An opinion has been requested from a Register of Wills (the Register) as to whether he may continue to conduct personal (and private) bank business with a local bank that is a depository of his office's funds. The Register inquires in particular as to application to him of Commission Opinion No. 80-14, which involved similar facts pertaining to another Register of Wills. He indicates that he owns stock (49 shares) in a local bank (the Bank) which is the depository of his office's funds. He estimates that the value of the stock is in excess of $1,000. He also has checking and savings accounts with the Bank, and indicates that his private business has a business loan with the Bank. The Register indicates that, in addition to being the depository of his office's funds, the Bank is about to merge with another bank which is a depository of other State funds.
The Bank is one of two banks located in the same town as the Register's office. He indicates that he also has personal banking business and is a Director of the other local bank. This bank is also a depository of State funds, though not those of his office. He states that other County banks are 7 to 16 miles away and would be very inconvenient given the need to make regular daily deposits. He inquires as to whether he can comply with Opinion No. 80-14 and the Ethics Law by placing the stock in his wife's name and severing loan and borrowing business with the Bank, but retaining his personal deposit activities.
This request raises issues under §3-103(a) of the Ethics Law (Article 40A, §3-103(a) Annotated Code of Maryland, as amended Laws of 1981, Ch. 796). The fact situation is very similar to that presented in Opinion No. 80-14. In that Opinion, we found that the particular Register of Wills had an interest in a banking entity that had contractual dealings with the official's agency as contemplated by provisions of §3-103(a) in effect at that time. We directed the Register in that case to sever private banking relationships with the depository bank.
Since issuance of Opinion No. 80-14, the Ethics Law has been amended to add the concept of "financial interest" to the interest prohibitions of §3-103(a). The current provision thus prohibits the having of a financial interest in an entity that has contractual dealings with an official's agency. The issue, in part, is whether and how this amendment alters the application of Opinion No. 80-14 to the Register's situation. The earlier opinion was based largely on the very broad definition of the term "interest," which was a controlling criteria under the original law. Since this term was amended to be "financial interest," if the Register has a "financial interest," then the rest of Opinion No. 80-14 continues to apply to him.
Section 1-201(m) defines a financial interest to include the "ownership of any interest as the result of which the owner has received, within the past 3 years, or is presently receiving, or in the future is entitled to receive, more than $1,000 per year." Even though the Register's income from his stock is under $1,000 per year, we believe that his future entitlement to receive over $1,000 for sale of the stock brings the interest within the Law's definition of "financial interest." This is consistent with holdings of the Board of Ethics (the Commission's predecessor agency), which dealt with issues involving this same definition on several occasions. The Board consistently held that the right to receive in excess of $1,000 for property constituted a financial interest in the property.1 We find no basis in the Ethics Law or its legislative background for reaching a different conclusion here. We therefore conclude that the Register's holdings in the Bank are financial interests prohibited by §3-103(a) and that our advice in Opinion No. 80-14 applies to his situation.
The question thus remains concerning whether placing the stock in his wife's name cures the problem. In this connection it should be noted that the term "interest" is defined in §1-201(n) of the Ethics Law to include the holding of an interest either directly or indirectly. The Commission has generally not interpreted this to mean that all interests held by an employee's spouse are necessarily held indirectly by the employee. However, we have viewed the attribution provisions under the financial disclosure provision of the Ethics Law (§4-104) as providing guidance in this area.
Applying the attribution rationale in providing informal financial disclosure advice, we have generally taken the view that stock or property held by a spouse which came to the spouse as an individual (through inheritance or otherwise) and over which the employee cannot reasonably be expected to have control, need not be viewed as interests held "indirectly" by the employee. However, where an interest is transferred to a spouse solely for some mechanical or other purpose so that it is just technically held by another, we have generally informally advised that the interest must reasonably be viewed as held indirectly by the employee. This is especially so if the employee continues to have practical control over the interest. We believe that a transfer specifically within the context of a potential conflict of interest must be viewed as a technical transfer that would not sufficiently divest the Register of the financial interest to satisfy the requirements of §3-103(a) of the Ethics Law.
Herbert J. Belgrad, Chairman Reverend John Wesley Holland Betty B. Nelson Barbara M. Steckel
Date: July 22, 1981
1 Title 19, COMAR, Opinions No. 3, which involved the holding of real estate valued in excess of $1,000; No. 48, which involved shares of stock in the parent corporation of a State commission member's primary employer; and No. 69, which involved stock ownership in a bank which was a depository of the official's agency.