The Director of the Mental Hygiene Administration (the Director) has requested the opinion of the State Ethics Commission as to the propriety of the Department of Health and Mental Hygiene entering into a contract with a private professional association of physicians (the Association) for the provision of somatic medical services to a State Medical Facility (the Facility), where the Superintendent of the Facility (the Superintendent) is a member of the Association.
This request arises out of a situation that developed and was heard by the Board of Ethics under the prior Code of Ethics. The Facility is a psychiatric facility whose patients are often violence-prone and difficult to treat. Representatives of the Facility and DHMH who appeared before the Commission indicate that difficult working conditions and salary levels below those available in private practice make recruitment of medical personnel difficult. Part-time medical services have in the recent past been supplied to the Facility by a consultant who is a member and President of the Association. This arrangement was approved by the Board of Ethics, notwithstanding the relationship between the Superintendent (then Clinical Director of the Facility) and the Association, under the Board's power to suspend the operation of the provisions of the Code of Ethics if it found that the public interest would be served.
The current situation results from an interest by the Facility and DHMH in expanding the original consultancy to a contract with the Association under which it would enlarge its medical services coverage to the Facility to 24 hours a day, seven days a week. The proposed contract calls for the provision of specified types of medical services for payment of a flat annual fee. It further provides that the Association will be directly responsible to the Facility's Superintendent and Clinical Director; these persons will be responsible for evaluation of the Association's performance and for provision of day-to-day interface and direction to the Association in its contract implementation.
The Superintendent continues to hold his interest in the Association, a professional association in which each of the eleven participating physicians owns an equal interest. Each physician receives a salary from a common pool which consists of all the fees earned by each doctor and turned over to the Association. (The Superintendent indicated to the Commission that this includes his salary from the State.) Physicians are also provided bonuses based on their productivity.
The conflict of interest issues raised by the Superintendent's continued relationship with the proposed contractor were presented to the Board of Ethics, but action was suspended pending conclusion of a public bidding process, and subsequently presented to the newly-established Ethics Commission. Negotiations and contract review have been handled by the Mental Hygiene Administration. No other bids having been received, the Administration wishes to conclude the contract with the Association.
The questions raised by the Director regarding the potential conflict of interest arising from the Superintendent's relationship with the proposed contractor must be evaluated in light of the Public Ethics Law enacted in the 1979 General Assembly and effective on July 1, 1979 (Md. Code Ann., Art. 40A). There are several provisions in Title 3 of the Law that are relevant to this situation. However, we believe that the prohibitions of §3-103(a) alone are fully dispositive of the question raised by the Director. Section 3-103(a) prohibits an official or employee from being employed by or having an interest in any entity which is negotiating or has entered into a contract with his agency. The Superintendent would appear to have both an employment and an ownership interest in the Association; he holds a one-eleventh interest in the Association and also draws a regular salary plus bonus. The other conditions of §3-103(a) would also appear to be met, as the Association is a business entity proposing to contract with the agency with which he is affiliated (whether that "agency" is viewed as the Facility or the broader-based Mental Hygiene Administration or DHMH).1.
The Law does not vest this Commission with authority to waive the proscriptions of §3-103(a), nor would there appear to be any basis here for concluding that such circumstances were not intended to be covered by these limitations. In evaluating the connection between the Superintendent's private and official interests for conflict of interest purposes, the conclusion must be that the Superintendent's interest in the Association is strong. As a one-eleventh owner of the Association, he has an interest in the benefits to it flowing from the existence of a potentially long-term and significant financial commitment from the State to the Association. Moreover, to the extent that payments under the contract form a part of the pool from which members' salaries are drawn, the Superintendent stands to be a recipient of some of the funds payable by his agency under the contract. His interest in the Association and the contract would thus appear to be both direct and substantial.
Further, his ability to affect the interests of the Association in his official position is also substantial. As Superintendent, he is responsible for all aspects of the Facility's functioning, including provision of medical services to patients. He could hardly meet his official responsibilities without being directly and regularly involved in his colleagues' activities under the contract. In fact, the proposed contract specifically identifies the Superintendent as one of the persons responsible for providing direction to the Association. The contract also identifies the Superintendent as a key official involved in evaluation of the Association's performance. He would, therefore, be in the position of evaluating, reviewing and making recommendations regarding the quality of the performance of individuals acting on behalf of a business entity in which he has a substantial direct and personal interest.
Under these circumstances, we believe that this situation presents the very type of conflict or appearance of conflict intended to be prohibited by §3-103(a), as it implements the legislative findings expressed in §1-201 that "the people have the right to be assured that the impartiality and independent judgment of public officials and officers will be maintained." We realize the Director believes that the proposed contract is advantageous to the Facility and to the State; he has thus requested the Commission's views as to the propriety of his entering into the contract with the Association. We do not believe it is our province to review and advise the Director as to whether or not to enter into a contract. However, it is our view, based on the facts presented to us, that if the contract is executed, the Superintendent's continuing to serve both in his capacity as a public official and in his employee/ownership capacity at the Association would constitute a violation of §3-103(a) of the Law2.
Commission member Reverend John Wesley Holland abstains from participation in this Opinion.
Herbert J. Belgrad, Chairman
William B. Calvert
Jervis S. Finney
Barbara M. Steckel
Date: May 2, 1980
1 The §3-103(a) prohibitions also relate to entities negotiating with an employee's agency. Given the nature of the question presented to us, the existence of the Board of Ethics exemption, and the pendency of the matter prior to the effective date of the Public Ethics Law, we have not inquired into or dealt with issues raised by this aspect of §3-103(a).
2 Other relevant provisions of the Law include §§3-101 and 3-105. Section 3-101 is a basic disqualification provision which prohibits an employee from participating (except in a ministerial or administrative capacity) in any matter in which he has any legal or equitable economic interest, direct or indirect. Other provisions of the section require disqualification from participation in matters that have as a party:
1) a business entity in which the employee has a direct interest from which he receives or is entitled to receive more than $1,000 per year;
2) a business entity of which the employee is an officer, director, trustee, partner or employee; or
3) a business entity having a contract with the employee which could reasonably be expected to result in a conflict of interest.
All of these disqualification provisions could raise serious questions if applied to the facts presented here. The Superintendent's interest in the Association would seem to bring him within these provisions, and it is difficult to perceive how he could effectively disqualify himself and still meet the responsibilities of his official position. Though §3-101 provides for a waiver under certain circumstances, we do not believe waiver under this Section need be considered here, as §3-103(a) controls.
Section 3-105 prohibits an employee from being employed by an entity having a contract with his agency where the subject matter of the contract is within his official duties. Since the proposed contract would be within the Superintendent's official duties, this situation would also appear to fall within the proscription of §3-105.