New York State
Ethics Commission


Advisory Opinion No. 96-14: Application of Public Officers Law §74 to the Chair of the State Racing and Wagering Board.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by the law firm of Whiteman Osterman & Hanna on behalf of its client, Dr. Jerry Bilinski, Chair of the New York State Racing and Wagering Board ("Board"). Bilinski asks whether certain actions to be taken by him following the Commission's issuance of a Notice of Reasonable Cause will avoid future violations of Public Officers Law §74 with respect to the matters described in the Notice.

Pursuant to the authority vested in it by Executive Law §94(15), the State Ethics Commission ("Commission") hereby renders its opinion that if Bilinski takes the actions he has proposed, he will, in the future, avoid repetition of the acts described in the Notice and will meet the minimum standards of Public Officers Law §74.

BACKGROUND

There is a substantial history to this matter. In February 1996, the Commission opened an investigation into whether Bilinski, as Chair of the Board, violated the Public Officers Law with respect to activities in which he engaged related to the ownership and breeding of thoroughbred racehorses. This investigation led to the issuance of a Notice of Reasonable Cause, issued on June 3, 1996, alleging that Bilinski, on 14 occasions, violated §74(3)(i) by selling breeding rights to licensees of the Board, and, on 16 occasions, violated §74(3)(f) by creating and maintaining partnerships to own horses with a licensee of the Board. Pursuant to law, the Notice of Reasonable Cause was referred to the Governor.

On May 15, 1996, Bilinski asked the Commission whether he could prevent recurrence of the past violations in the future by taking certain steps, including the creation of a blind trust. In response to that request, the Commission issued Advisory Opinion No. 96-9, dated May 28, 1996, which held the actions he proposed to take did not rectify the situation. The opinion included a description of the activities in which Bilinski was engaged. The reader is referred to the opinion for the facts which give rise to this request, as well as for the applicable law.

Having failed to satisfy the Commission with his earlier presentation, Bilinski now presents a new and totally different proposal. He again asks whether he can avoid future violations of §74 if he takes the proposed actions.

In his earlier proposal, Bilinski would have retained his interests in the breeding of the two stallions in which he holds syndicate shares, but he would place those interests in a blind trust. The Commission found that the blind trust would not shield him from the details of the activities in which the horses would be engaged. Bilinski now proposes to divest himself of his interests in the breeding rights of the stallions during the period in which he serves as a member of the Board. With his divestiture, he argues, there would be no violation of §74.(1)

The details of Bilinski's latest proposal are as follows.

Bilinski has divested himself of his breeding rights to Go and Go and Cormorant, the two stallions in which he has interests, during his tenure as a member of the Board by making a gift of those rights to Cornell University by means of a written deed of gift. Pursuant to this document, Bilinski has relinquished to Cornell "any and all decisions with respect to the sale or disposition of seasonal breeding rights, participation in matters of syndicate governance, and any and all proceeds from the use of [his] fractional interests, including 'extra seasons'." Bilinski's submission to the Commission states that as long as Bilinski is on the Board, he will have no ownership interest or involvement in the sale or disposition of seasonal breeding rights of the two thoroughbred stallions. In addition, Bilinski represents that he will not acquire, by purchase or gift, any interest in whatever foals may be produced from stallion breeding activities performed during the term of the gift, including foals conceived during such term but born afterward.

Bilinski has resigned as President and Treasurer of the professional service corporation "Jerry Bilinski DVM and Anina la Cour DVM, P.C." He will surrender his ownership of 50% of the stock of the professional corporation to the corporation at one-half of the book value of the shares as of December 31, 1995. As a condition of this sale, the corporation will grant to Bilinski an option to purchase a 50% interest in the corporation within six months after his termination from State service at a price equal to one-half the book value of the shares at the end of the year prior to his exercise of the option. This is in conformance with §§1509 and 1510 of the Business Corporation Law.

Bilinski and la Cour have entered into a formal lease providing for fixed payments for la Cour's rental of Bilinski's several properties at North Chatham.

Finally, Bilinski's wife, Darlene Bilinski, has resigned and no longer serves as the secretary to the syndicates that own Go and Go and Cormorant.

DISCUSSION

The critical part of Bilinski's proposal is the divestiture of his breeding rights in Go and Go and Cormorant during the period of his membership on the Board. In the Notice of Reasonable Cause previously issued, the allegations with respect to the stallions concerned the sale of these breeding rights to licensees of the Board. Under his latest proposal, Bilinski will not retain any breeding rights; they will belong to Cornell. Since he will not own these rights, he cannot sell them to licensees, or, indeed, to anyone. Thus, the fundamental difficulty which led to the issuance of the reasonable cause notice has been resolved.

Bilinski will not be involved in the sale of the breeding rights by Cornell or in Cornell's actions relating to the governance of the syndicates that own Go and Go and Cormorant. This will preclude him from directing or influencing the actions and decisions of Cornell or the syndicates from behind the scenes. The resignation of Darlene Bilinski from her position in the two syndicates further assures that he would not indirectly play a role.

Bilinski has proposed further actions to eliminate some related potential difficulties. He will not acquire any interests in the foals born or conceived as a result of the exercise of the rights he has given to Cornell. This assures that he will not financially benefit from these rights through the purchase and resale of the offspring that may result from the breeding.

Bilinski's resignation as an officer of "Jerry Bilinski DVM and Anina la Cour DVM, P.C." and his divestiture of his equity interest in this corporation during his term of office will assure that he will not financially benefit from the sale of goods and services by this corporation to licensees of the Board. His only financial interest during the period of his membership on the Board will be the fixed rental payments he will receive as a 50 percent owner of the property leased to a corporation wholly owned by Anina la Cour. Since these are fixed payments, they are not dependent on sales to licensees.

While Bilinski will maintain residual interests in Go and Go and Cormorant, these interests will be restored to him only after he has completed his service as a member of the Board. Such residual interests are not violative of §74 because, with his divestiture, he will not have the ability to control the value of these interests while he is in public service. Thus, his interests while serving as a member of the Board are dormant, and will not cause a substantial conflict of interest or the appearance of such a conflict with the proper discharge of his duties in the public interest.

Therefore, should Bilinski take all of the above actions, he will, in the future, avoid repetition of the acts described in the Notice of Reasonable Cause. Such action, of course, does not result in a withdrawal of the Notice, as the allegations contained therein were based on past actions.

CONCLUSION

The Commission concludes that Bilinski's proposal, as submitted, will, in the future, avoid his repetition of the acts described in the Notice of Reasonable Cause and will cause him to meet the minimum standards of Public Officers Law §74.

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.

Concur:

Evans V. Brewster,
Robert E. Eggenschiller,
Donald A. Odell, Members

Dissent:

Angelo A. Costanza, Member

Costanza, A., dissenting. In Advisory Opinion No. 96-9, the Commission questioned whether, other than through complete divestiture, Bilinski could, through a trust agreement or otherwise, meet the requirements of §74.

The Commission has often stated that the code of ethics contained in Public Officers Law §74 prohibits the appearance of conflicts as well as actual conflicts of interest. Indeed, in Advisory Opinion No. 96-6, we noted that "[a]s Bilinski, as Chair of the Board, has 'general jurisdiction over all horse racing activities and all pari-mutual betting activities, both on-track and off-track' (Racing, Pari-Mutuel Wagering and Breeding Law §101), it is imperative that the public trust be maintained and that his actions are free from even the appearance of such a conflict". In my opinion, the appearance of a conflict of interest is not removed by Bilinski's proposal.

Bilinski has not divested himself of his interests in the two stallions. Rather, he has given away the breeding income from the two horses during a period of time. He continues to own 28 of 40 ownership shares in one stallion and 9 of 40 ownership shares in the other. The stallions' breeding activity establishes, in part, their overall value. Thus, while Bilinski may not share in the profits from the sale of breeding rights during his term in office, as the ultimate owner of the shares he has a direct financial interest in what happens to the stallions during his tenure in State service. The public could reasonably perceive that his interests continue while he serves as a member of the Board.

While it is true that Bilinski's temporary gift of the season shares to Cornell will prevent additional violations of Public Officers Law §74(3)(i), which prohibits him from selling goods or services to a licensee of the Board of which he is Chair, there remains an appearance of a conflict of interest in that he retains a residual interest in the stallions, and is thus interested in seeing their value increased while serving on the Board.

Dated: July 2, 1996


Endnotes

1. Bilinski has sold all of his interests in the mares he co-owned with a licensee of the Board to his partner, who had surrendered his license. The Commission approved of this step in Advisory Opinion No. 96-9. This will prevent recurrence of his past violations of §74(3)(f).



URL: http://www.nysl.nysed.gov/edocs/ethics/96-14.htm