80.04

OPINION NO. 80-4

An official of the Mental Hygiene Administration (MHA) of the Department of Health and Mental Hygiene (DHMH) has asked whether any provision of Title 3 of the Public Ethics Law (Md. Code Ann., Art. 49A) would prohibit his serving on the Board of Directors of a non-profit alcoholism project (the Project).

In his letter to the Commission he states that as part of the Project's activities, it will attempt to seek and receive grants from a number of organizations including the Maryland Alcoholism Control Administration. He stated that he has not in his MHA capacity had any direct relationship with alcoholism programs in Maryland, but that occasionally he is called upon to evaluate programs that are jointly funded by MHA and the Alcoholism Control Administration.

Both the Commission and the official agreed that his personal appearance before the Commission was not necessary. The official waived confidentiality.

The official is involved in planning and evaluation for the MHA, which supervises and licenses all public and private institutions in Maryland in which mental patients are housed. It also makes grants-in-aid to further community mental health services. The MHA is one of three separate Administrations in the DHMH which stand on an equal footing under the Assistant Secretary for Mental Health and Addictions. The other two are the Alcoholism Control Administration (ACA) and the Drug Abuse Administration. None of these administrations has supervisory control over any of the others.

The project is a private non-profit corporation which provides alcoholism counseling, assistance and outreach programs for a certain segment of Maryland's population. It is presently planning a grant request to the Federal government which, at the moment, has more potentially available money than the State for the kinds of programs contemplated by the Project. The staff of the ACA is lending grant planning assistance to the Project for the Federal grant request. In the future the Project may wish to apply for funding to the ACA or for joint funding from the ACA and MHA.

Information received from the staff of the ACA indicates that the potential for ACA funding of a new grantee such as the Project varies in direct proportion to the total amount of grant money available. At the present time, as money is in short supply, the ACA gives first priority to the grantees-in-place such as certain County Health Department projects and half-way houses.

A new grantee usually applies by letter to the Director of ACA. The ACA program staff evaluates the request in terms of grant money available, the purpose of the project, and whether the project will be filling a community need not filled by any other group. If the request is for joint ACA and MHA funding, the staff of each jointly evaluate the project and provide assistance and consultation. The final decision or approval is made by the Assistant Secretary for Mental Health and Addictions and ultimately by the Secretary of the DHMH. An alcoholism project funded by the Federal government is still required to have ACA approval. The ACA also participates in monitoring and evaluation of Federal projects.

Even if an alcoholism program is funded solely by the ACA, a staff member of the MHA occasionally will be asked to evaluate the mental health ramifications of the project. If a project is jointly funded, ACA and MHA are both involved in funding recommendations, consultation, planning, monitoring and evaluation.

The section of the Public Ethics Law involved is §3-103(a), which provides in pertinent part:

(a) An official or employee may not be employed by, or have an interest in, any entity subject to the authority of that official or employee or of the government agency with which he is affiliated or by any entity which is negotiating or has entered a contract with that government agency....

The Law does not define the term "employed by." "Employer" is defined in §1-201(i) as "any person paying or agreeing to pay compensation to another person for services rendered."1 Since the term "employer" is only used in connection with lobbying requirements (Title 5 of the Law) that rely heavily on compensation as a key factor, however, it would not appear that this reliance on compensation as part of the employment relationship is required in other portions of the Law where the employment relationship is a factor.

Nor do we believe that the general legal view of employment as involving "service for remuneration"2 need be compelling. Rather, it seems that in interpreting the term "employed by" for purposes of the conflict of interest provisions, resort can be had to the legislative statement of policy in section 1-102 of the Law. This provision refers to the public's right to be "assured that the impartiality and independent judgment of public officials and officers will be maintained" and the need that the conduct of the State's business not be subject to improper influence. In other words, the public should be able to expect officers and employees conducting the public business to serve and owe their allegiance to only one master and one constituency: the Government and the people of the State of Maryland.

Applying these principles to the concept of the term "employed by" in section 3-103 would support an approach relying on the substance of the employee's relationship with the outside entity, rather than the existence or amount of compensation. Where the employee holds an office, directorship, or other position of trust with an entity where the relationship would reasonably be expected to require a personal loyalty or commitment to the goals of the entity, then holding the position would be prohibited by §3-103(a), if the entity is subject to the authority of or has contractual dealings with the employee's agency.

This approach accords with the view consistently applied by the Board of Ethics (the Commission's predecessor agency) in dealing with comparable employment prohibitions under the Code of Ethics,3 recognizing that the same kinds of potential conflicts can arise whether a State official receives a salary from an entity or holds an office of trust with an entity. By prohibiting an official's service with an entity under the authority of or engaging in contractual dealings with that official's agency, §3-103(a) minimizes the potential for an entity to receive an advantage in its dealings with the agency that another entity without agency connections would not possess. This view is also consistent with §4-103(e) of the Law regarding financial disclosure. This section requires disclosure of "all offices, directorships and salaried employment...in any corporation or other business entity doing business with the State," apparently recognizing that some positions, such as offices and directorships, may create potential conflicts of interest, even though they do not constitute salaried employment.

We therefore find that the employee's relationship with the Project is a relationship prohibited by §3-103(a) if the Project is under the authority of or engaged in contractual dealings with his agency. As indicated, the MHA has responsibility to review, evaluate and monitor grants (and grant applications) jointly funded by it and ACA, and to participate at the ACA's request in review and evaluation of grant applications (including those federally funded) processed by the ACA. Thus, if the Project is seeking a grant funded either by the Federal government or the ACA or jointly by the ACA and the MHA, then it is an entity subject to the authority of or negotiating with the official's agency.

Therefore, we advise the official that §3-103(a) of the Law prohibits his serving as a member of the Board of Directors of the Project so long as the Project is engaged in the process of either seeking grants or operating under grants from the Department of Health and Mental Hygiene and so long as the Project is seeking grants or operating under grants from the Federal government if those Federal grants involve the Department of Health and Mental Hygiene in a contractual capacity or if the Department monitors, evaluates or in any other manner is involved in policy-making decisions with respect to the Project; these activities all involve potential responsibility by the Mental Health Administration.

Herbert J. Belgrad, Chairman
   William B. Calvert
   Jervis S. Finney
   Reverend John Wesley Holland
   Barbara M. Steckel

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1 The term employee is defined in §1-201(h) only with respect to State employment and thus is not relevant to the question of whether a member of an entity's board of directors is an employee of the entity.

2 See Md. Attorney General Opinion, 63 OAG 106(1978).

3 See Opinions No. 127, 125, 80, 72 and 63.