New York State
Ethics Commission


Advisory Opinion No. 96-26: Application of Public Officers Law §74 to a prospective appointee's membership on a State public benefit corporation.

INTRODUCTION

The following advisory opinion is issued in response to a request for a formal opinion from James M. McGuire, First Assistant Counsel to the Governor. His request concerns Joseph Strasburg ("Strasburg"), President of the Rent Stabilization Association of New York City, Inc. ("RSA"), who is a prospective appointee to the position of Director and Chair of the State of New York Mortgage Agency ("SONYMA"). He asks whether Strasburg, upon assuming this part time, unpaid position, would satisfy Public Officers Law §74 if he were to recuse himself whenever an applicant before SONYMA is an RSA member. He also asks about Strasburg's lobbying the Division of Housing and Community Renewal ("DHCR") and its Commissioner, the Office of the Governor and the Legislature.

Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by Executive Law §94(15), the Commission hereby renders its opinion that Strasburg may accept the prospective appointment to SONYMA and satisfy Public Officers Law §74 by recusing himself from the deliberations and voting whenever a member of RSA has a matter before the Board or any committee of the Board on which he serves. In his lobbying activities on behalf of RSA, Strasburg may lobby the Office of the Governor, the Legislature and the Commissioner of DHCR on matters not related to SONYMA, except he may not discuss any matter before DHCR with the Commissioner while attending meetings of the corporation.

BACKGROUND

On June 7, 1996, First Assistant Counsel McGuire advised the Commission that Strasburg was being considered for membership on the board of the Housing Finance Agency ("HFA") and as a director and Chair of SONYMA.(1) He requested an informal opinion as to whether a potential conflict would be created by such appointments and whether Strasburg's recusal could satisfy any potential conflict that might arise. Having received an informal opinion, McGuire now requests a formal opinion from the Commission.

Strasburg is employed as the President of RSA, a not-for-profit organization dedicated to furthering the interests of holders of residential property investments. Its primary goal is to reform New York City's rent control laws. The organization represents approximately 25,000 property owners, some 70% of whom own buildings with fewer than twenty rental units.(2) It is funded by dues which are based upon the number of units held by each member.

Strasburg, along with three other top executives of RSA, is registered with the New York State Lobbying Commission. However, Brian Meara and the law firm of Hinman, Straub, Pigors & Manning are RSA's primary lobbyists. For the last reporting period, RSA estimated that it will expend $16,000 for expenses relative to lobbying for the calendar year.

RSA's lobbying efforts are before the Legislature, the Office of the Governor and DHCR. None of its lobbying activities, whether performed by RSA or by its outside firm, has any relationship to matters before SONYMA. RSA lobbies DHCR, whose Commissioner, by statute, sits on the board of SONYMA, on a number of issues, including rent control, state regulatory procedure, mandated landlord services to tenants and reformation of the bureaucratic process. DHCR, following criteria established by the New York State Legislature, either grants or disallows applications from RSA members to increase or decrease rents for both rent controlled and rent stabilized apartments.

Based upon the facts contained in McGuire's request of June 7, 1996, the Commission, on June 10, 1996, issued an informal opinion It held that, as RSA does not have matters before SONYMA, there is no per se conflict in Strasburg's prospective appointment. However, the Commission placed restrictions on his participation in certain matters because of his position with RSA. First, it said that Strasburg should refrain from discussing any matter before DHCR with the Commissioner while both are attending board meetings. Second, the Commission noted that McGuire, in his request, said that Strasburg had stated that if a member of RSA has a matter before the Board he would recuse himself. The Commission held that if Strasburg followed this procedure and also refrained from assisting any RSA member in preparing an application to SONYMA, there would no conflict or appearance of a conflict of interest. Finally, the Commission prohibited Strasburg from lobbying the Office of the Governor on matters that are related to the work of SONYMA.

On November 26, 1996, McGuire requested a formal opinion. He asked:

1) If a member of RSA submitted an application to SONYMA for mortgage insurance and Strasburg recused himself after being advised by staff that the applicant was an RSA member, would there be a violation of any provision of the Public Officers Law?

2) Would Strasburg be permitted to lobby DHCR and its Commissioner, provided that he did not discuss any RSA matter before DHCR with the Commissioner while attending SONYMA board meetings?

3) Would Strasburg be permitted to lobby the Office of the Governor and the Legislature on matters of concern to RSA?

The Commission has spoken with Manuel Menendez, Senior Vice-President and Counsel to SONYMA, who provided information about the structure and activities of the corporation. He advised the Commission that SONYMA is a public benefit corporation created to alleviate shortages of funds available in the private banking system for residential mortgages within the State through the purchase of mortgage loans on single family housing units from certain lenders. Its primary mandates are to increase the affordability of home ownership of low and moderate income residents, and promote the development of affordable housing and the stabilization of neighborhoods throughout the State. SONYMA also administers a Mortgage Insurance Loan Fund Program which guarantees mortgage loans on multi-family housing developments and certain other facilities, and provides pool and primary insurance on SONYMA's single family loans. The corporation has nine directors: the Superintendent of Banks, the Comptroller, the Director of the Budget, the Commissioner of DHCR, one appointed by the temporary president of the Senate, one appointed by the Speaker of the Assembly and three appointed by the Governor with the advice and consent of the Senate. The appointed directors each serve for a term of four years.

Menendez has advised that it is highly unlikely that an RSA member would apply for assistance under SONYMA's low interest rate program or its conventional rate home mortgage program. Even if there were an application from an RSA member, it would not be considered by the Board, as individual single family loans are not approved at that level. Members of the Board approve only bond financing for the single family home programs and the parameters of the programs.

SONYMA's other major program is the Mortgage Insurance Loan Fund Program, where applicants, except those seeking policies in connection with the construction of health care facilities, could well be RSA members. All applications for mortgage insurance are initially reviewed at the staff level. The administrative staff evaluates the merits of each application, and thereafter forwards to the Mortgage Insurance Committee (Committee) its recommended disposition. Pursuant to SONYMA's by-laws, the Committee, which is comprised of selected board members appointed by the Chair, and on which the Chair serves ex-officio, can finally approve insurance applications of less than five million dollars. For insurance applications greater than five million dollars, the Committee can either reject the application, in which case it is denied, or recommend its approval to the full Board. Under the normal review procedure, a Board member would not consider an application prior to its formal presentation to the Board unless the member serves on the Committee. While the Chair is an ex-officio member of the Committee, Menendez states that the Committee can act without the participation of the Chair.

In his letter of request of November 26, 1996, McGuire states that Menendez has advised that if SONYMA staff is provided with a list of RSA members, it can screen Mortgage Insurance Fund applicants to determine whether an applicant is a member of the organization. In the event an applicant is an RSA member, Strasburg could recuse himself by refraining from the voting or deliberations on the application and by not discussing the matter with other directors.

APPLICABLE STATUTE

Public Officers Law §74 sets forth the Code of Ethics for State officers and employees. Section 74(2) contains the rule with respect to conflicts of interest:

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 not only actual but apparent conflicts of interest. Of relevance to this inquiry are the following:

  1. No officer or employee of a state agency. . .should accept employment or engage in any business or professional activity which will require him to disclose confidential information which he has gained by reason of his official position or authority.

  2. 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.

  3. No officer or employee of a state agency. . .should use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others.

  4. No officer or employee of a state agency. . .should engage in any transaction as representative or agent of the state with any business entity in which he has a direct or indirect financial interest that might reasonably tend to conflict with the proper discharge of his official duties.

  5. An officer or employee of a state agency. . .should not by his conduct give reasonable basis for the impression that any person can improperly influence him or unduly enjoy his favor in the performance of his official duties, or that he is affected by the kinship, rank, position or influence of any party or person.

    . . . .

  6. 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.

Section 74 addresses not only actual conflicts of interests but also conduct that gives rise to the appearance of a conflict. The law is intended to enhance the public's trust and confidence in government through the prevention of favoritism, undue influence, corruption and abuse of official position.

DISCUSSION

I. The need for Strasburg's recusal.

In Advisory Opinion No. 94-11, the Commission noted the important benefits received by the State when able and experienced individuals offer their services with little or no compensation. It stated:

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.

Recognizing that unpaid individuals who serve as board members are often appointed because of their interest and expertise in the subject area of the body to which they are named, the Commission has interpreted Public Officers Law §74 to often permit their membership on public entities related to their private sector work. While each circumstance is different, the Commission has looked to disclosure and recusal as a preferred mechanism to avoid potential conflicts rather than the imposition of a total prohibition on State service.

For example, in Advisory Opinion No. 92-11, the Commission permitted a member of a public benefit corporation to continue his service on the corporation's board even though he was a partner in a law firm that sought to provide legal services as outside counsel to the corporation. To prevent or diminish the appearance of a potential conflict of interest, the Commission imposed several conditions upon the board member. It required that full disclosure of his relationship to the law firm be made to the entire board, that he take no part in the firm's proposal to provide legal services, and that he have no communication with any board member or employee of the corporation regarding the merits of the firm's proposal.

Similarly, in Advisory Opinion No. 93-16, the Commission held 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 said that because of the nature of the individual's private 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."

This approach is in contrast to the Commission's view with respect to full time State employees seeking to engage in outside activities. For example, in Advisory Opinion 92-16, the Commission considered whether a leasing agent employed by the Office of General Services could also serve as an elected city official for a locality over which he had official responsibility for securing leases on behalf of the State. The Commission considered whether he could properly perform his official duties for the State in negotiating and securing leases while, at the same time, advocating for the interests of his constituents in securing as many leases as possible within the locality in which he held an elected position. The Commission concluded that even if there were no actual conflict, there remained the appearance of a conflict under Public Officers Law §74, and the individual could not hold both positions simultaneously.

Applying these precedents to Strasburg, the Commission finds that he need not be disqualified from serving as a director and Chair of SONYMA. Since RSA does not have any matters before the agency, a prohibition on his service would be overbroad. There is no need to prevent someone like Strasburg, who is knowledgeable and experienced in housing issues, from volunteering his services to the State. The question, then, is the extent of the need for Strasburg's recusal.

In Advisory Opinion No. 96-3, the Commission was also faced with a question concerning HFA. There, an individual who was an active partner in a title abstract business was considering becoming a member of counsel's office at the agency. Since he intended to continue in the business, the Commission was, as here, faced with the question of how a conflict or the appearance of a conflict of interest could be avoided. One of the Commission's concerns was the possibility of the individual's possibly considering an application from a client or former client of the abstract business. To resolve this problem, the Commission approved an arrangement whereby the individual would provide a list to HFA of all of the abstract company's present and past clients, including attorneys, firms and lenders. The list would be updated periodically. Such a list, the Commission said, would permit informed decisions as to whether the individual was required to recuse himself in any specific case. It stated:

If the attorney recuses himself at HFA on all matters related to the selection of title insurers and declines clients as he has proposed, he cannot use his public position for private gain, nor can he be perceived as so using his position. His commitment to provide HFA with a list, updated on a periodic basis, of the past and present clients of the company will assure that the required conditions are met.

By approving this procedure, the Commission was satisfied that a mechanism had been established whereby both the individual and the agency would have actual knowledge of each past and present client of the individual's business. Given this precedent, the proposal set forth in McGuire's request letter pursuant to which Strasburg would recuse himself upon being advised that an applicant for SONYMA mortgage insurance was an RSA member would meet the standards of Public Officers Law §74.

Since the members of RSA can be identified, it appears to be reasonable, as Menendez has offered, to require the SONYMA staff, in reviewing a matter, to check the names of the individuals involved in the matter to determine whether any are members of RSA. Strasburg could then be advised and determine whether recusal is necessary whenever he serves on the Committee or the Board.(3)

For these reasons, Strasburg's recusal on all matters involving RSA members that come before him when serving on the SONYA Board or any of the Board's committees would satisfy Public Officers Law §74.(4)

II. Strasburg's Lobbying activities.

In its prior informal opinion, the Commission discussed whether Strasburg could lobby the Office of the Governor and the DHCR Commissioner on behalf of RSA. The Commission permitted Strasburg to lobby the Office of the Governor on matters unrelated to SONYMA, and stated:

If the Commission were to preclude Strasburg from taking the prospective positions, it would, of necessity, be holding that a registered lobbyist who may lobby the Governor may not be appointed to any position in government by the Governor, even to a position unrelated to his or her lobbying. This would keep many willing and able individuals from serving in government, and does not seem necessary to avoid conflicts or the appearance of conflicts. Here, Strasburg will be holding uncompensated, part-time positions for set terms. Once appointed, he will not serve at the pleasure of the Governor. In fact, the boards of HFA and SONYMA are expected to act independently of the executive branch. In such a situation, the Commission does not believe there is a conflict between Strasburg's public responsibilities and his unrelated private lobbying.

This conclusion may well be compelled by Matter of Hancox v Bress, 208 AD2d 1031 (3d Dept. 1994), where the Appellate Division held that the Commission may not bar a State employee who is a policymaker from engaging in an outside activity governed by his agency which is unrelated to his public responsibilities. The Court noted that without a connection between his State work and the outside activity, there was no violation of §74. (Compare Speers v State Ethics Commission, 209 AD2d 919 (3d Dept. 1994), where the Court upheld the denial of an employee's request upon a showing that the work of the employee's unit was related to his prospective outside activity.) While Hancox was concerned with the outside activity of a policymaking State employee, its holding could be applied to Strasburg's situation. Without a connection between his lobbying activities and his duties as a member of SONYMA, a finding that he would be in violation of §74 might be incompatible with the decision of the Third Department. While it can be argued that Hancox is distinguishable on certain grounds, the Commission is not prepared to challenge the Court's guiding principle.

With regard to Strasburg's lobbying the DHCR Commissioner on behalf of RSA, the issue is somewhat more complicated, as the Commissioner serves by statute on the SONYMA board. To protect against the appearance that Strasburg, by virtue of his serving on the same board, would have unwarranted access to the DHCR Commissioner on behalf of RSA, the Commission held, in its informal opinion, that while attending board meetings, Strasburg should take care to avoid the appearance of a conflict that would arise if he were to use his position to lobby the DHCR Commissioner. The Commission now, in its formal opinion, holds that Strasburg, to avoid using his public positions for private benefit, should refrain from discussing any matter before DHCR with the Commissioner while both are attending Board meetings. In refraining from such discussions, he will avoid giving the impression that he is using his public position to secure unwarranted privileges in violation of §74(3)(d). Strasburg may, however, lobby the DHCR Commissioner in other settings on behalf of RSA on matters not related to SONYMA.

Finally, McGuire inquires about Strasburg's lobbying the Legislature on behalf of RSA. As with the Office of the Governor, he may do so on matters not related to SONYMA. He may wish to inquire of the Legislative Ethics Committee, which has jurisdiction over members of the Legislature and their staffs, as to whether it has any guidelines concerning such lobbying activities.

CONCLUSION

Strasburg, as President of RSA, would not violate Public Officers Law §74 if, upon accepting appointment as a director and Chair of SONYMA, he recused himself from agency deliberations or votes on any matter involving a member of RSA. With regard to his lobbying activities on behalf of RSA, Strasburg may lobby the Office of the Governor, the Legislature, and Commissioner of DHCR on matters not related to SONYMA, but he may not discuss any matter before DHCR with the Commissioner while attending meetings of the corporation.

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

All concur:

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

Dated: November 27, 1996


Endnotes

1. Strasburg is no longer being considered for the HFA board.

2. In his request for an informal opinion, McGuire had indicated that 90% of RSA's members own buildings with fewer than four rental units. This was in error.

3. The Commission understands that members of RSA may be corporations, partnerships and managing agents, as well as individuals. If an applicant who is not personally an RSA member has an interest in an entity that is a member, Strasburg need recuse himself only if he has personal knowledge of the applicant's interest in the member entity.

4. As noted in the informal opinion, Strasburg should also refrain from assisting an RSA member in preparing an application to SONYMA.



URL: http://www.nysl.nysed.gov/edocs/ethics/96-26.htm