are therefore prohibited from appearing, practicing or rendering services for compensation on any matter before the Liquidation Bureau for a period of two years from termination of their State service, but they may during that period engage in those activities before the Department.

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.

All concur:

Joseph M. Bress, Chair

Barbara A. Black
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell, Members

Dated: January 17, 1995


Endnotes

1. See, Matter of State of New York v Public Employment Relations Board (146 AD2d 961). There, the Appellate Division affirmed a judgment of Supreme Court upholding a 1984 determination of the Public Employment Relations Board that the Liquidation Bureau, which was considered throughout the proceeding as an employer separate from the Department, was a public employer for purposes of the Taylor law.



URL: http://www.nysl.nysed.gov/edocs/ethics/95-01.htm