An opinion has been requested as to whether the Director of Intergovernmental Affairs in the Department of General Services may be a licensed real estate broker and engage in a limited real estate business. We advise, based on the facts presented regarding the Requestor's official duties and the nature of his real estate activities, that this activity may continue, assuming that the circumstances remain in the narrow confines as described.
The Requestor works in the Office of the Secretary of DGS, which is the agency in State government responsible for State facilities, including acquisition, construction, management and operation of such facilities. This Department is also the central purchasing authority for State government, generally responsible for procurement of goods and services used by State agencies. The Requestor's position as Director of Intergovernmental Affairs involves provision of staff and managerial support to the Secretary and Deputy Secretary, involving coordination and review of agency-wide programs, as well as service as legislative and governmental affairs officer, internal control and performance review officer, and regulations and publications coordinator. He indicates that the agency has six Assistant Secretaries who are responsible for defined program areas, one of which is real estate. According to the Requestor, the agency operates under a clear division of responsibility as reflected in these Assistant Secretary positions, and there is little overlap. He reports directly to the Secretary and Deputy Secretary, as do the Assistant Secretaries for particular programs, and does not function as a Chief of Staff or as a clearinghouse unit through which particular proposed actions by the operating programs would be processed for the Secretary's review and action.
In particular, the Requestor indicates that his legislative duties include functioning generally as coordinator of DGS legislative activities during the Session and the interim. He helps to develop legislative policy and draft documents. He tracks bills and coordinates Departmental testimony, and prepares fiscal notes and impact reports. He says that while this work may entail legislative matters pertaining to the Department's real estate activities, it does not involve him in the operational aspects of this activity. As the regulations coordinator, the Requestor may work with the agency counsel to draft regulatory changes as recommended by a program office, and serve as the liaison to the Division of State Documents to ensure proper processing and compliance with regulatory requirements. He says that there has been very little regulatory work directly relating to the real estate function, and his activities regarding procurement regulations have been technical and policy directed rather than involving any particular real estate transaction. The same is true, the Requestor says, as to his work as the agency-wide performance review coordinator, which involves collection of information for inclusion in quarterly and annual performance reports. The Requestor coordinates this reporting process, but indicates again that it entails no focus on any specific transactions. Another primary area of activity involves his coordination of the agency's involvement in interagency task forces and participation in task force and study projects.
The Requestor advises that he may review correspondence relating to a particular legislative matter or proposal, but would not see a letter regarding a particular proposed lease or property purchase, or about an issue raised by a particular landlord. He states that he has never been asked to participate in any meetings or discussions involving property acquisitions or particular deals. The DGS ethics liaison, as well as the Deputy Secretary, confirm this view. The ethics liaison, who is the agency counsel, indicates that he works closely with the Requestor on regulations and legislative drafting and related activities, and states that he is not aware of any involvement by the Requestor in the agency's real estate program. Nor, we are advised, does the Requestor have any involvement in capital budget planning that would entail issues relating to real estate purchases and rentals. The agency advises that the Requestor's duties are sufficiently remote from its real estate functions that a private real estate business would not present conflict or appearance issues for the agency.
This request involves the Requestor's private real estate business. According to the Requestor, this is a very limited activity. He says he has been licensed since 1983. In 1991 he with another individual established a realty corporation (the Corporation), of which he is a 51 percent owner and in which he functions as the broker of record. The Requestor indicates that in this firm he limits his work primarily to management of residential rental properties, and his partner handles about 6-8 residential sales transactions per year. The Corporation's activity focuses almost entirely on the Chinese community in this area, as to both property management and sales transactions. He himself had only two sales transactions recently, one involving assistance to a relative and the other work with a nonprofit group. Other sales persons affiliated with the Corporation also have very limited activity. According to the Requestor, the purpose of establishing the Corporation was to enable him to lawfully engage in residential property management activities. The Corporation, he says, is not a growing enterprise. It does not advertise, recruit agents or solicit business, or engage in commercial or industrial real estate activities, though he recognizes that in some circumstances dealings are required with large real estate agencies that may do commercial work and may have some interaction with DGS.
This request is presented for a review of application of the Ethics Law to the Requestor's private real estate business, arising in part from a DGS policy established in 1994. The policy generally prohibits real estate businesses by DGS employees "working for the Division of Real Estate, the Office of Master Planning or any other employee in a position of supervision of the aforementioned or any employee in a position to influence any real estate decision." It further advises that other employees should not engage in real estate activities without advice from the Ethics Commission. This policy responded to an Ethics Commission review of private real estate activities of DGS employees during 1994 which concluded with a recommendation that the Department adopt a policy limiting such activities by its employees. In informal guidance to the Department, we advised that employees could not:
use their State position or status to benefit themselves or others;
use State time, facilities, equipment (including telephone) or other resources in connection with private business activities;
use State confidential information to benefit themselves or others;
participate in matters where they, their children, spouse, parents, or siblings have an interest;
participate in matters involving their private employer, a business in which they have an interest, a business with which they are negotiating employment, a business with which they have private business dealings, or a business to which they owe money;
be employed by or have an interest in any entity subject to the authority of DGS, doing business with the Department, or negotiating a contract with it; or
have any other secondary employment which would impair their impartiality independence of judgment.
The guidance also particularly identified entities involved in such activities that could present issues. These included, for example, DGS vendors, real estate companies, appraisers, title companies, lending institutions, and fellow employees.
The Commission advice to DGS was based on a review of many prior opinions addressing outside activities by State employees or officials in the real estate business.1 In reviewing these situations we generally consider the impairment provision of §3-103(a)(1)(ii) of the Public Ethics Law (Article 40A, §3-103(a)(1)(ii), Annotated Code of Maryland, the Ethics Law), which prohibits any employment that would impair an individual's impartiality or independence of judgment, as well as the participation, prestige and information provisions of §§3-101, 3-104 and 3-107. Generally the concern in these situations has resulted in barring such activities where there was an overlap in the populations to be served by the private work and the State duties. While advising in some cases that real estate activities are not absolutely prohibited, we have said that the activities would be barred where they would necessarily bring the individual into contact with individuals or companies that would be interacting with the agency or agency program, or where the prestige of the person's State position would be an unavoidable factor in the private undertaking.
In the situation as the circumstances are described here, it appears that there is little likelihood of this type of overlap. The Requestor's official duties seem to be remote from the agency's real estate functions, thus limiting the likelihood that the impairment and prestige provisions would apply. Also, the Requestor describes his real estate business is very limited, with his own work involving management of a defined set of properties. Apparently none of his business associates or their clients include any persons or entities directly relating to the DGS particularly or State government generally. There appears to be no direct affiliation with real estate companies, though his partner's sales activities could involve some interaction with an agency or firm. His partner's activities, which are also limited, could involve work with appraisers or banking institutions that tend to be part of a sales transaction, but it is suggested that these interactions would be unlikely to lead to connections with his agency, given the Corporation's narrow range of activity.
Based on this description of his private business, we advise the Requestor that this private real estate activity may continue, as long as it can be conducted consistent with the guidelines set forth above. This advice, however, relies substantially on our understanding of the size and focus of the Corporation's and the Requestor's activities. We are concerned that any growth of the business or expansion to include commercial sales would necessarily lead to the types of interactions discussed above, and possible relationships with entities dealing with the Department. This advice also relies on the advice of the Department that the Requestor does not engage in activities for the Department that involve him in its operational real estate activities. His continued ability to pursue this private work assumes that his official duties also continue to be limited as described and that the activity continues to function without incident.
Mark C. Medairy, Jr., Chairman
Michael L. May
Robert J. Romadka
April E. Sepulveda
Date: February 23, 1995
1 See, for example, Opinions No. 93-2, No. 91-4, No. 89-10, No. 88-8, No. 88-7, No. 87-9, No. 83-41, and No. 80-15. Opinions published in COMAR Title 19A.