An advisory opinion has been requested regarding whether the Appointments Secretary in the Office of the Governor may serve on the Board of Directors of a private commercial bank (the Bank). We advise that this service as described would not be barred by the Public Ethics Law (Article 40A, Annotated Code of Maryland, the Ethics Law), if it is conducted in accordance with the guidelines outlined in this Opinion.
The Requestor's job as Appointments Secretary is to manage the unit in the Governor's Office that processes appointments in the Executive Branch, both for regular positions and as board and commission member positions. This includes a wide range of appointments, including Banking Board members, the position of Bank Commissioner, and other board or executive department positions that may have contact with the banking industry. We are advised, however, that Office involvement in particular appointments varies depending on a variety of factors, including the statutory basis of the position. The Bank Commissioner, for example, is appointed by the Secretary of the Department of Licensing and Regulation (DLR) with the approval of the Governor and the advice and consent of the Senate. Members of the Banking Board are appointed by the Governor with the advice of the Secretary. We are advised that where a statute specifies participation by an agency Secretary or provides for nominations from private groups, the Appointments Office tends to be less involved in the recruitment of potential nominees or in subsequent discussions regarding their appointment. This is stated to be the case as to Bank Commissioner and Banking Board appointments.
In his specific duties as Appointments Secretary, the Requestor does not have other continuing substantive program assignments within the Governor's Office. He is, however, a member of the Governor's immediate staff. He may be given assignments unrelated to appointments on an occasional basis, and as an advisor of the Governor may be involved in informal discussions on any topic that is of concern to the Governor. The Requestor indicates, however, that though he is aware that issues involving the banking community do come up, he has not in the past been involved in these issues; he has never testified or otherwise made personal appearances as to legislative or other matters relating to banking. Nor, he advises, does he in the context of his position learn of information regarding the banking industry that would be confidential. He notes that executive matters relating to bank regulation are primarily the responsibility of DLR, and should the Governor's Office have any direct dealings with these issues they would directly involve the Secretary of DLR and other personnel.
This request arises from the fact that the Requestor has been asked to participate as one of a slate of candidates in an election to the Board of Directors of a Maryland chartered bank that is subject to the significant regulatory authority of the State through the Bank Commissioner and the Department of Licensing and Regulation. The Bank conducts general commercial and retailing business through offices in nine Maryland counties. It is not listed on the Ethics Commission's general list of entities doing business with the State for either 1989 or 1990, though it is identified on the Treasurer's list of financial institutions doing business with the State (probably as a depository of State funds). It also has paid legislative and executive branch lobbyists registered with the Commission under Title 5 of the Public Ethics Law.
The Requestor advises that he was asked to serve on the Bank's Board (if elected) because of his general background as a developer and businessman and his existing friendship with one of the organizers of the group that put together this slate. He indicates that he has no other business relationship with this individual and has not in the past owned stock in this or any other bank (though he purchased a small amount recently as a result of his involvement in this process). He would be one of 28 Board members involved in general policy considerations relating to direction and management of the Bank, including passing judgment on loans. His service on the Bank's Board would be compensated.
The relationship that the Requestor would have with the Bank if he is elected would be an employment relationship as contemplated by §3-103(a) of the Ethics Law. This section prohibits an employee or public official from being employed by an entity that is subject to his authority or that of his agency, or that has contractual dealings with his agency (subsection (a)(1)(i)). It further prohibits any other employment relationship that would impair the individual's impartiality or independence of judgment (subsection (a)(1)(ii)). The Requestor works in the Appointments Office, a staff component of the Office of the Governor. Unlike some other more formal Executive Branch organizational units which are administratively part of the Executive Department, it does not have regulatory, procurement or related functions. Thus, the Requestor as part of his duties as Appointments Secretary would not appear to have regulatory or contractual responsibilities.
We recognize that under some circumstances the Governor may be called upon to be a decision-maker as to particular banking-related matters involving specific issues. However, we do not believe that all private entities that are subject to the authority of an executive agency that may ultimately report to the Governor should necessarily be viewed as subject to the authority of units of the Governor's Office as that phrase is contemplated in this section. Thus, though the Bank is subject to the regulatory authority of the Bank Commissioner and the Department of Licensing and Regulation, and may have contractual relationships with other agencies within the Executive Branch of State government, it is not, in the absence of some more direct and specific authority interaction with the Office of the Governor, an entity that is subject to the Requestor's authority or that of his agency for purposes of § 3-103(a)(1)(i). This is particularly true in view of the fact that the Requestor and his unit have no duties involving procurement or regulatory functions.
The strict subsection (a)(1)(i) prohibition would therefore not apply to bar the Requestor's service on the Bank Board. This conclusion is similar to the result we reached in our Opinion No. 84-24 involving a college president whose service as a member of a bank board of directors was permitted since there were no relationships between the bank and the college. This Opinion (which has subsequently been relied upon in informal advice to the Secretary of a cabinet department regarding service on a bank board), also included, however, certain limitations reflecting a variety of concerns arising under other provisions of the Law. In our view, these concerns also have application to the Requestor's situation, particularly in view of the nature of his position.
The Appointments Office necessarily has direct or indirect contact with persons who could impact on banks. This could include State banking regulators or advisors, and members or potential members of other boards and commissions that have functions which can include bank relationships through loans, deposits or other activities. Also, members or potential members of State boards or commissions that do not have bank-related activities may as individuals have significant current or former relationships with banks. These circumstances raise the potential for conflict of interest under the impairment provision of §3-103(a)(1)(ii) of the Law, in view of the large universe of appointees and the broad mission of the Governor's Office. This section, however, prohibits secondary employment only where the facts clearly support a conclusion that the activity would impair the official's ability to do his State job. In adding this provision to the Law in 1981 the Legislature expressly rejected more stringent language which would have prohibited employment where it "tended" to cause impairment. In reviewing the facts here, although we recognize there are potential issues that could arise, we cannot, based on these facts, conclude as a matter of law that the Requestor's service on the Board would in itself impair his ability to do his State job.
Even though the proposed Bank Board affiliation would, based on the above facts, thus not be prohibited under §3-103(a), several other sections of the Ethics Law would impact on the Requestor's involvement with the Bank Board, both in his capacity as a public official and in his position as a Bank Board member. These include:
1) Section 3-101 would prohibit participation by the Requestor in a matter in which he has an interest or which involves as a party an entity with which he has an employment relationship. He would therefore be barred from any participation in matters of executive policy or legislative development that would impact on the economic or other interests of the Bank or the banking industry, as well as from participation in banking-related appointments.
2) Section 3-104 of the Law prohibits the intentional use of prestige of office for one's own private gain or that of another. Application of this provision to the Requestor is a complex matter, since he has a high level position that is known and can be a factor in how people relate to him. The Law requires intentional use, however, and we have tended to interpret this to mean that some intentional act needs to be taken by the person. The Requestor would, for example, clearly be prohibited from discussing any concerns or views of the Bank with persons or agencies in State government, as they would necessarily relate to him as a public official in the Office of the Governor. As a practical matter, this means that he must use the utmost care to avoid dealing with State activity or appointments where banking or banking relationships could become an issue or matter of discussion. It also means that he should not participate in matters on behalf of the Bank involving the State.
3) Section 3-107 limits use of confidential information for private gain. Issues could arise for the Requestor under this provision if this type of information were discussed or disclosed at staff meetings or cabinet meetings in which he participates. Information acquired in this way that would benefit the Bank could not only not be disclosed by him to fellow Bank Board members or associates; it could not be used or taken account of by him in his own actions as a Bank official.
In our application of the provisions of the Ethics Law, we have reviewed many situations raising various issues presented by private relationships undertaken by State employees and public officials. Where the strict prohibition did not apply, however, we have consistently advised that speculative potential alone for conduct inconsistent with these limitations is not a sufficient basis to prohibit an employment or interest relationship entirely. This is particularly true where the conduct at issue relates to only part of an individual's State duties. Based on the nature of the Requestor's duties, his lack of direct involvement in banking policy decisions and the stated indirectness of his dealings with the Bank and the banking industry, we therefore advise that this service would not, as the situation is currently described, be prohibited by the provisions of the Public Ethics Law.
The Requestor should be aware, however, that he continues to be subject to all of the requirements of the Ethics Law as discussed in this Opinion, and that the allowability of his service with the Bank assumes it is possible for him to comply with these provisions and that in fact he does so. It should also be understood that if in practice the dual service does result in actual specific issues and problems creating an impairment in his State duties, the private service would have to be discontinued.
William J. Evans, Chairman
Mark C. Medairy, Jr.
Robert C. Rice, Ph.D.
Mary M. Thompson
Date: July 1, 1991