81.38

OPINION NO. 81-38

An opinion has been requested as to whether an employee of Bethlehem Steel Corporation (Bethlehem) may be appointed to the State Use Industries Advisory Committee if his private employer occasionally sells steel to State Use Industries (SUI).

An employee (the Appointee) in the Purchasing Department of Bethlehem has been recommended for appointment to the SUI Advisory Committee. SUI is a component agency of the Department of Public Safety and Correctional Services (DPSC). The SUI Advisory Committee was established in the 1981 Legislative session (Article 27, 681A—681B, Annotated Code of Maryland). Its responsibilities are to make recommendations regarding the establishment and maintenance of industrial plants, to provide advice regarding possible new industries and improvement of job training programs, and to review various aspects of SUI's operations. The SUI General Manager believes that the Appointee would be an asset to the Committee because of his prior experience on the Procurement Appeals Board under the Department of General Services (DGS).

Bethlehem has in the past sold pre-coated rolled coiled steel to SUI for its use in making license plates. The Appointee indicates that he is not in any way involved in these transactions. He states that pursuant to a court consent decree the Purchasing and Sales Departments at Bethlehem do not work together or communicate with each other. He indicates that he is not familiar with the details of these types of sales, nor is he aware of any other business dealings between his private employer and either SUI or DPSC.

Purchasing personnel at SUI indicate that the agency purchases coiled steel on an irregular basis in an open bid procedure. The Agency, which replaces all the license plates in the State every 5 years, buys steel for the plates in one very large purchase to meet this 5-year replacement, and makes smaller purchases in the intervening years. The purchases are all made through the formal Invitation for Bid (IFB) process, using forms very similar to those used by the DGS. The IFB is sent to a list of firms known to be suppliers of license plate stock; any firm that handles steel in this form is entitled to bid. The IFB list includes approximately 10 firms, largely from the East. The bidding firms provide product samples and the bids are evaluated on two primary criteria: price and availability.

Bethlehem apparently is frequently the successful bidder in these purchases. The last large purchase went to this firm and involved the sale of 1,310 tons of steel at approximately $900,000. Personnel at SUI indicate, however, that the Agency is considering possible use of aluminum rather than steel for the plates, along with several other changes in the license plate; such changes would have to be implemented by the General Assembly. DPSC's Fiscal Administrator indicates that Bethlehem does not contract directly with any part of the Department other than SUI.

The basic legal issue in this request is application of the board and commission exemption provision in § 3-103(a) of the Public Ethics Law (Article 40A, § 3-103(a), Annotated Code of Maryland, the Ethics Law). Section 3-103(a) generally prohibits employment by a public official with an entity that has a contractual relationship with his agency, as well as inconsistent employment that would impair the individual's impartiality and independence of judgment. Given the Appointee's relationship to Bethlehem's sales operations and SUI's formal competitive purchasing procedure, application of the inconsistent employment prohibition would not appear to be at issue here. There is presently no open contract between Bethlehem and SUI. However, in SUI's next large steel purchase, Bethlehem may submit a bid and be the successful bidder, which would appear quite clearly to bring the Appointee within the prohibition of § 3-103(a).

Section 3-103(a)(2)(iii) of the Ethics Law, however, establishes an exemption for members of boards and commissions that can be applied at the time of appointment. It exempts an individual from § 3-103(a)'s employment prohibition as to "employment held at the time of appointment, provided it is disclosed to the appointing authority, the Commission, and, in instances where confirmation is required, to the Senate prior to confirmation." In interpreting this provision, it is our general view that it does not apply to all conflicting transactions that could arise out of employment disclosed at the time of appointment. We believe, rather, that the exemption should be applied, as a general matter, only to conflicting transactions that are similar or related to a situation that results in an appointee's private employment being a conflict at the time of appointment.

However, it is our view that this exemption may be applied to situations where no actual conflict exists at the time of appointment, but where past relationships and transactions raise a reasonable likelihood that there will be future similar dealings between the appointee's agency and a private employer. This is especially so where the character of the transactions can be described and defined with reasonable precision. Since Bethlehem's only dealings with SUI (or DPSC) involve this particular and very discretely defined type of sales transaction, we believe that the Appointee's situation fits within this interpretation of the exemption in § 3-103(a)(2)(iii).

Section 3-103(a)(2)(iii) provides for exemption from the prohibitions of § 3-103(a)(1) as to employment held at the time of appointment, provided it is publicly disclosed as set forth above. We believe this request presents the type of situation intended to be addressed by this exemption, allowing the State to benefit from the services of qualified individuals, based on disclosure and prior knowledge and evaluation of actual or clearly defined potential conflicts of interest that would otherwise be disqualifying. We therefore conclude that if the disclosure provisions of § 3-103(a)(2)(iii) are followed, the Appointee here will be exempted from the prohibitions of § 3-103(a)(1) as they relate to his Bethlehem employment and transactions that are related to or similar to those disclosed by him.1 The Appointee should be aware, of course, that this exemption provision does not excuse him from compliance with the other conflict of interest provisions of the Ethics Law. These include, for example, disqualification from participation in matters in which an official (or certain relatives or business entities with which he is connected) has an interest as well as prohibitions against acceptance of certain gifts and misuse of official position or confidential information.

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

Date: October 15, 1981

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1 The Ethics Commission is, in coordination with the Governor's Appointments Office, developing a form and general guidance materials that can be used to facilitate disclosure and application of this exemption provision within the context of the appointment process.