An opinion has been requested concerning whether a college professor may be an officer, director or employee in a corporation which has a contract to provide services to one of his college's departments.
This request is submitted by the Executive Assistant to the Chancellor of the University of Maryland at College Park. The request deals with the relationship between an economic data processing corporation (the Fund) and the Bureau of Business and Economic Research (BBER), part of the Division of Behavioral Sciences located on the University's College Park campus. The Fund is a private non-stock, non-profit corporation headed by a University Professor of Economics (the Professor). The Professor serves as president and director of the Fund; though he is not generally paid a salary by the Fund (he received one check in 1974), he has indicated that he will not rule out the possibility that he would draw a salary in the future.
The Fund is chartered to do research work related to input-output analysis or other branches of economics. It performs economic forecasting services for private clients, and also operates a University project within the Department of Economics which provides regularly updated long-term and medium-term economic forecasts utilizing an economic forecasting model owned by the Fund. This University work is done partly with privately-generated monies donated by the Fund to the University. Both the private and University work is conducted in campus facilities rented from the University, and graduate students funded by the University work on the Fund's University work. Additionally private employees working solely for the Fund do work for private clients, while University employees work on the Fund's college project.
The particular status of the relationship between the Fund and the University at the time of consideration of the request was not clear. There was apparently no formal lease agreement between the two entities, or any formal acceptance of money or services donated to the University. No formal contracts were identified regarding the Fund's provision of services to the University, or the assignment of University personnel or students to the Fund's work.
This request was precipitated by a proposed contract action that would expand the scope of the Fund's relationship with the University. Basically, the contract would allow BBER to use half of the Fund's computer capacity, in return for payment of a management fee and half of the computer's operating costs, and also a 5-year amortization of half of the cost of the computer. Though the contract was planned to be processed through the University's procurement system, its basis was in an informal letter of intention between BBER and the Fund. Based on this letter, the Professor's understanding of BBER's computer needs, and evaluation by the Fund of the cost of other sources, the Fund anticipated that costs for the computer to be purchased by it would be deferred by the University as set forth above. The agreement had been informally implemented at the time of the request though no formal contract processes had been followed, nor had any approvals been secured from the Department of Budget and Fiscal Planning or the University's Vice-President for Administration.
The requestor here has specifically inquired as to whether the Fund may bid on and possibly be awarded the contract for provision of computer capability to BBER. We do not provide advice to agencies regarding their administrative and contract decisions (see our Opinion No. 80-9), as the Ethics Law deals with the personal actions of individual employees, rather than agencies. Rather, the issue here is whether the Professor may continue his simultaneous relationships with the Fund and the University, if the Fund has or is negotiating a contract with his agency. This issue arises under §3-103(a) of the Maryland Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law), which prohibits an official or employee from being employed by or having an interest in an entity that contracts with or is seeking to contract with his agency.1
The Professor is the President and on the Board of Directors of the Fund, and also performs (currently) non-compensated employee-type services for the Fund. We believe that these connections constitute an employment relationship with the Fund, as contemplated by §3-103(a)(1)(i) of the Ethics Law. We have considered situations involving service as an officer or director of an entity on several occasions, and have generally looked to the substance of a relationship rather than solely whether it involves compensation. In our Opinion No. 80-4, for example, we stated that:
Where the employee holds an office, directorship, or other position of trust with an entity where the relationship would reasonably be expected to require a personal loyalty or commitment to the goals of the entity, then holding the the position would be prohibited by §3-103(a), if the entity is subject to the authority of or has contractual dealings with the employee's agency. (7 Md. R. 888 (May 2, (May 2, 1980)). See also our Opinions No. 82-2 and No. 82-12.
It is also our view that the Fund is an entity that contracts with or seeks to contract with the Professor's agency. The Professor is employed at the University on its College Park campus. He is in the Department of Economics, which is the academic Department with which the Fund's current University project is affiliated. Moreover, BBER and the Department of Economics are both part of the University's Division of Behavioral Sciences, and they obviously have similar and related involvement in the study of economics. Under these circumstances, we believe that the contract between the Fund and the University regarding BBER would be a contract with the Professor's agency for purposes of §3-103(a). We therefore conclude that continuation by the Professor of his affiliations with the Fund while it has or is negotiating these contractual relationships with the University would not be consistent with §3-103(a) of the Ethics Law. 2
We recognize that the University allows, even encourages, its faculty to engage in outside consulting and other activities that contribute to their professional and academic growth. However, while some private consulting and other activities may be conducted without presenting conflicts of interest, we believe that substantial relationships with private entities that have such significant contact with the University (and in fact with the employee's own Division) are undesirable. In the situation here, clear distinctions that should be drawn between public and private entities appear not to have been drawn or heeded, thus raising questions under the Ethics Law.
The apparent absence of proper administrative processes here shows clearly why this type of relationship is the very sort of situation intended to be addressed by the Ethics Law. A contract is being contemplated under which substantial economic benefits would accrue to a private entity. Moreover, the procurement action is built upon an established informal relationship that apparently developed totally outside of the various administrative fiscal, procurement and leasing mechanisms created by the State to ensure that such matters are handled impartially and objectively and in the public interest. Further, however innocent the intentions of the parties are, this type of arrangement raises an appearance of conflict of interest and fails to assure the public of independent judgment of the officials as envisioned in §1-102(a) of the Ethics Law.
Herbert J. Belgrad, Chairman
Jervis S. Finney
Reverend John Wesley Holland
Barbara M. Steckel
Date: May 26, 1982
1 As amended, Ch. 796, Laws of 1981, effective June 1, 1982. 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. 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 (See Notice of Proposed Action, 8 Md. R. 2122 (December 28, 1982 and 9 Md. R. 839-840 (April 16, 1982)). However, given the concerns expressed in the text above, we do not believe that such regulations would overcome the bar established by §3-103(a) in this case.