|Advisory Opinion No. 98-07:||Application of Public Officers Law §74 to members of New York State advisory boards.|
The following advisory opinion, which is issued upon the Commission's having received a complaint concerning gifts allegedly received by unpaid members of an advisory board, discusses the application of the conflict of interest provisions contained in Public Officers Law §74 to unpaid and per diem members of such boards.
Pursuant to the authority vested in it by Executive Law §94(15), the State Ethics Commission ("Commission") renders its opinion that Public Officers Law §74 applies to members of advisory boards (1) when they are designated as policymakers, or (2) where at least one member of the board on which they serve is appointed by the Governor. The statute will be applied in a manner that recognizes the special nature of such boards and the responsibilities of their members.
The State of New York utilizes the services of hundreds of advisory boards, councils, commissions and similar bodies, the members of which are usually unpaid, but may, in a few instances, receive per diem compensation. These boards differ substantially in nature and function. Some are formed pursuant to a statute which sets forth their responsibilities and authority, while others may be formed by Executive Order, memorandum or even a press release. Members may be appointed by the Governor, often on the nomination of various other officials, or they may be appointed by the official they are authorized to advise.
Many boards meet regularly and have significant input into agency policy; others meet occasionally and have only a modest voice in the making of decisions. Those in the latter group are often created without specific statutory authority or obligations, with the expectation that the members will offer input from varying perspectives to agency decision makers. While the input of the members is important to the development and implementation of agency programs, final policy determinations are left to the officials receiving the advice of the boards.
Recently, the Commission received a complaint concerning an advisory board that has several gubernatorial appointees and, by all accounts, exerts considerable influence over agency and State policy. The board was considering a matter that would have significantly affected a particular manufacturer. Recognizing the influence of the board, the manufacturer, it was alleged, gave a significant gift of travel, lodging, hospitality and other entertainment to some board members. The event was alleged to have occurred in 1991.
The Commission is concerned with the acceptance of such gifts by members of advisory boards, but it has never opined as to how those provisions of the Public Officers Law that constitute the State's ethics laws apply to these boards. Given the complexity of the problem, the Commission invited comment from the State's agencies. Many made submissions to the Commission and offered valuable insight. Their views varied significantly. In fact, one agency proposed that the ethics laws should not apply at all to advisory boards while another thought that they should apply just as they do to all State officers. Others had various proposals. The Commission, believing there is a need to clarify this matter, renders this opinion.
Public Officers Law §74, the Code of Ethics, provides the minimum standards against which State officers and employees are expected to gauge their behavior. The Code addresses the conflict between the obligation of public service and private, often personal, financial interest. The rule with respect to conflicts of interest is as follows:
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 actual as well as apparent conflicts of interest. While all of the provisions of this subdivision may be applicable to advisory board members, those that are most likely to apply are the following:
(d) 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.
(e) 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 reasonable tend to conflict with the proper discharge of his official duties.
(f) 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.
. . . .
(h) 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 in violation of his trust.
Under §94 of the Executive Law, the Commission has jurisdiction over those State officers and employees who come within the definitions found in Public Officers Law §§73 and 73-a. Section 73-a includes within its definition "officers . . . of . . . commissions, councils or other state agencies . . . who hold policy-making positions, . . ." (Public Officers Law §73-a[c][ii]). It also includes "members or directors of public authorities, other than multi-state authorities, public benefit corporations and commissions at least one of whose members is appointed by the governor, . . ." (Public Officers Law §73-a[c][iii]). Thus, any individual who serves on a body and has been designated as a policymaker or who serves on a body with a gubernatorial appointee falls within the ambit of the Commission. There is no statutory exception for a board or commission that is advisory only.
Public Officers Law §73 excludes from its definition of covered officers and employees unpaid and per diem board members (Public Officers Law §73[i][iii] and [iv]). Therefore, advisory boards members, unless paid on other than a per diem basis, are not subject to that section's provisions. However, they are subject to the requirements and restrictions of §§73-a and 74.(1)
Although advisory boards are subject to these statutes, the Commission realizes that it cannot treat their members as it does other officers and employees who exercise final decision making authority. Their different role in the functioning of government, limited to acting as unpaid advisors, must be recognized.
The Attorney General has previously struggled with the question of how to treat advisory boards. In Formal Opinion No. 82-F2, he held that the Executive Advisory Commission on Insurance Industry Regulatory Reform was not subject to §§73 or 74 because it did not exercise "executive power." He addressed the Advisory Commission and said:
We think that your commission is distinguishable from other agencies within the Executive Department by virtue of the absence of executive power. You have no responsibility with respect to the administration or policy of the Executive Branch. Your charge is limited to advising the Governor on initiatives that he might take in proposing changes in the Insurance Law. Indeed, if you have any "power" at all, it is quasi-legislative, not executive, for you are advising the Governor in his quasi-legislative capacity as a proposer of legislation . . . . This tenuous relationship with the Governor as Chief Executive of the State is not sufficient to make your commission an agency of the State within the intent of sections 73 and 74.
One year later, the Attorney General opined that the Temporary State Commission on Banking, Insurance and Financial Services was subject to §74 even though it appeared to have no greater decision making power than the Insurance Industry Reform Commission. He noted in Formal Opinion No. 83-F20:
The mandate of the Commission is to study and evaluate the structure and dynamics of the financial services industry and make such recommendations as may be appropriate regarding changes in legislation, regulations and policy (L 1983, ch 567, §43). It seems clear from the structure of the Commission's membership that the legislative intent was to draw upon the knowledge and experience of various sectors of society by allocating seats on the Commission to members of the insurance, banking and financial services industries, as well as to consumers, academics and other interested parties. The obvious purpose was not to insulate the Commission from the views of private interests, but to provide a forum in which such views would be synthesized in the process of formulating the Commission's recommendations.
The Attorney General went on to say:
Section 74 is drafted to be flexible. For example, its operation here would not bar from membership on the Commission individuals employed in the industries under scrutiny since the Commission is clearly designed to include such people. It would, however, require all Commission members and employees to pursue the public interest in the Commission's work. The knowledge and experience which Commission members bring from the various sectors enumerated in the creating statute must be devoted to the advancement of the public good and not the private interests from which the members come. In accepting a public office and the opportunity to shape public policy, the Commission members and employees assume an obligation to adhere to the standards of conduct which the public rightfully expects of those holding a public trust. Those standards are expressed in section 74 of the Public Officers Law and, in our opinion, are applicable to the Commission.
It appears to the Commission that both of the bodies on which the Attorney General opined were advisory in nature; yet, he found one to be subject to §74 and one not to be. The distinction was based on what he viewed to be the power and functions of the two boards.
This Commission has not previously opined on how advisory boards should be treated, but it has observed that unpaid members of boards with decision making authority must meet certain standards. In Advisory Opinion No. 94-11, the Commission said:
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. While it is not the intention of this Commission to dissuade involvement of such individuals or place an undue burden on such persons in the performance of their official State duties, it is equally important to recognize that those who engage in public service, whether compensated or not, are entrusted with a unique duty and responsibility to analyze, develop, and execute the policies and programs of the State of New York, often allocating public resources in the process. It is because of this important responsibility that such individuals take all appropriate measures to avoid even the appearance of impropriety.
Under the Code of Ethics, as contained in §74, State officers and employees, including those who serve in unpaid or per diem status, must avoid a conflict between their private interests and their public duties.
Although advisory boards are different in nature from those with decision making power, as they do not exercise final governmental authority -- or, to use the Attorney General's phrase, "executive power" -- their powers are not so limited that they should be totally exempt from the strictures of §74. Many advisory boards play an important, and sometimes a critical, role in the development of State policy. Thus, as the Attorney General held in Advisory Opinion No. 83-F20, their members should be held to appropriate standards of conduct. This presents the question of the standards to be applied, or, from the perspective of statutory law, how the strictures of §74 are to be imposed on these boards.(2)
The nature of the responsibilities of the members of an advisory board bears, substantially, on the extent to which certain activities are or are not prohibited. Public Officers Law §74 does not prohibit officers of an advisory board from having interests in all activities that have the potential for creating a conflict of interest. The section prohibits interests or activities which are "in substantial conflict with the proper discharge" of an officer's duties.
Where decisions of an advisory board invariably become the decisions of the agency, the risk that interests or activities of a member will conflict with the proper discharge of the member's duties will be "substantial"; where advisory board decisions merely inform a policymaker's decisions, the risk of conflict is less substantial. For example, the action of the Hospital Review and Planning Council on a hospital's application for a certificate of need is advisory, but it effectively determines whether or not the hospital's expansion plans will be approved. It would be inappropriate for a member of the Council who is associated with an applicant to participate in the consideration of the application even though the Council's decision is merely "advisory." It may well be inappropriate in the case of the application of a competitor to so participate.
The Commission recognizes, however, that in many instances appointees to advisory boards will be selected because of their institutional affiliations or perspectives. While such appointees are expected to bring dispassionate analysis to bear, it is reasonable to assume that their opinions will be affected by their background and experience. For example, where representatives of labor and management sit on the same board, their differing perspectives may influence their views of the public good. The theory that lies behind the creation of such boards is that, despite the inherent differences in the views of the members, they will find common ground by sitting around a table and talking with each other or at least will help to sharpen the issues. Both outcomes can be of great value to decision makers. This is also a time honored mechanism for offering interest groups a voice in public decision making.
Because of the nature of advisory boards, their members need not suspend outside affiliations that might give rise to appearances of conflicts if held by government decision makers. For example, the Commissioner of Health may establish an advisory board to consider restructuring of the hospital reimbursement system and appoint a hospital official to the board. That hospital official may be expected to set aside the parochial interests of his or her institution during the course of the advisory board's deliberations, but would not be expected to suspend appearances before the Department of Health on behalf of the institution.
This does not mean, however, that advisory board members are free to engage in acts which represent direct conflicts of interest. A simple example of a prohibited action is the acceptance by a board member of a gift from a party interested in the outcome of a subject the board is considering. For example, if an advisory board to the Insurance Superintendent were to advise him as to whether he should permit mutual companies to be converted into stock companies, a board member should not accept a gift from a mutual company that is actively seeking to convert.(3) In general, acceptance of a gift from a party directly interested in a board's discussions would be a conflict of interest and a violation of §74.
Another example of a prohibited act is the voting by an advisory board member on a matter that directly affects his or her specific employer, as opposed to the general area of interest that the member represents. For example, assume a board is to advise the Empire State Development Corporation as to how to best spend money in a particular program created to aid businesses that are seeking to expand. If a member of the ABC Widget Co. sits on the board, and ABC is seeking an expansion loan under the program, the board member must disclose his or her interest and refrain from voting on that particular application, even though the board's role is only advisory. Failing to disclose, except where the interest is self-evident, or voting in that situation would give rise to a direct conflict of interest, which is prohibited.
From the comments received from the agencies, it appears that there are too many advisory boards with functions that vary too widely for the Commission to set forth detailed rules that are applicable to all boards in all instances. Each board acts in its own manner in whatever area it has been given authority. The one common thread that can be identified is that each board member must be careful not to act in a manner which results in a personal benefit or a benefit to his or her specific employer or organization (as opposed to a general area of interest that the member may represent). Each agency should advise the members of its advisory boards that are covered by §74 of this opinion and inform them that they are expected to be aware of the type of acts that would cause them to be in violation of the statute.(4)
The Commission is available to offer advice as specific situations arise.
The Commission concludes that Public Officers Law §74 is applicable to members of the State's advisory boards when they are designated as policymakers or where at least one member of the board on which they serve is appointed by the Governor. In applying this statute, the Commission will give recognition to the special nature of these boards, as discussed above.
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.
Paul L. Shechtman,
Evans V. Brewster
Henry G. Gossel
O. Peter Sherwood,
Dated: July 15, 1998
1. Section 73-a requires that they file annual statements of financial disclosure. This opinion deals only with the application of the strictures of §74 to them.
2. The Commission's conclusion that advisory board members are subject to §74 refers only to those boards that fall within its jurisdiction. (See Discussion, above).
3. By a gift, the Commission includes such items as travel, meals and entertainment. A discussion of gift giving in the public sector and how Public Officers Law §74 is applied to the receipt of gifts can be found in Advisory Opinion No. 94-16.
4. Agencies may also, as a matter of agency policy, adopt these standards for advisory boards that are not covered by §74.