Ethics Commission advice has been requested as to whether a prohibited conflict of interest would arise if the spouse of the President of a State college (the College) were to be the incorporator and operator of a non-profit corporation that would lease space from the College and otherwise interact with the College's Education Department in operating a child care center (the Center). Apparently the President's spouse is trained as an educator in early childhood education. Prior to their location in Maryland, she worked at a training site for child care operators, training teachers. She is currently employed as a teacher at a local Community College. She indicates that her intention when the family came to Maryland was to open a child care center. She began a search for a location, discussing a possible location with a local developer, and also generally letting it be known around campus and in other quarters that she was seeking a location for a child care center.
According to the Chairperson of the College's Education Department, the spouse originally contacted him about the possible use of College space and a cooperative effort with the College. He indicates that his Department has in the past operated a child care center on campus, but had discontinued this because of declining enrollment in the field of early childhood education, and the inability to fund a center. He says that he was enthusiastic about the idea of a center on campus because it would be a benefit to faculty, staff and students who need child care services, and because it would provide an on-campus location for internships in early childhood education that are required for students beginning in the freshman year. The Chairperson does not envision that any College funds would be committed to a Center, though he indicates that in-kind exchange of services would be likely. Under this type of arrangement, the Center would be available for student internships and for academic research and other activities, and in turn would be able to call on faculty resources or expertise, as well as other campus facilities (such as the Physical Education Department for swimming instruction). Apparently there is also an expectation that a faculty member from the Education Department would serve on an advisory board for the Center.1
The precise nature of the substantive relationship between the Center and the College's Education Department, however, is indefinite at this point. The details would be worked out after a determination as to whether the facility could even be located on campus. The proposal is for the Center to be housed in space leased from the College in the lower floor of an unused college building. This building had been closed because it had been determined, with some other facilities, to be excess to the College's needs. According to the College's Vice President for Business Affairs, this determination was made at the instigation of the Legislature and the Board of Trustees for State Universities and Colleges, and was made in 1982, largely before the President's arrival at the College.
The Vice President indicates that the lease of the space is primarily the responsibility of the College, and particularly the Vice President for Business Affairs. It is described as an informal sole source process, with no bid requests or formal solicitation of tenants. When an organization or individual expresses an interest in leasing vacant space, the College Business Affairs staff calculates a cost per square foot based on utilities, maintenance and other factors. The College does all of the preliminary work and negotiations with the prospective tenant, and presents a proposed lease to the Department of General Services for what is described as "pro forma" review. The lease also goes to the Attorney General's Office for review as to legal sufficiency. It is submitted to the Board of Public Works for approval and is signed by the Vice President for Business Affairs.
Except to the extent that the President's Administrative Council may be involved in developing the cost information, the President of the College does not participate in this process. The Vice President indicates that other excess space has been leased in this process--the old gymnasium has been leased to a local sports organization, and an upstairs portion of this particular building is in the process of being leased to the University of Maryland. As to this particular transaction, the Vice President says that he has had very brief and general conversations with the President's spouse about her interest in the space and tentative plans for a child care center. His only discussions with the President have been generally to explain the leasing process.
Apparently the original plan was to establish a child care center that would operate solely based on fees from clients. The spouse's planning was being done at the same time that there was a lot of publicity and legislative concern being expressed about qualifications and standards applied to day care personnel. Based on discussions with the Education Department, as well as with at least one legislator, the proposal was expanded to include operation of the Center as a training center for day care personnel and a possible resource area for leadership and planning in developing child care standards. Though this approach may involve use of faculty teaching expertise, the Chairperson of the Education Department does not view this as involving any College commitment in addition to the general in-kind exchange of services originally contemplated. No funds for the center will come from the College.
The spouse's plan for funding the expanded project is to apply for State grant funds, possibly from the Department of Economic and Community Development. The spouse also anticipates acquiring financial support through fund-raising directed at charitable organizations, and of course from fees. The Center would be established as a non-profit corporation that would be a grantee entity. The spouse's salary would be paid by the grant, not by the College. The President indicates that he will not be an incorporator or investor in the Center, nor does he anticipate that any family funds or property would be presented as security in connection with a lease between the Center and the College, or as part of any grant application to another State entity.
Since the proposed activity as described here involves the spouse of a State employee, rather than the employee himself, the primary initial issue is whether any of the strictly applied interest or employment provisions of §3-103(a)(1) of the Public Ethics Law (Article 40A, §3-103(a)(1), Annotated Code of Maryland, the Ethics Law) would be applied here. Subsection (a)(1)(i) of this section prohibits having an employment or interest relationship with an entity that contracts with one's agency. Subsection (a)(1)(ii) bars any other employment relationship that would impair a person's impartiality or independence of judgment. Since there appears to be no suggestion that the President would be providing services to his wife's Center that could be viewed as employment, we find no basis for applying subsection (a)(1)(ii). The question is therefore whether, under the circumstances, he would be viewed as having a financial interest in it that would be prohibited by §3-103(a)(1)(i).
The financial disclosure provisions in the Ethics Law specifically provide for attribution of spousal interests (§4-104), and the disqualification provisions of §3-101 also expressly address interests and other financial relationships of spouses and other relatives. Section 3-103(a)(1)(i), however, specifically applies to officials and employees, and does not expressly incorporate any attribution provisions. We have thus been reluctant in the past to apply §3-103(a) to interests or employment of an individual's spouse, despite the recognition that a spouse's income may figure significantly in the family finances. (See, for example, our Opinion No. 80-17, an employment Opinion where this issue first arose.) On two occasions, we have barred spouses' interests under this provision, where the situation involved transfer by the employee of a prohibited interest specifically for Ethics Law purposes. (Opinions No. 82-12 and No. 81-29.)
A more recent case involved a community college professor whose spouse owned a computer equipment business. The employee was an officer of the company, and apparently family funds had been invested, though his spouse was the sole stockholder. We noted in a footnote that legal issues were raised as to whether he had a financial interest in the business, though, given his provision of services to the entity, the Opinion was resolved based on his direct employment relationship with it. The President states that he will not be a stockholder or investor or otherwise affiliated with his spouse's enterprise, and in his request expressly states that the entity will be a non-profit enterprise. Based on our prior Opinions, and assuming that the entity will be non-profit and that neither family funds or property nor the President's resources would be required as security in either lease or grant consideration, we conclude that he does not have a financial interest in the entity. The proposed existence of a lease contract between it and the College would therefore not bring the situation within the §3-103(a)(1)(i) bar.
As §3-103(a) of the Ethics Law does not apply to absolutely prohibit the spouse's affiliation with the College, the question then becomes whether and how the nonparticipation and prestige provisions of §§3-101 and 3-104 of the Law apply in this situation. Section 3-101 forbids any non-ministerial participation in a matter in which an official's spouse has an interest, or which involves as a party a business entity with which the official or a spouse has a financial interest, employment or other defined relationships. The proposed leasing arrangement between the Center and the College, as well as any agreement regarding in-kind exchange of services, would in our view bring any matter involving the Center within this prohibition, and the President would be required to disqualify himself from any involvement, however informal, in activities relating to the Center.
Section 3-104 of the Ethics Law further prohibits an official from intentionally using the prestige of his office for his own economic benefit or that of another. In implementing this provision, we have generally looked for some intentional act by an official for it to apply. Certainly the relationship between the President and his spouse is known. He has apparently not promoted her presence on campus, however. Thus, even though there could be appearance concerns presented here (especially if the spouse's enterprise becomes a visible part of the public debate about child care), we cannot conclude that as a matter of law the activity is prohibited by this provision, in the absence of any affirmative action by the President to further his spouse's position on campus.
To summarize, we do not believe that the proposed relationship of the President's spouse to the College would result in a violation of the absolute employment and financial interest prohibitions of §3-103 of the Law. It would, however, present issues under §§3-101 and 3-104 that will require him to take extreme care to avoid violation. He must, for example, take exceptional care to avoid any discussion, however informal, of his wife's activities in connection with the College. He should avoid any discussions involving use of space, or resolution of disputes that may arise in connection with the interface of the Center with the Education Department or other campus facilities. Both he and his spouse should also take care even in social and informal situations to avoid conversations or activities in which his official position could be viewed as impacting on her relationship with the College. The President must also be certain not to be drawn into any situations that could arise where faculty, staff and students use the Center and thereby enter into contractual (possibly creditor) relationships with his spouse.
Thomas D. Washburne, Chairman
Herbert J. Belgrad
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Date: November 26, 1985
1 Note that we do not here address any issues regarding application of conflict of interest provisions to the service by a faculty member on the advisory board of a private entity.