A Register of Wills (the Official) has requested our advice as to the propriety of continuing a predecessor's practice of depositing Office funds in a local bank in which the Official owns 12 of the 250,000 outstanding shares and conducts other account and loan business.
The Official took office as Register of Wills in December, 1978 and has continued to deposit the Office's funds in the bank designated by the former Register of Wills as the Office's depository bank (the Bank). The Official owns 12 shares of stock in the Bank, which has an outstanding issuance of 250,000 shares, and also identified other longstanding interests with the Bank as a depositor and creditor. A change of designation to another large bank in the area has been considered but rejected based on advice from the Attorney General's office in May, 1979 that the Official's brother's Chairmanship of that bank's Board of Directors would raise conflict of interest problems. There are apparently other banks in the area with which the Office could deal and which would not raise conflict of interest issues.
This request raised issues under several sections of the Public Ethics Law (Md. Code Ann., Art. 40A, the Law), but we believe §3-103(a) alone is completely dispositive of the request. Section 3-103(a) prohibits an official or employee from being employed by or having an interest in an entity that has contractual relationships with his or her agency. Section 1-201(m) of the Law defines "interest" as any legal or equitable economic interest owned or held by the individual, jointly or severally, directly or indirectly. In an opinion from the Attorney General concerning the use of the term "interest" in the Law, the Attorney General indicated that the term must be read literally wherever it appears, without reference to the threshold levels set forth in the prior Code of Ethics or in the Law's definition of financial interest. This interpretation was adopted by this Commission in an earlier opinion involving application of the term interest in §3-101 of the Law. (Opinion No. 80-9)
Under this construction, even 12 shares of stock and loan accounts (a checking account, as a demand account, is specifically excluded from "interest" by §1-201(m)(2)) must be viewed as "interests" for purposes of §3-103(a), and the Official's Office, as indicated above, is a substantial depositor to the Bank. Since the relationship between a depositor and a bank is generally viewed as being contractual in nature1, we believe the Official has an interest in an entity having contractual dealings with the Official's agency as contemplated in §3-103(a). This conclusion is consistent with the goals of the Law as set forth in §1-102, to assure the public that the conduct of the State's business is not subject to improper influence or "even the appearance of improper influence."
In our view this situation is one intended to be covered by the Law as a potentially conflicting relationship exists between the Official's private interest and public duties; even though the Official's interest and control over the Bank may be small, the Official's control and involvement in the Office's banking decisions is substantial. Further, the Official's personal loan dealings with the Bank, taken with the substantial business the Office does with the Bank, result in a situation where questions could arise as to whether the Official's control over this substantial State business could result in favored treatment by the Bank with regard to the personal activities.
We therefore conclude that continued deposit of the Office's funds in a Bank in which the Official has share and loan interests would constitute a violation of the provisions of §3-103(a) of the Law2. Steps should be taken immediately either to establish a depository account for the Office in another bank or sever the Official's personal dealings with the Bank.
Mr. Calvert was a member of the Commission when this case was considered and decided, but resigned prior to the issuance of the formal opinion.
Herbert J. Belgrad, Chairman
William B. Calvert
Jervis S. Finney
Reverend John Wesley Holland
Barbara M. Steckel
Date: July 23, 1980
1 Financial Disclosure Advisory Board Op. No. 8, citing Taylor v. Equitable Trust Co., 269 Md. 149, 155 (1973).
2 Even if an absolute interest prohibition is not found under §3-103(a), the disqualification provisions of §3-101 would probably lead to the same result, since application of the Attorney General's construction of the term "interest" could also bring the Official within §3-101's prohibition against officials participating in matters in which they have an interest. Arguably, since the designation of the Bank was actually made by the predecessor, the Official's actions could be viewed as primarily administrative or ministerial and therefore excluded from §3-101. The Official does, however, have continuing discretion to change the Office's depository bank and the decision not to take such action could be viewed as the type of action covered by §3-101.