|Advisory Opinion No. 97-11:||Application of the post-employment restrictions to a former employee serving as an unpaid State officer at her former agency.|
The following advisory opinion is issued in response to an inquiry from Anita Laremont, Senior Vice President - Legal and General Counsel of the Empire State Development Corporation ("ESDC"). Her inquiry concerns the application of Public Officers Law §73(8), the revolving door statute, to [ ], who served as a Director and as President of [a subsidiary of the New York State Urban Development Corporation ("UDC")], and who has resigned from the presidency but continues to serve on the board as a Director.
Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by §94(15) of the Executive Law, the Commission hereby renders its opinion that [the former President] may continue to serve as a Director of [the UDC subsidiary] and, as such, is subject to Public Officers Law §74. At the same time, as former President, she will be subject to the two year bar and the lifetime bar contained in Public Officers Law §73(8) except when exercising her regular duties as a Director. Thus, while she may serve as a Director, she may not appear, practice or render services for compensation in relation to a matter before [the UDC subsidiary] for two years from her having left the presidency; nor may she appear before any State agency or render services for compensation with respect to any case, proceeding, application or transaction with which she was directly concerned and in which she personally participated or which was under her active consideration while in State service.
The New York State Urban Development Corporation ("UDC") is a public benefit corporation, created pursuant to New York Unconsolidated Laws §6254 et seq., which does business under the name Empire State Development Corporation ("ESDC"). It is a "State agency" for purposes of Public Officers Law §§73, 73-a and 74. By statute, it is authorized to organize subsidiary corporations pursuant to the Business Corporation Law, the Not-for-Profit Corporation Law and the Private Housing Finance Law (Uncon. Laws §6262(1)).
Pursuant to that authority, UDC created [the UDC subsidiary], a wholly-owned subsidiary organized under the Business Corporation Law. [The UDC subsidiary's] purposes are "to facilitate performance of the essential governmental functions entrusted to UDC under the UDC Act, and to exercise all or any part of such public functions with respect to all or any part of a project. . .which is known as the 42nd St. Development Land Use Improvement Project." [ ].
[The UDC subsidiary] is one of nine ESDC subsidiaries. While each subsidiary has a separate board of directors, ESDC provides regular assistance and guidance to ensure coordination with and adherence to its policies and practices. This guidance is provided by ESDC's Senior Vice President for Special Projects, who reports to the Corporation's Chair.
As [the UDC subsidiary's] President, [ ] was responsible for the day-to-day operations of the corporation. Her duties included oversight and participation in property management, lease negotiation with operators/developers, lease enforcement, property condemnation, community outreach, project administration, budget preparation and revenue collection. She reported to the [the UDC subsidiary] board, which includes as one of its seven members the Chair of ESDC. [The former President], on occasion, turned to the Chair for guidance regarding [the UDC subsidiary] matters.
As President, [ ] directed a small staff of employees dedicated to [the UDC subsidiary's] projects. Like all [of the UDC subsidiary] employees, [the former President] was on the payroll of ESDC. In addition, all financial and legal matters of [the UDC subsidiary] were handled by ESDC.
At the same time [ ] was President of [the UDC subsidiary], she served as one of its Directors. She received no compensation for her directorship. As a Director, [ ], along with the other Directors, set policy for the corporation and took all corporate actions not delegated to the President.
[ ] resigned as President of [the UDC subsidiary] on December 31, 1996, to take a private sector position. However, she has continued to serve as a Director, having been re-elected to the Board in December, 1996. As there have since been no meetings of the Directors, she has taken no action of any kind since leaving her position as President.
Laremont wishes to know how Public Officers Law §73(8) applies to [the former President].
The revolving door provision of Public Officers Law §73(8)(a) provides:
(i) 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.
(ii) 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.
This subdivision, generally referred to as the "revolving door" provision, sets 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. Subparagraph (i) contains a two year absolute bar to an employee's appearing, practicing or rendering services for compensation on any matter before his or her former agency. Subparagraph (ii), the lifetime bar, is a permanent prohibition against a former employee's appearing before a State agency or rendering services pertaining to the same transaction in which the employee was directly concerned and in which he or she personally participated or which was under his or her active consideration while in State service.
The Code of Ethics for State officers and employees is found in Public Officers Law §74. Subdivision 2 sets forth the rule with respect to conflicts of interest:
No officer or employee of a state agency, member of the legislature or legislative employee 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.
The Commission begins its analysis by examining whether [the UDC subsidiary] is a "State agency" and whether its employees are "State employees" subject to Public Officers Law §§73 and 74. In Advisory Opinion No. 90-13, the Commission established tests to determine whether a subsidiary of a public benefit corporation is a State agency where there are no gubernatorial appointees on the subsidiary's board. The questions considered by the Commission are as follows:
(1) was the subsidiary created by, or is it statutorily under, the authority of a parent public benefit corporation, at least one of whose members is appointed by the Governor?
(2) is the purpose of the subsidiary to facilitate a particular statutory State purpose or an interest of the parent public benefit corporation?
(3) does the parent public benefit corporation own or control the subsidiary through stock ownership or the right to name a majority of the subsidiary's board of directors?
If any of the foregoing questions is answered in the affirmative, the Commission will conclude that the subsidiary benefit corporation is covered by §§73, 73-a and 74 of the Public Officers Law because there is a unity of entity and purpose between the parent and the subsidiary.
[The UDC subsidiary] meets all three of the tests. It was created by ESDC, which has members appointed by the Governor; its purposes, based on the language in its certificate of incorporation, quoted above, is to facilitate a State purpose of ESDC; and all of its outstanding stock is owned, and by its certificate, can only be owned, by ESDC. Therefore, [the UDC subsidiary] is a State agency, and its officers and employees are State officers and employees for purposes of Public Officers Law §§73, 73-a and 74.
Since [the UDC subsidiary's] status as a State agency brings [the former President] within the provisions of Public Officers Law §§ 73 and 74, the Commission must consider how these statutes apply to her. The difficult question is to which specific provisions she is subject, now that she has resigned from her status as a State employee but remains on the board of [the UDC subsidiary]. In her capacity as an unpaid State officer--a Director of [the UDC subsidiary]--she is within §74 but not §73(1). More specifically, she is not within subdivision 8 of §73, which applies only to former officers and employees. However, viewed as a past President, [ ] is a former State employee subject to the revolving door provisions of subdivision eight. This presents the question of whether she can at the same time be a current State officer and a former State employee. If [the former President] is not now subject to §73(8), she will never be subject to its two year bar, since she would not be covered by its restrictions at such time as she leaves her position as a Director. The Commission has not previously addressed such a situation.
In ,a href="93-13.htm">Advisory Opinion No. 93-13, the Commission concluded that a former Executive Chamber employee could be appointed to serve on a Task Force advisory to the Governor. The Task Force, however, was not within his former agency. In that situation, the Commission, in determining that the individual's service as a "volunteer" on the Task Force would not violate either the two year or lifetime bar, stated that "[u]npaid service performed at the request of the State and for the benefit of the State should not be construed as an appearance before a State agency."
That Opinion supports [the former President's] continuing to serve as a Director without violating the revolving door statute, but it does not answer the question of how the statute operates with respect to her private sector work. In this unusual situation, the Commission will strive to carry out the intent of the revolving door statute and equate [the former President], as best as possible, with other individuals who are current or former State officers or employees.
First, following Advisory Opinion No. 93-13, [the former President] may continue to serve as an uncompensated Director of [the UDC subsidiary] and perform the regular duties of a director. In such position, she will continue to be subject to Public Officers Law §74.
Second, even though she is continuing as a Director, she will be deemed to be a former State employee based upon her having left the presidency on December 31, 1996. Consequently, she is subject to the restrictions of §73(8), except that these restrictions will not apply when she exercises her regular duties as a Director. This means that with respect to all other activities, she may not, prior to January 1, 1999, appear, practice or render services for compensation in relation to any matter before [the UDC subsidiary](2), nor may she work on any case, proceeding, application or transaction in which she personally participated or had under her active consideration while in State service.
Finally, at such time as [the former President] resigns as a Director, a "second" two year bar will not begin, as uncompensated officers of State agencies are not subject to §73. Therefore, after December 31, 1998, the post-employment restrictions of §73(8)(a)(i) would not preclude [the former President] from appearing or rendering services in relation to matters before [the UDC subsidiary] other than with respect to those transactions prohibited by the lifetime bar. However, should [the former President] remain on the Board after that date, §74 would continue to apply and limit her private sector activities before [the UDC subsidiary].
The Commission concludes that [ ], having resigned as President of [the UDC subsidiary], may continue to serve as a Director of the corporation, and, as such, is subject to Public Officers Law §74. At the same time, she, as former President, is subject to the revolving door's two year bar, commencing January 1, 1997, and lifetime bar, except when exercising her regular duties as a Director.
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.
Evans V. Brewster
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell
Paul L. Shechtman, Members
Dated: April 29, 1997
1. The definition of state officer or employee for purposes of §73 is contained in subdivision one of that section and excludes members of public benefit corporations who are uncompensated or paid on a per diem basis.
2. Because of the relationship between ESDC and [the UDC subsidiary], [the former President] may also be barred from appearing, practicing or rendering services, except as a [UDC subsidiary] Director, in relation to any matter before ESDC, as she may have a dual former agency. (See Advisory Opinion Nos. 90-22, 95-19, 96-7 and 97-1.) The Commission will consider this question should it become an issue.