89.07

OPINION NO. 89-7

An advisory opinion has been requested by a publicly held corporation (the Corporation) regarding the recently enacted law containing disclosure and nonparticipation requirements as to certain Prince George's County District Council land use proceedings (HB 890, Ch. 244, Laws of Maryland, 1989 Sess.). The Corporation has proposed a plan for its disclosure under this law, and has asked whether this would be adequate to meeting its filing responsibilities. We advise the Corporation that its proposal, if adjusted as we have set forth below, would meet the law's requirements.

House Bill 890 adds a new subtitle 6 to the local government title of the Public Ethics Law (Article 40A, §6-601 et seq., Annotated Code of Maryland, the Ethics Law), and has other provisions not at issue in this request. The purpose of the law is described as prohibiting a member of the Prince George's County Council from voting on or participating in certain zoning proceedings if the member has received, during a certain period of time, a contribution from certain persons or entities involved in the proceeding. The law generally applies to contributions and actions after April 10, 1989.

In addition to the nonparticipation provision, the statute requires disclosure by the council member in writing of certain contributions of money, goods or services from a zoning matter applicant or an applicant's agent within 36 months before the filing of an application and while it is pending, before any proceeding on the application. The law also requires the filing with the zoning request application of an affidavit from an applicant (as defined in the new provisions of the Ethics Law) either: disclosing the name of any council member to whom it has contributed money, goods or services or whose candidacy it has promoted within 36 months before filing the application (and while it is pending), or stating that it has not contributed money, goods or services to a member of the council in connection with a council member's candidacy, or requested others to do so. An affidavit is also required to be filed by agents for the applicant after the filing of an application disclosing any council member to whom it has contributed money, goods or services or whose candidacy it has promoted, when the agent has knowledge of the application.

The law defines several filing actions that are viewed as zoning request applications, and applicant is defined in two categories. Section 6-601(c)(1) defines the first category of individuals or entities that could be covered as applicants to include:

1) a direct owner, purchaser or lessee of the land;

2) a trustee that has an interest in the land, with the exception of a corporate mortgage bond trustee; and

3) a holder of an interest in a business entity that has an interest in the land.

Section 6-601(c)(2) includes two other situations where a person or entity could be considered to be an applicant, specifically noting a spouse or children of a person listed in subsection (c)(1), or specified business organizations in which any of the persons listed in subsection (c)(1) has an interest. Agent is defined in §6-601(b) to include persons who are employees of any applicant while the application is pending or within 36 months prior to application. Agent also includes persons hired or retained by the applicant in connection with the land, such as lawyers, accountants, engineers, realtors and others.

Affidavits and disclosures are to be maintained in the case file for the zoning action, and periodic reports are to be compiled by the clerk of the County Council. The statute provides that court action to require compliance with the statute may be sought by the State Ethics Commission or an aggrieved party, can be for injunctive or other relief, and can include (under some circumstances) voiding of official actions. It also calls for criminal prosecution where any person knowingly and willfully violates the law. Under § 1-201 of Article 40A the State Ethics Commission is the advisory body for the provisions of HB 890. As such the Commission will issue opinions and guidelines, and may under § 2-103 of the Article issue regulations.

The provisions of HB 890 involve the actions of the Prince George's County Council sitting as a District Council (hereafter the term Council or District Council refers to the County Council sitting as the District Council) pursuant to the provisions of Title 8 of Article 28, Annotated Code of Maryland. Article 28 establishes the National Capital Park & Planning Commission as a bi-county agency responsible for land use and physical development within the Maryland counties that are part of the national capital area. Title 8 of Article 28 provides for designation of the County Councils of Montgomery and Prince George's Counties as the District Council for the portion of the national capital region located respectively within each county. Section 8-101 provides that each of the District Councils may by ordinance adopt and amend the text of the zoning ordinance and zoning maps, which generally govern all rules and regulations for the use of land in the particular County.

Pursuant to these provisions, the District Council enacts zoning regulations. It establishes a general plan, a master plan for areas, and sectional maps. It defines permitted uses for land within defined zones, and establishes substantive and procedural rules for landowners who want to depart from these rules in their uses of their property. Special exceptions and zoning map amendments are two ways of seeking authority to depart from an established land use or zoning requirement. These actions are initiated by application to the Planning Board (the Prince George's section of a regional board established as part of the National Capital Park & Planning Commission), on a form provided by the Board that includes, along with identifying information about the property and the action requested, a statement listing the names and addresses of all individuals having at least a five percent financial interest in the property, or, if the owner is a corporation, of those owning at least five percent of the shares of any class of corporate security of the entity. The application is considered through the Planning Board, with appeal to the District Council. If not appealed, a special exception decision can become final if the District Council determines not to review it, while zoning map amendments are always heard and finally decided by the District Council.

This request involves application of HB 890 to special exception and zoning map amendment proceedings involving the Corporation as a contract purchaser and proposed developer of two parcels of land in Ft. Washington, in Prince George's County. This entity is a publicly traded corporation with over 210,000 employees and 60,000 shareholders. The title holders of the two parcels of land are a private trust (the Trust) and a joint venture (the Joint Venture), and the Corporation has an agreement with a private membership organization (the Organization) to develop, own and operate a retirement facility on the property for the entity and its members. The individual members of this organization would not appear to have an actual interest in the property. The Corporation's request for special exception and zoning map amendment have been heard by the zoning hearing examiner, whose decision is pending review by the District Council.

The Corporation in considering the requirements of HB 890 has proposed to comply by submitting written affidavits from the company's corporate officers and directors indicating if they have promoted the candidacy of a council member after April 10, 1989, listing the members, and identifying the support. It would also file a corporate affidavit addressing whether any officers, directors, stockholders, employees, third party contractors, or any other persons, firms or corporations with any interest in the Corporation or in whom it has any interest, have been authorized, directed or requested by the Corporation to make any contributions to or otherwise promote the candidacy of any Council member.

The Organization would file a corporate affidavit similar to the Corporation's corporate affidavit, and each of its board members would file an individual affidavit. As to the title holders of the properties, the Corporation would propose that the Trust provide an affidavit from each trustee, beneficiary, and their spouses and adult children. The Joint Venture would provide an affidavit from each joint venturer, their respective spouses and adult children. The Corporation's proposal would also involve each individual consultant or attorney retained by either of the direct applicants in submitting an affidavit and also in stating whether or not any partners, officers, stockholders, employees, third party contractors, or any other persons, firms or corporations with any interest in the firm or in which the firm has an interest, have been authorized, directed or requested by the firm to make any contributions.

The specific request of the Corporation is whether its proposed disclosure meets the requirements of the law. Its particular circumstances raise specific issues regarding actions and disclosures necessary to comply with the requirements of HB 890. We propose to respond to the specific request of the Corporation. We recognize that there are other issues presented under the law that are not raised by this request. These issues will be addressed in other guideline documents, advisory opinions requested by other parties covered by the law, and possibly in Commission regulations. Moreover, since our review of this request is limited to the request presented to us by the Corporation, the opinion generally does not discuss where or to what extent the company's proposal could possibly exceed the specific statutory requirements.

The Corporation's proposal generally raises three specific issues. These involve 1) the treatment of stockholders as possible interest holders under § 6-601(c)(1)(iii) of the law; 2) the inclusion of other entities in which the Corporation or other applicants have an interest§§(6-601(c)(2)(ii)); and 3) the need to account in the affidavit for employees of the Corporation who are not stockholders. In considering the extent to which individuals and entities in these categories are to be included in the disclosure, we believe as a general matter that this law is intended to address the activities of persons or entities involved in such a way in the zoning and land use issue that their interest could bring them within the designation as an applicant. Generally, this could be the result of actual involvement, clear financial impact, or both. We therefore conclude that in resolving any ambiguities in the law's definition of applicant it is necessary to consider the existence of an application or proceedings involving a property as that is understood in the context of the zoning process. A review of the law and the legislative history suggests that the law is intended to require disclosure by those persons or entities that are involved in the application or whose monetary interest in the entity or the land is such that they are deemed to be involved.

In our view the purpose of dividing five types of persons or entities as applicants into two separate categories and identifying another group as agents is to distinguish between those whose interest and involvement in the project is direct and those whose involvement is less direct and who therefore have differing disclosure requirements. This is to some extent set forth in §6-601(c), which establishes two different potential groups of applicants, one of whose interest and involvement is generally less direct than the other. For example, an entity deemed to be an applicant under §6-601(c)(2)(ii) does not require shareholder disclosure, while such disclosure may be required under certain circumstances for applicant entities as defined in subsection (c)(1)(i).

In our view the first, more direct, group of applicants are those three categories listed in § 6-601(c)(1), including direct owners, etc., trustees, and those having an interest in an entity with an interest in the land. As to the first two of these categories, the Corporation proposes the submission of affidavits from the Corporation, the Organization,1 the Trust, and the Joint Venture. As to the third category, that of shareholders, we believe that the law was only directed at those shareholders having such a financial or operational connection to the project or corporate political contribution activity involving the Council as to be considered applicants. The law cannot be intended to be read to be absurd or unworkable. We believe the Commission is required to read the terms of the law in their reasonable sense in view of the purpose of the law, and consistent with the approach taken in applying the Ethics Law in the almost ten years of its existence.

It is therefore our opinion that as a general matter disclosure from all of the shareholders and others having an interest in the Corporation may not always be required. The Commission is of the further opinion, however, that affidavits should be submitted by those shareholders or shareholder entities having a more significant economic stake in or who independently or in association with other shareholders exercise control over the Corporation, or, in the case of more narrowly focused corporations or other organizations, such as the Joint Venture, a real stake in the project itself. The existing zoning application documents of the County seem also to recognize this in their approach for identification of persons or entities holding a greater than five percent interest in an applicant.

We therefore believe generally that the Corporation's submission would meet the requirements of the first applicant category if it included affidavits from any individual or entity that holds a legal or equitable economic interest of five percent or greater in the Corporation.2 This is based in part on the broad nature of this corporation and the relatively small role this project would play in its total financial well-being. As to the other groups directly involved here, all of the owners are being disclosed. Of course, if a holder of less than five percent of the stock in the Corporation were playing an active role in the project, or was engaged in making contributions to council members at the urging of the Corporation, then that person would also be considered an applicant.

As to the categories of applicants included in §6-601(c)(2) of the law (spouses and children, and entities that hold an interest in any entity listed under the other categories), we view the statutory approach of putting this category in a separate part as recognizing that their interest is generally less direct. In essence, these are attributable interests, reflecting a concept that exists in the more general provisions in §4-104 of the Ethics Law. In our view the law is concerned with those people or interests that are so significant or whose activities are such that they could be deemed in these circumstances to be an applicant. Thus as to issue number 2 presented by the Corporation, regarding entities in which interests are held by one of the category 1 applicants, we believe that relevant factors to be considered are the extent of the interest and other indicators of common goals, such as sharing of employees, directors, offices, or investors. Whether the applicant has significant control over the secondary interest is also a factor to be considered.

In summary, in our view a primary consideration in concluding that an affidavit should be required from an entity held by a primary applicant is whether the circumstances suggest that the entity should be viewed as an applicant for purposes of the statute (this category applies only to entities). Therefore, disclosure regarding entities of this type would usually only be required if the nature of the entity is such that it could reasonably be considered to be an applicant. Generally to meet this requirement the share of the applicant in the entity will be significant, there will be an overlap in investors or employees or both, and the entity by reason of geographic location or nature of the entity will have a meaningful substantive interest or financial interest in the outcome of the project. Of course, if the entity is actively involved in the project, or is engaged in political contribution activity at the urging of the applicant, then it would be deemed to be an applicant. Issue number 3 presented by the Corporation has to do with how the Corporation should treat its employees under the disclosure provisions of the law. The Corporation's proposal would address employees to the extent that they are not authorized, directed or requested by the Corporation to make contributions or promote a candidacy on its behalf. Employees (except for officers and directors) would not submit applicant affidavits, however. Section 6-601(b) of the law includes employees as agents not included in the affirmative disclosure required in connection with submission of the application. We therefore do not believe that affirmative affidavits are required of these individuals as part of the Corporation's filing, nor do we believe that the Corporation or others similarly situated in most situations are compelled by the law to swear to the actions or activities of others not within their control. We do believe, however, that in the interest of sound administration and defining with some certainty those accountable for compliance with the statute, the principal participants in these proceedings should identify others involved at their behest and on their behalf.3

We therefore believe that the Corporation's affidavits should include an addendum listing its officers and directors if they are not otherwise identified on the affidavit, any employees that are significantly involved in the project or with the property that is the subject of the application, and any attorneys, architects, engineers or others such as those listed in §6-601(b) that have been hired or retained by it for any purpose related to the land that is the subject of the proceeding. It is also recommended that these persons/entities be advised by it of their obligations under the disclosure requirements of the law.4

This Opinion, as noted above, addresses the issues presented by the Corporation in its situation. We recognize that there continue to be other issues regarding implementation of this law, and undertake promptly to issue guidelines regarding those issues. We believe, however, that this review should provide guidance for compliance with the law to similar corporate applicants whose situations present issues similar to the Corporation's. In any case, it is our conclusion, in summary, that if the Corporation submits an affidavit package that includes affidavits from interest holders and from those entities in which it holds an interest if it meets the criteria set forth above, and an addendum listing other involved employees and agents, it will have fulfilled the initial filing requirements of the law. A similar evaluation should be made by the Joint Venture and the Trust to the extent any of these issues are applicable to them.

M. Peter Moser, Chairman
   Rev. C. Anthony Muse
   Robert C. Rice, Ph.D.
   Barbara M. Steckel

Date: June 20, 1989

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1 Because the Corporation has decided to treat this entity as an applicant for its purposes, we do not decide whether this entity is an applicant as a technical legal matter under the ethics provisions of the law.

2 We do not deal here with a situation where an interest holder deemed to be covered under this construction would refuse to file an affidavit, preferring to consider that question based on specific facts should the issue arise in this or other cases.

3 #032; We also believe that Council Members should make contribution records available to assist applicants and agents in identifying people or entities involved in the contribution activity.

4 #032; The Commission will be considering a regulation to make these two actions, and those discussed in footnote 2 requirements under the general informational and records requirements of the Ethics Law as amended.