Our advice has been requested concerning whether members of a Community College Board of Trustees may have affiliations with a trust company and a savings and loan association with which the college maintains accounts.
This request was presented by the attorney for a local community college (the College), on behalf of two current members of the Board of Trustees of the College (the Board). The request arose out of their employment, and in one case, financial interests, with financial institutions which maintain accounts for the College. Community college boards of trustees are established pursuant to State Law in each county that has a community college. (See Education Article of the Maryland Annotated Code, §16-201). Each Board is composed of seven members appointed for six-year terms by the Governor with the advice and consent of the Senate. The boards exercise general control of the community college in the county and may adopt rules and regulations. In addition to general corporate and management authority, community college boards appoint the college's president and control the institution's real and personal property. Also, consistent with standards established by the State Board for Community College, local boards establish entrance requirements and develop and administer the institution's educational programs.
Board Member A was originally appointed to the Board in July 1971 and his present term expires on June 30, 1986. This individual serves as the Chairman of the Board of a local federal savings and loan association. According to the college's attorney, Member A has no ownership interest in the savings and loan association although he is compensated for his service on the Board of Directors. The College has maintained several savings accounts with this savings and loan association since 1964 and has made deposits to it in the form of certificates of deposit. Board Member B was also originally appointed to the Board in July 1971 and his present term expires on June 30, 1988. He is the President of a local full service bank and his financial disclosure statement indicates that he is also a member of the Board of Directors of the bank and owns 1090 shares in it either solely or with his wife. The material submitted by the College's attorney indicates that the College established seven checking accounts with this bank in 1972. Both of these individuals have submitted Board and Commission Financial Disclosure Statements pursuant to Title 4 of the Public Ethics Law (Article 40A, Title 4, Annotated Code of Maryland, the Ethics Law). Neither, however, submitted Appointee Exemption Disclosure forms at the time of their most recent appointments.
This request raises issues under the outside employment and financial interest prohibitions of §3-103(a)(1)(i) of the Ethics Law, as well as under the exemption provisions of the Law. Subsection (a)(1)(i), among other things, bars an official or employee from being employed by or having a financial interest in an entity that has contractual dealings with his agency. We have previously advised that community colleges are executive agencies in State government as defined in §1-201(1) of the Law,1 and that members of their boards of trustees are therefore officials of the State for purposes of §3-103(a). (See Opinions No. 83-36 and No. 83-29.) We have also specifically held that banking depository relationship such as those between the College and these financial institutions result in contractual relationships potentially subject to the bar of §3-103(a)(1)(i). (See our Opinions No. 81-29 and No. 80-14, both involving Registers of Wills who held interests in banks with which their office maintained checking and other accounts.)
Both of these Board Members hold compensated employment relationships with financial institutions with which the College maintains accounts, and one of them holds a substantial number of shares in such an institution. Under these circumstances we must conclude that they would both be covered by §3-103(a)(1)(i),2 and barred from holding their banking affiliations, unless they come within one of the exemption or exception provisions of the Law. There are several sources of exemption or exception authority in the Law. The introductory language to §3-103(a)(1), for example, provides that its prohibitions apply "except as permitted by regulation of the Commission where such interest is disclosed or where such employment does not create a conflict of interest or the appearance of conflict...." Also, §3-103(a)(2) establishes exceptions for members of regulated parties (subsection (a)(2)(i)), for individuals having ministerial duties where there would be no conflict or appearance of conflict (subsection(a)(2)(ii)), and for appointees who disclose the conflicting employment or interest at the time of appointment (subsection (a)(2)(iii)). Section 3-103(a)(3) further provides for exemption based on a gubernatorial request in extraordinary situations where it is necessary to recruit highly or uniquely qualified individuals for public service and to assure the availability of competent services to the public.
We are not convinced that any of these provisions dealing particularly with §3-103(a) would be applicable here. These two Board Members have significant overall policy and management responsibilities that limit the applicability of the general §3-103(a) exception,3 as well as the application of the exception for those having ministerial duties. They are not regulated parties appointed to a regulatory board, and there was apparently no disclosure of these relationships at the time of their most recent appointment.4 Nor has there been any gubernatorial request setting forth extraordinary circumstances to justify exemption.
We believe, however, that the circumstances presented in this request justify a temporary exemption pursuant to §2-103(h) of the Law. This provision allows modification by the Commission of any of the requirements of the Law as to "any member of the State board or commission if, because of the nature of the board or commission... application of the [Law] to that...member...: (i) would constitute an unreasonable invasion of privacy; (ii) would significantly reduce the availability of qualified persons for public service; and (iii) is not necessary to preserve the purposes of *the Law*." We have granted one conflict of interest exemption under this provision in our Opinion No. 82-56, noting there that this exemption references several distinctly different exemption situations, and that some of the criteria may be less applicable than others to particular circumstances. For example, reference to invasion of privacy in subparagraph (i) may be a key factor in evaluating application of financial disclosure provisions, but less significant in considering exemption from a conflict of interest provision. We have thus developed the view that these exemption criteria must be read together to effectuate the clear intent of the Law to allow less restrictive application of the Law.
In Opinion No. 82-56, we also noted that part-time members of boards and commissions often serve with little or no compensation and are generally expected to have other income-producing activities. We considered the §2-103(h) exemption as reflecting a legislative understanding that some persons who volunteer their public service on State boards or commissions "may bring special skills to their assignment that would be lost to the State if the conflict of interest prohibitions were strictly applied." Nevertheless, our general approach to this exemption has been to treat it as an extraordinary measure designed to deal with situations where strict application of the provisions of the Ethics Law would clearly be contrary to a defined public interest. In our view the basic intention of the Law is that its provisions be uniformly and evenly applied to require avoidance of situations that could impair a State agency's credibility and damage the public's trust in its implementation of its mission. We continue to believe that this is the correct and proper approach to the section, especially given the specific exceptions built into §3-103(a) itself.
However, we think that all of the circumstances of this request taken together present a type of legal and factual situation that the §2-103(h) exemption provision was intended to address, at least until this potential conflict can be considered by the appointing authority in the context of the appointment process. These individuals are part-time appointees to a community college board in a small Maryland county, where prominent business people in the community are sought to serve, and where the pool of persons with needed expertise is not as large as in more urban jurisdictions. The College has requested exemption both orally and in writing, pointing out the need for the experience provided by these long-time Board members. Moreover, this Board is described as one that is involved in general policy decisions and unlikely to be dealing with operational matters such as banking decisions; also, the amount of money at issue appears to be negligible from the banks' point of view. We are also aware that these members have served on the Board for several years while having these affiliations, and apparently no questions or public issues have been raised about these relationships.
We therefore advise these Members that they are exempted from the provisions of §3-103(a), as to the interests and employment currently held by them and disclosed on their financial disclosure statement. This exemption applies only until their current appointments expire; any subsequent exemption must be properly within the context and procedures of the appointee exemption process. Also, the Members should be aware that the exemption extends only to the employment and interest provisions of §3-103(a)(1)(i). The other provisions of the Ethics Law, including the disqualification provision (§3-101), the prestige provision (§3-104), and the official information provision (§3-107) continue to apply in this situation. Moreover, our decision is based on the facts as currently presented to us. Should the College's relationships with these financial institutions change significantly, or if the Board were to become more involved in the College's banking decisions, it is not at all clear to us that the exemption would continue to be appropriate.
*Mr. Finney was a member of the Ethics Commission at the time this request was considered and decided, but resigned prior to issuance of the formal Opinion.
Herbert J. Belgrad, Chairman
*Jervis S. Finney
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Date: November 29, 1983
1 See our Opinions No. 81-10, No. 81-7, No. 80-21 and No. 80-9. Except as otherwise expressly cited to the Maryland Register, Opinion citations are to Ethics Commission Opinions published in COMAR Title 19A.
2 Note that §1-201(m) of the Law defines financial interest to include the ownership of an interest as the result of which the individual is entitled to receive more than $1,000 per year. We have interpreted this definition to include interests having a sale value of over $1,000. (See, for example, our Opinions No. 81-21 and 79-1.) Though we are not aware of the value of Member B's stock, it would seem likely that 1090 shares would have a value in excess of $1,000.
3 See COMAR 19A.02.01 and 19A.02.02 for our regulations setting forth the exception criteria under this provision.
4 The appointee exception process was enacted in the 1981 Session of the legislature and was available for use by at least one of these Members. While we have on occasion allowed exception under this provision where the failure to disclose was part of a transition period implementing this exception language, we are convinced that this provision must be applied consistent with its apparent purpose of allowing appointments to be made based on disclosure and knowledge by the appointing authority. Since a reasonable transition period has been completed, we are therefore unwilling to continue to allow application of this provision where the procedural and timeliness aspects of the particular situation are not consistent with the requirements of the Law. This provision is not available for use by individuals whose appointments preceded its enactment.