New York State
Ethics Commission


Advisory Opinion No. 98-04: Application of Public Officers Law §73(4) to an employee on leave without pay from [a State agency] who, as a member of a limited liability company, wishes to purchase a building with space leased to the State without competitive bid.

INTRODUCTION

The following advisory opinion is issued in response to a request from [ ], a State employee on leave without pay from [a State agency], who has inquired about his ability to join with two other individuals to form a limited liability company ("LLC") which would purchase a building, the present owner of which has negotiated without competitive bid a lease with the State Office of General Services ("OGS").

Pursuant to the authority vested in the State Ethics Commission ("Commission") by Executive Law §94(15), the Commission hereby renders its opinion that, since Public Officers Law §73(4) does not prohibit a State employee from leasing real property to a State agency, [the requesting individual] may become a member of the LLC as he has proposed.

BACKGROUND

[The requesting individual] is a State employee who, since [1993], has been on leave without pay from the position of [ ] at [a State agency]. His leave has been continued through [1998].

[The requesting individual's] inquiry concerns the possible purchase of a building. The present owner, through its real estate agent, has negotiated, without competitive bid, a lease with OGS for space for [a State agency other than his employing agency. That agency] intends to occupy approximately 35% to 40% of the total rentable space. The purchaser of the building would be an LLC in which [the requesting individual] would like to purchase a one-third interest. Upon the completion of the purchase transaction, the LLC would become the owner of the building and landlord to the State. [The requesting individual], as a member of the LLC, would share in the financial risk with the other members.

In his inquiry, [the requesting individual] asks whether the ethics law prohibits him from having a one-third interest in the purchase of this building. If it does, he asks whether he could participate by owning some lesser percentage of the LLC or by not sharing in the profits generated by the lease, in which case he also asks whether he could share in any losses arising therefrom. He further asks whether there is some lesser percentage of the leasable space or some time period prior to the purchase which would allow him to have an ownership interest, or whether his wife could be the owner of the interest in the LLC.

APPLICABLE LAW

Public Officers Law §73(4)(a), provides, in pertinent part, the following:

No . . . state officer or employee . . . or firm or association of which such person is a member, or corporation, ten per centum or more of the stock of which is owned or controlled directly or indirectly by such person, shall (i) sell any goods or services having a value in excess of twenty-five dollars to any state agency, or (ii) contract for or provide such goods or services with or to any private entity where the power to contract, appoint or retain on behalf of such private entity is exercised, directly or indirectly, by a state agency or officer thereof, unless such goods or services are provided pursuant to an award or contract let after public notice and competitive bidding.

DISCUSSION

At the outset, the Commission notes that [the requesting individual] remains a State employee as long as he continues on leave without pay. In Advisory Opinion Nos. 90-1 and 95-15, the Commission held that an employee on leave without pay from a State agency is subject to all of the restrictions of §§73 and 74 that are imposed on active State employees.

Thus, like all State officers and employees, [the requesting individual], or a firm or association of which he is a member, or a corporation of which he owns ten per cent or more of the stock, is prohibited by §73(4)(a)(i) from selling goods or services having a value in excess of twenty-five dollars to any state agency. There is an exception if the goods or services are provided pursuant to an award or contract let after public notice and competitive bidding. Since [the requesting individual] has informed the Commission that, in the case of his proposed participation in the purchase of the building, the landlord's lease with OGS was not the result of a competitive process, the Commission must examine §73(4).

The statute's prohibition is on the selling of goods or services to any State agency. In Advisory Opinion No. 93-10, the Commission extended this prohibition to leasing arrangements. It said that §73(4) "directs that a contract between any State agency and a State officer or employee involving the sale or lease of goods or services valued at more than $25 may be let only pursuant to public notice and competitive bidding" (emphasis supplied). That opinion concerned the leasing of real property by a State employee to an agency other than the one for which he worked. While holding that leasing was a transaction within §73(4), the Commission went on to find that it need not determine whether the statute's restrictions are intended to apply to the leasing of real estate, since it found that the procedures followed in that case were tantamount to public notice and competitive bidding.(1) The question of whether such leasing is so restricted must now be answered.

In Advisory Opinion No. 91-19, the Commission, in considering a statutory section other than §73(4)(a), held that the phrase "goods or services" does not include real property. In interpreting §74(3)(i), which prohibits a State officer or employee from selling "goods or services" to a licensee of his or her agency, the Commission stated:

Clearly, the phrase "goods or services" which refers to tangible items of personal property and services does not include real property such as in this case, the employee's home. McKinney's Statutes §94 states that the Legislature is presumed to mean what it says, and if there is no ambiguity, it is generally construed according to its plain terms. In this case, the Legislature expressly barred State employees from selling only goods or services to entities regulated by their employing State agency. The Commission will not extend the meaning of §74(3)(i) beyond its express terms or the reasonable implications of its language.

The Commission sees no reason to differ from this analysis when the identical phrase appears in §73(4)(a). Moreover, this result is supported by the usual rules of statutory construction. In another subdivision of §73 -- subdivision 7 -- which prohibits an officer or employee from appearing before State agencies in certain circumstances, the Legislature has included within the subdivision's prohibitions, appearances in connection with "the purchase, sale, rental or lease of real property, goods or services . . . ." (emphasis added). This demonstrates that the Legislature, when it wishes to extend a prohibition on the sale of goods or services to real property, explicitly uses the term "real property." The familiar principle of statutory construction expressio unius est exclusio alterius tells us that where a law expressly describes a particular act, thing or person to which it shall apply, an inference must be drawn that what is omitted or not included was intended to be omitted and excluded (McKinney's Statutes §240). Since the term "real property is included in subdivision 7 of §73 but not in subdivision 4, the latter must be read so as to not to bring real property within its prohibitions.

Given this statutory language, the Commission concludes that [the requesting individual] may become a member of the LLC that seeks to purchase a building containing space leased to a State agency.(2)

This result, although it follows from the statutory language, is unfortunate. It makes little sense to prohibit State officers and employees from selling services or selling or leasing personal property to the State's agencies but to permit them to sell or lease real property. The Governor, in his message approving the 1987 Ethics in Government Act, said that one of the Act's purposes is to "bar public officers and employees from . . . doing business with the State in the absence of competitive bidding." (Governor's memorandum approving Chaps. 813 and 814, Laws of 1987). The Commission urges the Legislature to amend §73(4)(a) so as to carry out its intended purpose.

CONCLUSION

The Commission concludes that Public Officers Law §73(4)(a) does not prohibit [the requesting individual] from becoming a member of the LLC, as the statutory prohibition on a State employee's selling or leasing "goods or services" to a State agency does not extend to the employee's selling or leasing real property.

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.

All concur:

Evans V. Brewster
Henry G. Gossel
Paul L. Shechtman
O. Peter Sherwood, Members

Dated: March 25, 1998


Endnotes

1. Specifically, the agency, a Developmental Disabilities Services Office of the Office of Mental Retardation and Developmental Disabilities, advertised for rental property in two newspapers. This is the normal business practice of the agency when it leases local private residences for the placement of its clients.

2. While [the requesting individual] may become a member of the LLC at this time, the provisions of §73(7) might prohibit him or the LLC in which he would be a member from appearing before OGS to renegotiate the lease when its current term expires.



URL: http://www.nysl.nysed.gov/edocs/ethics/98-04.htm