80.09

OPINION NO. 80-9

The Board of Trustees of the Baltimore County Community Colleges (the Board) has requested the opinion of the State Ethics Commission concerning the propriety of its executing a contract on behalf of a community college (the College) which was negotiated in part by College officials who owned stock in the entity with which they were negotiating. This opinion is rendered under the Commission's authority in §2-104 of the Maryland Public Ethics Law (Md. Code Ann., Art. 40A, the Law) to provide advice as to whether activities would come within the proscriptions of the Law.

Three officials (A, B, and C) holding different positions on the College staff participated in various ways in the development of a contract to be executed between the College and a private business entity. They are all public officials as contemplated by §1-201(k) and (z) of the Law. Taken together, these provisions define "public official" to include an individual in an executive agency who is classified or compensated at a certain grade or who is appointed to a commission, board, agency or other body in State government that is not in the legislative or judicial branch. Community colleges are executive agencies. Board of Trustees v. Ruff, Inc., 278 Md. 580, 366 A.2d 360 (1976), Katz v. Washington San. Comm., 284 Md. 503(1978). The Court of Appeals in Katz opined that, despite various indicia that a community college was a local agency, such a college was "...more properly characterized as an agency of the State because, among other things, it was created by the State, and because the powers of the Board of Trustees are set forth in public general laws." Thus, as public officials serving in an executive agency in the State government, the three individuals are subject to the provisions of the Public Ethics Law.1

The facts presented to the Commission indicated that Officials A, B, and C participated in varying degrees in drafting a Second Addendum to a contract the Board executed with a private business entity several years ago.2 Each of them owned stock in the business entity during at least part of the time he was acting on behalf of the College. Each of the three officials divested himself of his stock shortly after the College President requested them to do so. Official A was involved in drafting the original contract in 1976, and participated actively in negotiating and drafting the Second Addendum. For example, in August, 1979 he recommended insertion of a provision in the draft Addendum which subsequently became an issue and was the subject of intensive negotiation between the parties. Official A continued to be involved with the draft Addendum as follows: during the Summer of 1979, he advised the College President with respect to the draft Addendum; on September 12, 1979 he participated in a meeting of the Board of Trustees concerning the draft Addendum; and he also participated in at least one meeting between College personnel and representatives of the business entity concerning the Addendum. This official indicated that he owned 200 shares of stock in the business entity, which he purchased in October, 1978 and sold in the Fall of 1979 at the request of the College President.

Official B purchased 100 shares of stock in the business entity in November, 1978 while he was a mid-level College administrator. Subsequently, he was promoted to a high level administrative position at the College, which position included responsibilities relating to the subject Contract Addendum. His participation in the negotiation of the Second Addendum included efforts to influence the decision concerning changes in contract clause language, during meetings of College personnel in the Fall of 1979. Official B continued his stock ownership in the business entity during the period of his participation in the Second Addendum's negotiation, though he indicated that he had placed the stock in a safe deposit box and "forgot about it." Official C had participated in technical matters relating to the contract and the First Addendum at which time he did not own stock in the business entity. He also participated in the negotiation of technical aspects of the Second Addendum, providing technical advice and recommendations in a College meeting held on October 8, 1979. This official purchased 100 shares of stock in the business entity on October 4, 1979, and held them during the period when his technical assistance was relevant to the contract negotiations.

Though the issue presented by the Board's advisory opinion request raises questions under several provisions of the Law, §3-101(a) of the Law governs the subject conduct:

An official...may not participate in any matter, except in the exercise of an administrative or ministerial duty which does not affect the disposition or decision with respect to that matter, if to his knowledge, he...has an interest therein.

Section 1-201(m) of the law defines interest as "any legal or equitable economic interest."3 The term "interest" has a much broader application than "financial interest," which is defined in §1-201(1) of the Law to be reached only at certain threshold levels of interest (generally either holdings in excess of $1,000 or more than 3% of a business entity). In an unpublished opinion of the Attorney General rendered to the Commission on January 3, 1980, regarding the use of the terms "interest" and "financial interest," the Attorney General indicated that the "plain words of the statute must be followed unless absurd and clearly unintended consequences would follow." The Opinion, finding no such "absurd" or "clearly unintended consequences," concluded that the term "interest" in §3-101(a) must "be construed and applied as it is used and defined in this law," i.e., any legal or equitable interest. Accordingly, if an employee's holding constitutes either a legal or equitable economic interest, then official activities relating to it are limited by §3-101(a) even though it is below the de minimis level defined to be a financial interest. The ownership of shares of stock in the business entity by these three employees, therefore, constituted an interest as contemplated in §3-101(a).

Further, an employee's participation in contract negotiations to the extent that he recommends inclusion of a provision or changes in contract language or provides general or technical advice constitute more than mere administrative or ministerial acts; such participation affects the disposition or decision with respect to the subject matter of such advice and consultation. We, therefore, conclude that engaging in these types of activities in connection with a matter involving an entity in which an employee owns stock is prohibited by §3-101(a) of the Law.4

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

Date: May 28, 1980

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1 All three of these persons also meet the compensation criteria of a "public official."

2 The First Addendum was executed in June, 1978, and as none of the officials participated in it while they held stock in the business entity, it is not an issue here.

3 Although the term interest is defined as "any legal or equitable economic interest...which was owned or held...at any time during the calendar year for which a required statement is to be filed," according to an Attorney General's unpublished opinion of January 3, 1980, the underlined words are only relevant when dealing with aspects of Title 4 of the Law, dealing with financial disclosure, and should be ignored in applying the term in context of Title 3, dealing with conflicts of interest.

4 It is not the role of the Commission to advise the Board as to actions that it should take in carrying out its authority to execute contracts, though the College should be aware of the Commission's authority under Title 7 of the Law as to contracts touched by a conflict of interest.