82.11

OPINION NO. 82-11

An opinion has been requested concerning whether employees in the Department of Economic and Community Development (DECD) may serve as members of the Mid-Atlantic Certified Development Company.

This request is presented by the DECD counsel on behalf of several agency employees who have been invited to be members of the Mid-Atlantic Certified Development Company (Mid-Atlantic), a certified development company being established pursuant to the Federal Small Business Investment Act. The entity's members include private banking officials, representatives of local governments and the Greater Baltimore Committee, and private consulting and development firms. Mid-Atlantic serves as a conduit for Federal funds available for small-to-medium sized development projects. The project must be financed at least 50 percent by private bank financing at regular commercial interest rates. Up to 40 percent of the remainder may be financed by lower interest Federal debentures available through Mid-Atlantic, with the remaining 10 percent being front money from a local development company or Mid-Atlantic. All final financing determinations must be approved by the Federal Small Business Administration.

All the DECD employees proposed for membership in Mid-Atlantic are involved in some aspect of the Agency's industrial development or business financing programs, and would, as a general matter, be serving as agency representatives. The enabling act for development companies requires that their membership include representatives of various parties involved in business financing, but neither the law nor Mid-Atlantic's Articles of Incorporation reserves a specific membership for a particular entity, where, for example, there might be one or more "DECD" seats. The view among the proposed DECD members, as well as the Agency's Secretary and its Counsel, however, is that these persons were invited based on the positions they hold and the State functions they perform. Though no formal mechanism exists, the general understanding seems to be that these individuals would leave Mid-Atlantic should they leave their State position.

DECD personnel concerned with this program see it as filling a current gap in the economic development program in Maryland, because its lower administrative costs make it a feasible alternative for smaller projects. In working with private entities to put together financing for a project, DECD staff may look to several alternatives in coming up with a financing "package." This Federal program is seen as complementing the various State programs, and DECD's participation in it is viewed as enhancing the agency's ability to maximize the effectiveness of its development efforts. It is also viewed as a mechanism for improving access to these types of Federal funds for entities in smaller Maryland counties that do not have local development agencies and rely on DECD for development impetus.

The fundamental preliminary issue raised by this request is whether participation by these employees in Mid-Atlantic's program is appropriately viewed as an official agency activity. We believe that it is. In our Opinion No. 80-5, we considered a situation where an employee of the Maryland Port Authority was to serve on the Board of a private organization that leased space from his agency. We concluded there that

participation in private activities by employees as official representatives of their agencies does not constitute "employment" prohibited by §3-103(a) of the Public Ethics Law, as long as the facts clearly support a determination that the activities are part of the employee's official duties.

Though background facts of that case clearly established that the employee was filling an "agency" seat on the private entity's board of directors, we believe that the principles of that Opinion may be applied to the more general facts of this situation. In Opinion No. 80-5 we set forth ground rules to be applied in assuring that such activities were properly carried out as official agency responsibilities:

However, the ground rules of his participation should be clearly set forth: his appointment and service should be at the pleasure of the Port Administration; it should be made clear that his actions on the Board reflect the officially defined policy of the MPA; and it should be clear that no compensation, reimbursement or other remuneration be provided in connection with his service to the Board.

If the participating DECD employees comply with these principles then we believe that their service with Mid-Atlantic can be viewed as official agency business not subject to the limitations of the Ethics Law. We recommend that the DECD Secretary or his designee clearly communicate to the employees that their participation in the entity's efforts is subject to these conditions.1

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

Date: March 3, 1982

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1 t should be noted that if the employees' participation is treated as private activity, then several issues arise under the substantive provisions of the Ethics Law, including §§3-101, 3-103(a), 3-104 and 3-107.