An opinion has been requested concerning whether a Maryland State Trooper (the Trooper) may be employed by a corporation engaging in the sale of used cars.
This request was submitted by the Superintendent of the Maryland State Police in connection with his review of a request from the Trooper for approval of secondary employment with an entity proposing to engage in the sale of used cars (the Dealership). The Trooper is a stockholder, officer, and director of the Dealership, which is a business originally established by his spouse to sell and finish modular homes. The Dealership is operated on property that is part of the family home and was recently expanded to include used car sales. The Trooper, in addition to his other relationships with the entity, has occasionally been involved in purchasing vehicle inventory for resale.
Car dealerships are generally regulated by the Motor Vehicle Administration (MVA) pursuant to the Maryland Vehicle Law (Transportation Article, §§11-101 through 27-105, Annotated Code of Maryland). Dealership licenses must be obtained from the MVA, and standards established by MVA must be met and maintained. Individual salesmen must also obtain a license from MVA, and meet and maintain specified standards. In addition to primary regulation by the MVA, car dealerships in Maryland are also subject to State Police jurisdiction in several ways:
1) First, motor vehicles are required to possess specified safety equipment, and it is unlawful to knowingly drive or permit anyone to drive a vehicle which does not possess the required equipment. Rules and regulations establishing minimum standards for safety equipment are set jointly by the MVA and the Automotive Safety Enforcement Division of the Maryland State Police (ASED).
2) Second, no motor vehicle may be titled or registered for use in Maryland unless it has been inspected for compliance with minimum safety standards. Inspections are conducted by inspection stations licensed and regulated by ASED. Moreover, the seller of a motor vehicle (including a used vehicle) is responsible for obtaining an inspection and inspection certificate for any vehicle transferred by him.
3) Violation of the safety standards established under the Motor Vehicle Law is a misdemeanor enforceable administratively by the MVA or by the State Police. Given the cumbersome nature of MVA's administrative process, we are informed that State Police troopers are frequently called upon to issue charges regarding violations identified by MVA, so that these safety standards tend to be judicially enforced. In addition to this special role in the motor vehicle safety enforcement program, the State Police troopers also have general law enforcement authority enabling them, with probable cause, to stop and charge any person with violations of the motor vehicle law or any standard or regulation adopted pursuant to it.
The question here is whether the provisions of §3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law) serve to limit the Trooper's affiliation with or interest in the Dealership. Section 3-103(a)(1)(i)1 prohibits an official or employee from being employed by or having an interest in an entity that is under the authority of or contracts with his agency. We view the Trooper as having both an interest and employment relationship with the Dealership. The Trooper is a stockholder in the corporation, and we believe that this constitutes an economic interest as contemplated in the definition of interest as set forth in §1-201(n) of the Ethics Law. He also serves as a director and officer of the corporation, and has apparently provided services to the business as a buyer.
We have also in the past evaluated similar situations to determine existence of an employment relationship under §3-103(a). In our Opinion No. 82-2, for example, we noted that "in dealing with outside activities involving service as a non-compensated Board member, *we have* generally looked to the substance of a relationship and the type of duties and commitment involved rather than relying solely on the existence of compensation." In evaluating the facts presented here regarding the Trooper's affiliation with the Dealership, we conclude that this would constitute an employment relationship as contemplated by §3-103(a)(1)(i). (See also Opinion No. 80-4)
Moreover, we believe that under the circumstances presented here, the Dealership must be viewed as an entity "under the authority of" the Trooper's agency for purposes of §3-103(a)(1)(i). All vehicles transferred by the Dealership must meet the vehicle safety standards established by the ASED, a Division of the State Police, and the Dealership is responsible under § 23-106(b)(2) of the Motor Vehicle Law for obtaining a vehicle inspection certificate from an inspection station also regulated by the ASED. Also, the Trooper himself has operational enforcement responsibilities as to the compliance of Dealership vehicles with the vehicle safety laws, both in his general role as a police officer and within the special context of the relationship of the State Police to MVA in enforcing the vehicle safety standards. Though the Dealership may, as a practical matter, coordinate safety inspection and repairs with the purchaser of the vehicle, the fact is that the ultimate legal responsibility for meeting safety requirements for transferred vehicles lies with the seller of the vehicle. Thus, we view the Dealership as having significant special legal obligations for which it is answerable to the Trooper's State employer, the State Police. We therefore conclude that the Dealership is an entity under the authority of the Trooper's agency, and that his continued affiliation with it while he is a State Police employee is prohibited by §3-103(a)(1)(i) of the Ethics Law.2
Moreover, we believe that his spouse's operation of a used car business through the Dealership is also barred by §3-103(a)(1)(i) as long as the Trooper continues to serve with the State Police. Section 1-201(n) defines "interest" to be any legal or equitable economic interest, direct or indirect. We have not, as a general matter, held that interests and activities of a spouse must necessarily be attributed to an official or employee covered by the Ethics Law. In our Opinion No. 80-17, we dealt with a situation where an official in the Investments Division of the State Retirement Systems requested advice as to whether his spouse could pursue a career as a retail stock broker while he continued in his official capacity. We held there that such activity was permissible because the mere existence of a marriage relationship did not establish an identity of interests between the parties. We concluded that an official would not be viewed as having an indirect interest in his spouse's earnings or financial dealings absent an indicia of control over those finances, or some other indicia of an interest in the finances.
However, in Opinion No. 80-17, we also recognized that under some circumstances, spousal holdings or activities could give rise to a conflict of interest or appearance of conflict. We considered an Opinion of the Board of Ethics (our predecessor agency) in which the transfer of a joint interest in a real estate business was found to be inadequate divestiture by a State official (Title 19 COMAR, Opinion No. 81), and indicated that
...[i]n circumstances where the facts of a situation indicate that an interest held solely by a spouse is nonetheless controlled or substantially impacted by a State employee or official, the interest would be viewed as an interest of the employee or official as contemplated in [the Ethics Law definition of "interest"].
The situation presented here seems to fit within this application of the term "interest." There appears to be a clear current identity of the financial interests of the Trooper and his spouse in the Dealership. They were the sole stockholders and corporate officers and directors of this closed corporation; and the business is operated on the premises of the family residence. Under these circumstances we believe there is sufficient indicia of an identity of the Trooper's interests and those of his spouse to result in an "indirect equitable economic interest." Thus, we conclude that it is impermissible for the Trooper to maintain his position with the State Police if his spouse engages in the sale of used cars under the given circumstances for the same reasons he himself may not retain his employment or interest under the current business operations of the Dealership.
Herbert J. Belgrad, Chairman
Jervis S. Finney
Reverend John Wesley Holland
Barbara M. Steckel
Date: March 29, 1982
1 Article 40A, Annotated Code of Maryland, as amended, Ch. 796, Laws of 1981, effective June 1, 1981. Though additions were made to §3-103(a) in 1981, including a prohibition against any employment that would impair an individual's impartiality or independence of judgment, the substantive provisions cited and discussed here are the same as those in effect when this request was presented and considered, prior to June 1, 1981. Since this matter can be resolved without considering this additional provision, it is not being addressed here.
2 Since submission and consideration of this request the Ethics Law was amended to add regulatory exception authority to §3-103(a). Regulations defining exception criteria are now being considered by the Commission. (See Notice of Proposed Action, 8:26 Md. R. 2122 (December 28, 1981)). However, given the sensitivity of the Trooper's position as a law enforcement officer, as well as the key role played by the State Police in enforcing vehicle safety laws, we do not believe that such regulations would overcome the bar established by §3-103(a) in this case.