95.01

OPINION NO. 95-1

A request has been received from the Deputy Executive Director of the Maryland Port Administration (MPA) concerning whether he may participate with other individuals in a transaction with the City of Baltimore to purchase a restaurant/hotel located in the Inner Harbor near the World Trade Center. Based on the description of the Requestor's duties and the advice from the Port Administration regarding its potential interaction with the City and the private entity, we advise the Requestor that this affiliation is not prohibited. This conclusion, however, is subject to an understanding that the activity must be conducted as described and without any interaction whatever that would cause conflict between the Requestor's private and official functions.

The MPA is established pursuant to §§6-101 through 6-502 of the Transportation Article, Annotated Code of Maryland, with the mandate to promote and increase waterborne commerce in Maryland and particularly at the Port of Baltimore. The agency's goal is to attract commerce to the Port by developing and expanding existing facilities and advertising and promoting these facilities. It also has a mandate to work with private operators at the Port to improve the Port facilities and strengthen the workings of the private operators. It is charged with constructing additional modern facilities and installations, using public funds for construction and operation where private funding is not available. In carrying out this mission the MPA controls approximately 1000 acres in the harbor area of Baltimore City, including the World Trade Center, a large office building located on Pratt Street in the Inner Harbor. The MPA has its offices there and is landlord to other businesses, including those related to the international commerce activities of the Port. The Center is designed to market the Port, the City and the State to the world through the World Trade Center Associates, which has over 200 members in 54 nations.

The Requestor indicates that the agency's involvement with the City and businesses in the area relates solely to its mission to advance international trade for the area. He and the MPA Executive Director state that the agency does not participate in any private development or business groups and has no dealings with the Rouse Corporation or the Pier 5 Development Group, two organizations actively involved in business activities in the Inner Harbor. According to the Requestor, private sector committees that the agency deals with are industry people directly related to the waterborne transportation business of the Port, such as the unions, truckers groups and other transportation businesses. As to development by the agency in the area, we are advised that the agency develops only property with water deep enough to move cargo and has no interest in other development issues pertaining to the Inner Harbor. One such project, however, would entail purchase of property at Fells Point and construction of a cruise ship terminal. This would involve purchase of the property from a private landowner, with anticipation that the City would provide improvements to Caroline Street to allow access, though apparently the project is very preliminary and would not be expected to result in a functional facility until 1998. The Requestor is currently the Deputy Executive Director of the MPA. As such his duties involve him in the day-to-day operational activities of the Port. Particularly, he is significantly involved in policy development and implementation, in negotiating leases and contracts with persons and entities that use the Port, and in marketing and public relations activities for increasing shipping activities at the Port.

This request involves an investment venture being pursued by the Requestor relating to a restaurant and hotel located at Pier 5 in the Inner Harbor. According to the Requestor, this facility was owned by a private partnership with City financial support. When the private partnership foundered, the City took title and has been operating the facility since July 1994. The City has issued a Request for Proposals designed to transfer the property to private ownership/management. The RFP solicits bids in three possible alternative packages: 1) a proposal to manage for the City, which would retain ownership; 2) a proposal to manage with an option to purchase; or 3) a proposal for immediate outright purchase. The RFP establishes as a primary condition that no bid under $5.5 million will be considered, but that any financial structure (including possible City financing) can be proposed. Based on his belief that this presented an opportunity for minority investment in the City, the Requestor collaborated with a property manager/broker in the City and three others in putting together a proposal. The other participants include the owner of a grocery store chain in the City, a retired police officer who owns a security firm, and the owner of a system integration firm. All are City businessmen who are also minorities. According to the Requestor, none have any business with the MPA, either individually or through their businesses.

This group put together a proposal for purchase of the restaurant/hotel that would involve a percentage of private bank financing with the remainder of the financing by a loan from the City. This group was one of four bidders selected to make a proposal presentation and a decision by the City was pending at the time this request was heard. The Requestor indicates that he has had no direct contact with City persons involved in this transaction except in this presentation, and he had no knowledge of or connections with any City staff as a result of his MPA responsibilities. He advises that he will be a 25 percent owner in this business undertaking, and expects to serve on the Board of Directors and provide oversight services. He would not be involved in the day-to-day operation of the facility, and has indicated an anticipation that a management firm would be employed to run the hotel.

This request involves application primarily of the employment provisions of §3-103(a) of the Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law) and possibly issues under the prestige provision of §3-104. Section 3-103(a) prohibits an employee of a State agency from being employed by or having a financial interest in an entity that contracts with or is subject to the authority of his agency (subsection (a)(1)(i)), and from having any other employment relationship that would impair his impartiality or independence of judgment (subsection (a)(1)(ii)). Section 3-104 prohibits the use of the prestige of one's office for one's own economic gain or that of another. Since the entity here does not appear to have any authority or contractual relationships with the Port Administration, there would appear to be no coverage under the strict employment prohibition of §3-103(a)(1)(i). According to the Requestor, however, he will be serving on the Board of Directors of an entity organized to carry out this transaction, and would anticipate providing "oversight" services. This would be an employment relationship for purposes of §3-103(a), and would therefore present potential issues under the employment impairment provisions of subsection (a)(1)(ii).

We have generally read the impairment provision of the Law as intended to complement the strict employment prohibition to deal with situations where the strict authority or contractual relationships do not exist, but where there are relationships between the private activity and official duties to raise clear and serious concerns about the individual's ability to carry out State duties without a conflict. In evaluating this provision in the context of specific situations we have also considered potential issues under the §3-104 prohibition against the use of prestige of office. We have considered, for example, whether the activity was to take place geographically in the same area as the State activity, whether it involved interaction with private or public individuals encountered in the context of the official duties, and whether it involved the same subject matter and substantive programs as those addressed by the individual's agency. (See, for example, Opinions No. 91-4 and 89-5. Opinions published at COMAR Title 19A.)

In the situation here, both the Requestor and MPA's Executive Director have expressed the view that the Requestor's involvement in this investment would not relate to the Port or have any impact on it. They insist that the Port's interest relates solely to its defined mandate of increasing waterborne transportation through its cargo terminals and that it is otherwise not concerned with the general development of the Inner Harbor. Recognizing that the agency has dealings with the City, the Executive Director nevertheless indicates that the Requestor's involvement in this transaction with the City involves different people and that there are no relationships here that would present issues for the integrity of the agency or its operations.

We are not without some reservations regarding this activity, given that the Requestor is a high-level very visible official at the Port, which is a major economic force in the City. Its interest in generating waterborne commerce into and through the Port would seem to impact and be impacted by the private businesses in the area, including the restaurants and hotels that serve tourists. This could particularly be the case if the Port develops a cruise terminal. Also, the nature of the Port's program and the World Trade Center would put MPA in contact with businessmen and other visitors that may be potential customers of the restaurant/hotel. There is, however, no clear direct relationship between MPA and this business that would come within the strict employment prohibition of §3-103(a)(1)(i), and in view of the advice provided by the agency regarding MPA interests and activities, we do not believe the facts require a finding of impairment under §3-103(a)(1)(ii), as the situation is now described.

We therefore advise the Requestor that his proposed involvement in this investment activity is not, as described, prohibited by the employment and interest prohibitions of the Ethics Law. He needs to be aware, however, that this advice relies substantially on the assurances by him and his agency that there are no relationships or interactions likely between his agency and the business community which he would join as a business owner in the Inner Harbor. He also needs to be careful to avoid any dealings in his private capacity with Inner Harbor property owners or Baltimore City officials with whom he interacts as an MPA official. In our view the potential for concern here is substantial, given the location of the restaurant in the Inner Harbor and the significance of the activities of the Port for the City and its economic interests. The Requestor needs to be aware of this potential and be certain to avoid any possible overlapping of his private and official roles, recognizing that failure to comply with the employment impairment provision or with the disqualification, prestige and information provisions (§§3-101, 3- 104, 3-107) could result in a violation of the Ethics Law.

Mark C. Medairy, Jr., Chairman
   Michael L. May
   Robert J. Romadka
   April E. Sepulveda

Date: January 11, 1995