An advisory opinion has been requested concerning whether a bank examiner (the Employee) in the office of the State Bank Commissioner may provide consultant accounting services to a State credit union subject to his examination.
The Employee works as a bank examiner in the Division of Financial Regulation of the Department of Licensing and Regulation. His job involves conducting examinations of financial institutions, including credit unions, to determine compliance with laws and regulations governing such entities, as well as the general safety and soundness of the entity as a financial institution. He does not conduct accounting audits. In the course of the Employee's examination of a small credit union (the Credit Union) he learned that the entity's accountant was working with an inadequate accounting system which she was incapable of operating.
This request involves the Employee's proposal, for a moderate fee, to set up another more efficient and workable system for the Credit Union. He notes that the Credit Union is very small and that he can provide the service within a time frame and for a fee that is within the rather limited means of such an entity. He sees a real need for the service in this situation; he believes, since his official duties do not involve an audit of the books and accounts, that he can maintain his impartiality in future dealings with this institution, and, in any case, that full disclosure is adequate to avoid any conflict of interest or appearance of conflict.
The Commission is informed by the State Bank Commissioner that some small credit unions (and banks) would benefit from such additional managerial and accounting assistance. He does not believe, however, that there is necessarily any reason why these services must be provided by the Employee, or that there is, as a general matter, any programmatic agency interest in encouraging the availability of these services. He states that his agency examines banks and credit unions for soundness and viability. Though inadequate accounting services could in an extreme situation endanger an entity's soundness, the Bank Commissioner's Office does not, as a normal agency function, get involved in general auditing activities. The Commissioner notes that the type of service envisioned by the Employee goes beyond the concerns of the agency to general efficiency and practices designed to benefit the institution's members.
This request raises issues under several provisions of the Public Ethics Law (Article 40A, Annotated Code of Maryland, the Ethics Law), the most relevant being section 3-103(a). As the Credit Union is clearly regulated by the Employee's agency and in fact has been subject specifically to his jurisdiction, we believe that his being employed by or having an interest in it is barred by the plain language of section 3-103(a)(1)(i). Whether his work as a consultant is viewed as employment or the contractual relationship between him and the Credit Union is viewed as constituting an interest, his proposed activity would still violate section 3-103(a). We do not believe that disclosure by him would overcome this prohibition, nor do we believe that the exception criteria being considered in draft Commission regulations (8:26 Md. R. 2122, (December 28, 1981)) could or should be applied.
Herbert J. Belgrad, Chairman
Jervis S. Finney
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Date: February 10, 1982