An opinion has been requested concerning whether the Deputy Secretary of the Department of General Services (DGS) may continue to hold a substantial amount of stock in Exxon. The request grew out of a general review of the financial interests disclosed by DGS officials filing financial disclosure. The process is based on a review of officials' stock holdings as against the list of entities identified on the Ethics Commission list as doing business with their agency. This list reflects the Public Ethics Law's §1-201(e) definition of "doing business" as including contracts involving a cumulative consideration of $5,000 or more during a calendar year (Article 40A, §1-201(e), Annotated Code of Maryland, the Ethics Law). For the period covered by the reports under review (CY 1984) the list included Exxon and showed a total DGS commitment of $6,186. Based on his disclosure of ownership (through inheritance) of 676 shares of Exxon, the Deputy Secretary was included in this review.

Exxon is on the DGS bidder's list to supply diesel and other fuel oil for activities such as heating of State buildings, to provide bulk quantity gasoline purchased for State tanks (such as the State Police, which maintains its own gasoline pumps), and to supply word processing and other types of office supply equipment. Also, Exxon gasoline may be purchased at the pump by persons driving State vehicles and using State gasoline credit cards. Apparently, however, this type of use is not "tracked" by DGS, and often does not involve a direct contractual relationship with Exxon. The Company does not appear on the CY 1985 list of entities doing business with the State. The agency indicates that the company received a bid package on two actions; it bid on one but did not receive the award.

The duties of the Deputy Secretary include line and supervisory authority over five offices: Special Projects, General Professional Services Selection Board, Personnel, Affirmative Action/Contract Compliance, and the Office of Administrative and Fiscal Services. Both the Deputy Secretary and the Secretary indicate that he has not had direct contact in procurement efforts involving Exxon. The Deputy Secretary's duties do not place him in the direct line of authority over the purchasing or procurement processes, as these activities are under the Assistant Secretary for Operations. The Deputy Secretary also indicates that the Secretary has delegated procurement authority to the Purchasing Department, through buyers and their supervisors, to the Chief of the Bureau and Director of Central Services, and ultimately to the Assistant Secretary. Apparently neither the Secretary, nor the Deputy acting in his behalf, would be expected to be involved as an operational matter in purchasing actions, though the Secretary could be consulted as to problem issues.

The Deputy Secretary does, however, have delegated responsibilities under COMAR 21.10.02, the procurement regulations bid protest chapter. Regulation .08 provides that protest decisions are to be made by the agency's procurement officer, and all decisions are to be reviewed by the head of the agency and legal counsel. Disapproved decisions must be adjusted to reflect the agency head's decision, and issued decisions reviewed by the agency head are final agency actions for purposes of review. The Deputy Secretary is designated within DGS to act for the agency head in seeing that protests are processed in a timely fashion and to review draft responses and consult with agency counsel. He then briefs the Secretary, and according to the Deputy, where a procurement officer's response is "considered to be inappropriate, the Secretary of the Department of General Services orders the appropriate response." He further states that of 114 bid protests he has reviewed since July 1981, few involved any kind of oil purchase, and Exxon was not a party to any of the transactions.

This request presents issues under the financial interest prohibition of §3-103(a)(1)(i), which forbids the holding by an official or employee of a financial interest in an entity that contracts with or is under the authority of his agency. As the Deputy Secretary's interest exceeds a value of $1,000 (the financial interest threshold set forth in §2-201(n) of the Law), his continued holding of it would be inconsistent with this provision if Exxon were to contract with his agency. He was included in the original financial disclosure review of DGS officials based on Exxon's appearance on the list of entities doing business with the State in CY 1984. The CY 1985 list does not show the company with any DGS business, however, and we must therefore conclude that the strict prohibition of §3-103(a)(1)(i) would not apply to require divestiture by the Deputy Secretary of his Exxon stock, as the situation now stands.

We recognize, however, that the company is a major supplier of oil products and also supplies office equipment. It is on the DGS bidders list and could, as reflected in past experience, be a supplier and contractor in the future. Recognizing this, and in order to provide guidance to the Deputy Secretary and the Department, we believe that application of our financial interest exception regulations should be considered here to evaluate how the Law would apply in the event Exxon were to enter into contracts with the Department. These exception regulations implement language in §3-103(a)(1)(i) providing 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 appearance of conflict."

The regulations (COMAR 19A.02.02) are designed by the Commission as general criteria for determining whether an interest or employment that would otherwise be prohibited is so remote from the individual's agency and official duties that the possibility of a conflict of interest or appearance of conflict is unlikely. The criteria include consideration of the nature of the employee's official duties, as well as how and to what extent the private relationship relates to the agency and its activities. The regulations are designed to set forth guideposts for evaluating the possibility of a conflict of interest, rather than as technical criteria, and also provide for agency input, under certain circumstances, as to the impact of the holdings on the credibility of the agency in carrying out its program.

In our view, in applying the regulations to this situation, the major question under the criteria appears to be whether the Deputy Secretary's potential responsibilities, either in the bid protest area or when acting for the Secretary, mean that his duties (or those of his colleagues or his "unit") significantly impact on Exxon or an Exxon/DGS contract, if Exxon were to contract with the agency as it has in the past. We recognize that the Deputy Secretary is the number 2 man in the Department that does much of the State's purchasing and that Exxon is a major supplier of oil and gas products as well as office equipment and machinery. However, though it is on the approved bidder's list and at any time could become involved in an agency contract action, it is not clear even if this were to happen, whether the activity would require action by the Deputy Secretary. He has indicated that he is not involved in the day-to-day transactional activities of the Department's procurement program, and in five years has never had occasion to deal with Exxon.

Under all of these circumstances, it is our conclusion that the relationship of the Deputy Secretary's duties to and his potential for action regarding Exxon is too remote to require his divestiture at this time. This conclusion assumes, of course, that the Deputy Secretary would disqualify himself from participation in any way in any matter involving the company that might arise in its currently infrequent dealings with DGS. This result is also based on the fact that there is not history of a problem arising from the Deputy's holdings. If Exxon were again to do limited business with the agency, then based on the requestor's current duties, and assuming that the Secretary did not believe that the interest would impair the credibility of the agency, we believe that the interest can be retained. If, however, there were a significant change in Exxon's business dealings with the Department, or a change in the Deputy's official involvement with the company, then he should request further guidance from this Commission.

Herbert J. Belgrad
   Betty B. Nelson
   Barbara M. Steckel

Date: March 19, 1986