97.10

OPINION NO. 97-10

An opinion has been requested regarding application of the nonparticipation, financial interest and other provisions of the Ethics Law in a situation where an Administrative Assistant I in the Physical Plant Department at Towson University has a spouse who sells maintenance parts and supplies (and possibly office supplies) to units within her Department. We advise that this individual has an interest in her spouse's business that is barred by the prohibitions in the Ethics Law if the business sells to her agency. Based on the recommendation and advice from the University President, however, we believe that a regulatory exception can be allowed to permit this affiliation to continue within certain constraints.

The Requestor was hired in April, 1997, as a secretary assigned to the Assistant Director of Planning in Towson University's Physical Plant Department. According to the Requestor, she has been primarily a homemaker for many years and became aware of the vacancy at the University because her husband was on campus and saw a notice on a job board. She and the Associate Vice President for Planning both indicate that she submitted her application in the normal process and was considered and interviewed along with several other applicants, with her spouse having no role in the process or contact regarding her employment. She was selected for an entry level Grade 7 secretarial position (called an Administrative Assistant I) to work for the Division's Transportation Manager, a position that apparently could have entailed some minimal procurement recommendation activities.

Shortly after her employment, however, as a result of reorganization, the Requestor's position was reassigned to the Director of Planning. The Office of Planning has the responsibility for preparing and regularly updating the master plan for the campus, covering every aspect of the grounds, building, and facilities of the University. This is a very substantial and complex process that entails development of program and other budget justification documents needed to implement and fund the planned activities, but apparently does not involve day-to-day operational maintenance activities. As a consequence, the Associate Vice President advises that the Office does not include operational staff who purchase equipment and other materials for physical plant and maintenance activities.

The Requestor's spouse has for 13 years had a sole proprietorship business (the Business) which operates in the basement of their home. The Requestor indicates that she is not an officer in the business nor does she have any formal relationship with it. While she was at home, she provided bookkeeping and clerical services to the company, but she indicates that since she has started to work outside the home she has done nothing regarding the business. The business sells maintenance tools and equipment (the University's invoice file show such items as solenoid valves, spray adhesive, hose reels, a tool vault, padlock, and wrenches) to institutional clients such as hospitals, universities and nursing homes. The Business did just under $23,000 in business with Towson in FY 1997. According to the Requestor's disclosure, this represents between 21 and 33 percent of the Business' gross sales for the year, and the Associate Vice President describes it as a small percentage of the $630,000 in parts and supplies purchased by the Department during the same period. He indicates that purchases are made by operational workers involved an day-to-day facility and grounds upkeep in the maintenance, trade shops, grounds unit, and power plant engineers and plumbers within the Department's Division of Operations and Maintenance. These individuals may make purchases up to $500 without formal procurement process from any of a variety of suppliers known to them and included on a suppliers list. This could include small operations like the Business, chain stores, or industrial suppliers.

Section 15-502(b)(1) of the Ethics Law (State Government Article, §15-502(b)(1), Annotated Code of Maryland, the Ethics Law) prohibits a State employee from being employed by or having a financial interest in an entity that contracts with or is negotiating contracts with the individual's State agency. Section 15-102(t) of the Law defines a financial interest as any legal or equitable economic interest owned or held wholly or partly, jointly or severally, or directly or indirectly, whether or not the economic interest is subject to an encumbrance or condition. We have in the past considered application of the Law to spousal interests, including businesses maintained in the marital home, on several occasions. In Opinion No. 82-12, for example, we advised that a used car business owned jointly by a State Police Officer and his wife could not be continued by transfer to the spouse in order to avoid a conflict, given that it had been jointly operated and was to continue to function at the family home. In a more recent opinion (No. 97-3), we indicated that maintenance of a child day care center in the home of a Department of Social Services employee was prohibited, as the individual was viewed as having both an employment and interest relationship with a facility operated in his home and subject to substantial regulatory and possible funding relationships with his agency.

In considering issues regarding spousal interests in these and related enforcement situations, we have considered, in addition to the provisions and purposes the Ethics Law, the principles reflected in the State's marital property law (Family Law Article, §8-201, Annotated Code of Maryland), which defines marital property to include any property, however titled, acquired by one or both parties during the marriage. The Requestor indicates that her husband's business was begun during their marriage. Moreover, it is operated entirely in their home, and she has in the past provided services to it. Under the circumstances, we must conclude that the Requestor in fact has a financial interest in the Business for purposes of the Ethics Law, based on the factual situation and her relationship to the Business as well as the potential application of other principles of State law. We also conclude, consistent with many previous opinions, that the Business' supplying of commodities and equipment to the University in response to purchase orders and other procurement mechanisms, results in a contractual relationship between the Business and the University. The Requestor's affiliation with the Business would therefore be barred by the prohibition of §15-502(b) unless an exception is allowed.

Section 15-502(c) allows application of an exception pursuant to Commission regulations if it is determined that the circumstances of a situation do not result in a conflict of interest or appearance of conflict. Our exception regulations implementing these statutory criteria (COMAR 19A.02.02) consider the relationships of an employee's duties and agency position to the private business, as well as the nature of the private affiliation, and its interaction with an employee's agency. The regulations also consider the extent and value of any contractual relationships between the individual's agency and the private business, including the absolute value of the sales activity as well as the percentage it represents of the total gross income or capitalized value of the business. In the circumstances here the Business sales to the University for the preceding fiscal year were almost $23,000, well above the regulatory criterion of $5,000, and represent over 20 percent of the Business' gross income. The regulations thus suggest that an exception would not be allowable in the absence of a specific determination by the agency head that the conflict does not present a situation that impairs the credibility of the agency.

We have received an exception request from the University President regarding this situation. The University indicates that the circumstances here do not present problems for the agency, as her Department has taken appropriate measures to eliminate any conflict of interest. The agency has thus requested an exception, relying in part on the understanding that the Requestor performs now and will in the future perform no role in purchasing activities that would involve her spouse's business. Based on this information and request, we advise that an exception can be allowed pursuant to §15-502(c) and our exception regulations. This conclusion relies on the representations of the agency as to the Requestor's duties and the nonparticipation understanding, as well as the indications that the past and ongoing purchasing dealings with the Business are reasonable and appropriate in terms of the agency's purchasing rules and maintenance needs. We also assume that the Requestor continues not to provide support services to the Business, and that she will take care to avoid any situations that could be construed as use of her official position to advance her spouse's business or to provide otherwise confidential information to the Business. This includes, for example, taking care not to discuss her spouse's availability as a potential supplier where a particular need is defined, and not providing any convenience services on behalf of the Business, such as transporting documents to her spouse or carrying any goods from the Business to the University.

Michael L. May, Chairman,
   Mark C. Medairy, Jr.,
   Charles O. Monk, II,
   April E. Sepulveda

Date: August 27, 1997