|Advisory Opinion No. 96-7:||Application of the two year and lifetime bars of Public Officers Law §73(8)(a) to a former employee of the New York State Housing Finance Agency.|
The following advisory opinion is issued in response to a request submitted by the law firm of [ ] on behalf of its client, [ ], a former employee of the New York State Housing Finance Agency ("HFA") who was assigned to perform services for the New York State Medical Care Facilities Finance Agency ("MCFFA"). The law firm seeks a determination of: (1) [the former employee's] former State agency for purposes of the two year bar of Public Officers Law §73(8)(a)(i), and (2) whether [the former employee] may work on new project financing requests by entities that secured financing from MCFFA while he served there without his violating Public Officers Law §73(8)(a)(ii).
Pursuant to its authority under Executive Law §94(15), the New York State Ethics Commission ("Commission") hereby renders its opinion that (1) [the former employee's] "former agency" is HFA and the Dormitory Authority ("DA"), into which MCFFA has been consolidated, but as to the DA, he may not appear, practice or render services for compensation in relation to any matter only if the matter was within the authority of MCFFA prior to the Health Care Financing Consolidation Act of 1995; and (2) with respect to work on new project financing requests made by entities that had secured financing at MCFFA while [the former employee] served there, he is invited to seek future determinations from the Commission with respect to specific projects in accordance with the guidance given herein.
[The former employee] was employed by HFA from [ ] until [ ]. His last position with the agency was [job title]. In that position, [the former employee], like other HFA employees, was assigned to primarily serve MCFFA pursuant to a service contract between the two agencies. His duties included supervisory responsibility, on a day-to-day basis, for new program development, project financing and portfolio management. He reported to the President/CEO of MCFFA who, in turn, was responsible to the MCFFA board of directors.
[The former employee's] unit was responsible for creating and implementing financing programs for health and mental health projects as requested by the Department of Health and the Offices of Mental Health and Mental Retardation and Developmental Disabilities; coordinating the activities needed to issue tax exempt bonds on behalf of specific health or mental health projects; and monitoring the financial conditions of projects to which MCFFA made loans from the tax exempt bonds it had issued to assure the timely payment of principal and interest. In order to qualify for financing, projects had to receive a certificate of need from the Department of Health or the Office of Mental Health or Mental Retardation and Developmental Disabilities, and approval from the MCFFA board of directors and the Public Authorities Control Board.
MCFFA was created as a public benefit corporation by Chapter 392 of the Laws of 1973. Its purpose was to provide additional funds, through the issuance of bonds, for the construction and improvement of health and health related facilities, as well as facilities related to the care, maintenance and treatment of mentally ill and mentally retarded and developmentally disabled individuals. See Unconsolidated Laws §7412.
In 1995, the Health Care Financing Consolidation Act merged the functions of MCFFA into the DA, effective September 1, 1995 (Chapter 83, Laws of 1995). The Act provided that MCFFA "shall continue its corporate existence in and through the Dormitory Authority and the Dormitory Authority shall succeed to the powers, duties and functions of the agency. . . ." It further provided that MCFFA "shall not be deemed to have been terminated. . . ." As a result of this legislation, MCFFA no longer has its own board of directors. While its corporate existence continues, presumably to guarantee the integrity of bonds previously issued, it is now operated by the board of directors of the DA. All new projects that would have been financed by MCFFA will be financed by the DA with the approval of its board of directors.
The DA has broad statutory authority to issue bonds for the construction and improvement of educational facilities in the State. It also has had, even prior to the 1995 enactment, the authority to issue bonds to support those hospitals and health facilities specifically set forth in its governing statute, of which there are more than one hundred. See Public Authorities Law §§1676 and 1680.
A limited number of HFA employees who previously performed services for MCFFA have been transferred to the DA. According to the DA, these former employees neither occupied senior positions at MCFFA nor do they currently occupy such positions at the DA. Some of them perform services exclusively on MCFFA matters; others, including former MCFFA attorneys, have been integrated with the DA staff and perform services on both MCFFA and DA matters.
[The former employee] wishes to represent before the DA clients seeking approval for the issuance of tax exempt bonds on new projects. As a lender, the DA must provide initial approval before a new project receives financing, and also must approve certain actions where projects have existing debt.
[The former employee] asks two questions:
(1) Is he barred from representing clients before the DA for two years from his having left HFA? and
(2) May he work on new project financing requests by entities that had secured financing from MCFFA while he served there?
Public Officers Law §73(8)(a)(i) provides:
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.
Public Officers Law §73(8)(a)(ii) provides:
No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment, or which was under his or her active consideration.
These provisions, generally referred to as the "revolving door" provisions, set 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. They contain a two year absolute bar on a former employee's appearing, practicing or rendering services for compensation in relation to any matter before his or her former agency and a permanent prohibition against a former employee's appearing or rendering services pertaining to transactions in which he or she was directly concerned and personally participated or which were under the individual's active consideration.
(1) Is [the former employee] barred from representing clients before the DA for two years from his having left HFA?
As noted, Public Officers Law §73(8)(a)(i) bars former State officers and employees from appearing, practicing or rendering services for compensation in relation to matters before their former agency. Critical to understanding the breadth of these restrictions is a determination of a former employee's "former agency." While this is usually a simple matter, in [the former employee's] case it is complicated by his status while in State service and by the recent Consolidation Act.
The Commission has held that former employees may have more than one former agency (Advisory Opinion Nos. 90-22 and 95-19). In Advisory Opinion No. 90-22, the Commission considered an employee of an agency who worked as an administrator of another agency as a significant and regular assignment. Even though his service to the second agency was uncompensated, the Commission held that both were his "former agency" for revolving door purposes.
Given this precedent, the Commission concludes that [the former employee's] "former agency" is both HFA, the agency at which he held a payroll position, and MCFFA, the agency to which he was significantly and regularly assigned. His services to MCFFA were provided pursuant to a contract authorized by law. (Private Housing Finance Law §44)
The more difficult question is whether the DA, by virtue of its relationship to MCFFA as a result of the 1995 consolidation legislation, is also [the former employee's] former agency. In Advisory Opinion No. 93-11, the Commission concluded that where the newly created Office of Alcoholism and Substance Abuse Services ("OASAS") had succeeded to the former Divisions of Substance Abuse Services ("DSAS") and Alcoholism and Alcohol Abuse ("DAAA"), and the two merged agencies went out of existence, OASAS became the former agency of all DSAS and DAAA employees.
The facts here, however, are distinguishable from those presented in Advisory Opinion No. 93-11 because MCFFA continues its legal existence after the consolidation, although within the DA. Therefore, Advisory Opinion No. 93-11 is not directly controlling.
The Commission is dealing here with a unique situation. Unlike DSAS and DAAA after the merger, the former agency of [the former employee], MCFFA, continues its legal existence under the consolidation legislation. However, its functions have, for practical purposes, been assumed by the DA. If [the former employee's] bar were only as to MCFFA, he, unlike other former State employees, would be free to deal with his former colleagues, who are now DA employees, on the same types of matters on which they worked while he was in State service. If his bar were as to the entire DA, as successor to MCFFA, he would be unfairly prohibited from working with employees in an agency different from his former agency on matters unrelated to his prior work. Thus, if the Commission were to engage in its customary analysis and define the two year bar by agency, a fair result could not be achieved. Under these unique circumstances, the Commission will define the two year bar by function rather than agency. It recognizes that this functional analysis has the potential to cause significant uncertainty with regard to the breadth of the restrictions imposed on a former employee, and it takes this approach in these unusual circumstances only because it believes there is no alternative approach that leads to an equitable result.
Examining the functions of MCFFA prior to the consolidation and the functions of the DA, the Commission notes that there was substantial overlap. MCFFA was basically empowered to finance the construction of health and mental health facilities, while the DA was empowered to finance the construction of those health and mental health facilities specifically mentioned in its governing statute, of which there are about one hundred. Thus, while MCFFA's authority was general in this field, the DA's statute was specific, but it covered many of the State's largest health facilities. Under these circumstances, the Commission believes that the purpose of the two year bar would best be effectuated by barring [the former employee] from involvement with any facility that might have been financed by MCFFA prior to the consolidation. This would preclude him from using his inside knowledge and contacts which are not available to others.
At the same time, it would allow him to work on the financing of other projects that come before the DA even though he may be appearing before some of the same individuals with whom he worked while at MCFFA. Since the subject matter of the projects on which he would work would be different from those on which he worked when he was in State service, he would not have special knowledge unavailable to the public. In addition, the DA has informed the Commission that those employees who were transferred from MCFFA to the DA do not occupy senior positions, nor did they at their former agency. Thus, they will not be in a position to make final determinations with regard to any project on which [the former employee] might work. In sum, the Commission concludes that [the former employee] may not appear, practice or render services for compensation in relation to any matter before the DA if that matter was within the authority of MCFFA prior to the Health Care Financing Consolidation Act of 1995.
(2) May [the former employee] work on new project financing requests by entities that had secured financing from MCFFA while he served there?
The lifetime bar, contained in Public Officers Law §73(8)(a)(ii), prohibits former State employees from working on any case, application, proceeding or transaction in which they personally participated or which was under their active consideration while in State service. To determine whether work on a specific transaction is barred by this provision, the Commission must consider whether it is the same as a transaction on which an employee worked when he or she was employed by the State.
In Advisory Opinion No. 91-12, the Commission, in interpreting the lifetime bar, stated that, "[i]t is permissible for former employees to draw on their information concerning 'old' transactions if the information bears a relationship to the current transaction." In Advisory Opinion No. 91-18, the Commission reiterated its position that Public Officers Law §73(8)(a)(ii) does not preclude a former State officer or employee from appearing, practicing, communicating or rendering services for compensation on new and separate matters or transactions, notwithstanding that the State employee may have been directly concerned with or personally participated in a similar or related transaction while he or she was in State service.
Therefore, to respond to the second question, the Commission must determine whether a new project financing request is the same transaction as one on which [the former employee] worked while with the MCFFA where both projects emanated from the same entity. Like the first question, this one has some difficulties.
In Advisory Opinion No. 91-12, the Commission held that even significant changes in the scope and nature of a single construction project do not render the revised project a different transaction from the one originally conceived. A former employee who had worked on the original project was held to be precluded from working on the revised version. Thus, if [the former employee] had worked on the financing of a project while he was with MCFFA, he could not handle revised financing arrangements for the same project, even if the project were significantly altered. However, Advisory Opinion Nos. 91-12 and 91-18, cited above, would permit him to work on any entirely new project, even if sponsored by the same entity that financed a different project through MCFFA while he was employed there and which was one on which he worked.
Since each lifetime bar question is determined on a case-by-case basis (Advisory Opinion No. 90-22), the Commission can, at this time, give only this guidance to [the former employee]. He is invited to submit to the Commission the facts surrounding any specific financing project, and the Commission will render an opinion based upon the facts then before it.
The Commission concludes that [the former employee's] "former agency" is HFA and the DA, but, as to the DA, [the former employee] may not appear, practice or render services for compensation in relation to any matter only if the matter was within the authority of MCFFA prior to the Health Care Financing Consolidation Act of 1995; and, with respect to work on new project financing requests made by entities that had secured financing at MCFFA while [the former employee] served there, he is invited to seek future determinations from the Commission with respect to specific projects in accordance with the guidance given in this opinion.
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.
Angelo A. Costanza,
Robert E. Eggenschiller,
Donald A. Odell, Members
Evans V. Brewster, Member
Joseph M. Bress, Chair
Dated: April 15, 1996