New York State
Ethics Commission


Advisory Opinion No. 97-24: Whether ownership and operation of an out-of-state business by investigators employed by the State Liquor Authority violates Public Officers Law §74.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by [a lawyer] on behalf of his clients, [State employee A and State employee B]. Both [the State employees] are employees of the State Liquor Authority ("SLA") and are holders of out-of-state franchises from [a sports association]. [The lawyer] asks whether they may continue to own and operate their franchises while they carry out their public duties of inspecting and investigating SLA licensed facilities, including facilities in New York hosting [sports association] events.

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 [the State employees] may continue to own and operate the franchises they hold outside of New York State, but they may not inspect or conduct investigations with respect to any SLA licensed facility in New York that is the site of [the sports association] league play.

BACKGROUND

Both [the State employees] are employed by the SLA as [ ] Investigators, and, as such, are peace officers.(1) They conduct field investigations to secure information to be used as the basis for the SLA's consideration of license applications or possible administrative or disciplinary action against violators of the Alcoholic Beverage Control Law.(2) The Civil Service job specification for their title describes their duties as follows:

. . . plans and supervises field investigations and coordinates this activity with efforts of local law enforcement officers; trains new investigators; confers with staff members regarding the development of disciplinary actions and obtaining of adequate evidence where violations occurred; maintains control records of reports and complaints received and of investigation assignments; reviews complaints and police reports in conjunction with case files of licensees, and premises and office records of previous actions and analyzes data to determine the necessity for and priority of investigation or appropriate disposition of cases. Conducts confidential inquiries in connection with complaints and alleged complaints of improper conduct by the staff of the Division of Alcoholic Beverage Control and all local boards; enlists cooperation of local enforcement agencies where complaints indicate need for emphasis of enforcement of the law.

Generally, investigators such as [the State employees] are in the field one or two days each week, during which time they investigate premises and interview licensees. Based on these investigations, they prepare reports and make recommendations to the SLA Board.

[The State employees] also hold franchises from the [the sports association], which organizes and promotes [ ] tournaments. The franchises owned by [employee A] are all located in [state A]; those owned by [employee B] are located in [state B]. Both previously submitted applications to the SLA for authorization to engage in these outside activities, and received their first approval in September 1995.(3)

As [sports association] franchisees, [the State employees] organize regional [ ] leagues. They arrange for bars, clubs and restaurants to act as team host sites. Potential host locations are determined through telephone calls and word of mouth. They also schedule team matches and conduct regional tournaments.

Each league has a number of four-person teams, with each team paying the franchise owner twenty dollars per week during league play. Of that amount, the [sports association] receives three dollars in royalties to cover the costs of league expenses and tournament prizes. Of the remaining seventeen dollars, five are placed into escrow to cover the travel expenses of the team players. The remaining twelve dollars per team per week are retained by the franchise owner to cover his overhead and as profit.

On October 15, 1996, the SLA notified the Commission that [the State employees] were engaged in a private business as [sports association] franchise operators. In April, 1997, [the lawyer] requested an informal opinion from the Commission as to the propriety of their continuing to own and operate these franchises while serving as SLA investigators. On July 1, 1997, the Commission issued the requested opinion, concluding that [the State employees] could continue to own and operate their [sports association] franchises outside of New York State.

In the informal opinion, the Commission stated that [the State employees] could not hold any franchise in New York State, but they could continue to hold out-of-state franchises since they cannot exercise authority over the owners of the host sites in [state A] and [state B]. It made clear that no tournament under the aegis of [the State employees] could be held in a facility licensed by the SLA.

In its informal opinion, the Commission specified that neither [of the State employees] could "inspect or conduct investigations with respect to any facility which is the site of [sports association] league play. Because of their association with the [sports association], it could be perceived that they would not be unbiased in conducting such an investigation or inspection." To assure compliance with this requirement, the Commission recommended that the SLA obtain a list of facilities under its jurisdiction which are [sports association] sites.

Subsequent to the issuance of the informal opinion, the SLA followed the Commission's recommendation and obtained from the [sports association] a list of establishments in New York State which are sites for [sports association]-sponsored tournaments. The list contained 364 such establishments. On that basis, the SLA directed both [State employees] to divest themselves of their [sports association] franchises because it deemed the quoted restriction "incompatible with the performance of [their] official duties." The SLA stated that failure to comply would cause them to face disciplinary action.

Upon his clients receiving this notice, [the lawyer] requested a formal opinion of the Commission. In substance, he asked that the Commission reconsider the restriction included in the informal opinion that precluded [the State employees] from inspecting facilities in New York that are [sports association] sites. In support of his request, he raised three points.

First, he noted that when the informal opinion was issued, [a brewer] which is licensed and regulated by the SLA, was one of two national sponsors of the [sports association]. This had been noted and discussed in the opinion. After the opinion was issued, [the brewer] withdrew its sponsorship. There is currently no national [sports association] sponsor that comes within the jurisdiction of the SLA.

Second, [the lawyer] argued that there is no potential conflict when [the State employees] inspect a New York [sports association] site because neither derives any financial benefit from [the sports association] leagues or competition in New York. He also stated that "for the most part" neither is aware of whether or not a facility he inspects is [a sports association] host site.

Finally, [the lawyer] suggested that when the critical restriction was imposed in the informal opinion, the Commission was not aware that such a large number of facilities in New York were [sports association] sites. He surmised that it was not the Commission's intent to prevent [the State employees] from continuing their outside activities while remaining in the employ of the SLA as investigators.

[The lawyer] noted that the ability of [the State employees] to continue in their businesses, in which they have invested "a significant amount of money", depends upon the Commission's consideration of his request for a formal opinion.

APPLICABLE STATUTE

Public Officers Law §74, the code of ethics, provides minimum standards to which State officers and employees are expected to conform. Public Officers Law §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.

Standards set forth in §74(3) explain and define this rule. Those that pertain to these circumstances include:

  1. 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.

  2. 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.

  3. 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.

  4. 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 engage in acts that are in violation of his trust.

    DISCUSSION

    Public Officers Law §74 deals with conduct that may result in actual conflicts of interest as well as conduct that could give the impression that a conflict exists. As the Attorney General Stated in a 1979 opinion:

    A public official must not only be innocent of any wrongdoing, but he must be alert at all times so that his acts and conduct give the public no cause for suspicion. He must give no appearance of a potential conflict between his official duties and personal activities even though an actual conflict is not present. . . .(4)

    Where a State employee seeks approval of an outside activity, the Commission, in general, considers several factors: the employee's duties on behalf of the agency for which he or she works; the relationship of the agency and the employee to the proposed outside activity; whether the employee would be in a position to use his or her position to secure unwarranted privileges; and whether the outside activity would impair the employee's independence of judgment in the exercise of official duties (Advisory Opinion Nos. 90-5, 92-3, 92-16).

    Applying these standards, the Commission held in the informal opinion that [the State employees] can, consistent with Public Officers Law §74, continue to own and operate their out of state franchises since they, as SLA employees, cannot exercise authority over the owners of the sites that host the tournaments they organize. There appears to be no argument with respect to this part of the opinion.

    The portion of the opinion with which [the lawyer] takes issue is the restriction imposed on his clients in carrying out their public duties in New York as a result of their ownership of the out-of-state franchises. The Commission begins its analysis by considering [the lawyer's] arguments with respect to this restriction.

    His first argument is that [the brewer], a licensee of the SLA, is no longer a national sponsor of the [sports association]. However, in its informal opinion, the Commission considered the role of [the brewer] and determined that its sponsorship did not preclude [the State employees] from continuing to hold their out of state franchises. The role of [the brewer] was not the basis for the restriction to which [the lawyer] objects. Thus, the withdrawal of [the brewer] as a sponsor does not affect the Commission's conclusion.

    With regard to [the lawyer's] second argument -- that his clients receive no financial benefits from the New York host sites that they inspect -- there is nothing presented here that was not considered before. [The State employees] were precluded from inspecting New York host sites because their involvement with the [sports association] could lead to the perception that they would not be unbiased. As for their inability to identify a facility as [a sports association] site, it is the Commission's understanding that many facilities extensively promote in a highly visible manner, such as by hanging banners, their [sports association] activities.

    [The lawyer's] last argument -- that the Commission was unaware of the number of facilities in New York -- is also unavailing. It is true that the Commission was unaware of which facilities in New York were [sports association] sites; that is why it recommended that the SLA obtain a list. However, if there is a perception of possible bias in the inspection of [a sports association] site in New York, that perception is not altered by the fact that there are a particular number of sites, whether that number be small or large. The basic principles underlying the Commission's determination remain.

    It is fundamental that the ability of the SLA to enforce the governing laws and rules depends upon its investigators carrying out their duties responsibly, fairly and without favor, and that they be perceived as acting in such a manner. As the New York State Attorney General has said: "Public officials should avoid private employment which compromises their ability to make impartial judgments solely in the public interest. Even the appearance of impropriety should be avoided to maintain public confidence in government."(5)

    This principle is especially applicable to peace officers, who, like police officers, are held by law to particularly high standards of trust.(6) Again, the Commission can look to the Attorney General, who said in Informal Opinion No. 89-30:

    Police officers and peace officers, with their law enforcement duties and unique positions of authority in the community, must be particularly sensitive about their public image and, therefore, must avoid even appearances of impropriety.

    In that opinion, the Attorney General held that a village may restrict members of its auxiliary police from joining the volunteer fire department, rescue squad or ambulance squad. He went on to say:

    . . . . [T]he rules governing off-duty employment of police officers are, in our opinion, instructive as to peace officers who exercise law enforcement duties. . . . Restrictions on outside employment of police officers have been found to serve a valid public purpose. . . . You have indicated that the positions in question, if held by a member of the auxiliary police force, could create problems involving overlapping jurisdiction and divided responsibilities and loyalties. Under these circumstances, the restrictions that you propose appear reasonable.

    Since [the State employees] are peace officers, their judgments must be above any suspicion of being influenced by personal interests. This standard is inconsistent with their inspecting facilities associated with an organization from which they hold franchises. They have a personal financial interest in maintaining a good relationship with their franchisor, and that relationship could be perceived as being affected by the results of their inspections of sites that host franchisor-sponsored tournaments. Thus, neither [of the State employees] may inspect or conduct investigations with respect to any facility which is the site of [sports association] league play. As was said in the informal opinion, it could be perceived that they would not be unbiased in conducting such an inspection or investigation.

    CONCLUSION

    The Commission concludes that [the State employees] may continue to own and operate [the sports association] franchises they hold outside of New York State, but they may not inspect or conduct investigations with respect to any SLA licensed facility in New York that is the site of [sports association] league play.

    This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who is the subject of the opinion and who acted in good faith, unless material facts were omitted or misstated in the request for an opinion or related supporting documentation.

    Concur:

    Henry G. Gossel
    Paul L. Shechtman
    O. Peter Sherwood

    Dissent:

    Evans V. Brewster

    Dated: October 28, 1997


    Endnotes

    1. Alcoholic Beverage Control Law §15 and Criminal Procedure Law §2.10(36) designate SLA investigators as Peace Officers. Among the powers given peace officers, enumerated by CPL §2.20, are to make warrantless arrests; to use physical force and deadly physical force in making arrests or preventing escapes; to carry out warrantless searches whenever such searches are constitutionally permissible; to issue appearance tickets; and to exercise any other powers authorized by any general, special or local law or charter whenever acting pursuant to their special duties. New York Courts have determined that peace officers have the right and the duty to maintain the public peace and to prevent crime. See People ex rel. Lawrence v. Noble, 45 Misc. 2d 294 (1965).

    2. Alcoholic Beverage Control Law §17(7) empowers the SLA "to inspect or provide for the inspection of any premises where alcoholic beverages are manufactured or sold."

    3. [The sports association] records show that [employee B] purchased his franchise two years before he obtained the SLA's approval; [employee A] purchased his franchise one year before receiving agency approval.

    4. 1979 Op. Atty. Gen. 66.

    5. Informal Opinion of the Attorney General No. 84-58.

    6. See Toro v. Malcolm, 44 N.Y. 2d 146 (1978) and Sharkey v. Police Department, Town of Southampton, 179 A.D. 2d 655 (2d Dept. 1992).



    URL: http://www.nysl.nysed.gov/edocs/ethics/97-24.htm