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New York State Ethics Commission
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Advisory Opinion No. 00-6: The revolving door restrictions of Public Officers Law §73(8)(a) preclude a former employee of the New York City Housing Development Corporation from appearing or rendering compensated services on behalf of two related not-for-profit corporations; the government-to-government exception of Public Officers Law §73(8)(e) does not apply.

INTRODUCTION

The following advisory opinion is issued in response to requests submitted by [ ], an attorney with the New York City Housing Development Corporation ("NY-HDC") and [ ], a former employee of NY-HDC, for an opinion as to whether the post employment restrictions of Public Officers Law §73(8)(a) prohibit [the former employee], who now works for the New York City Housing Partnership Development Corporation ("HPD Corp.") and is a member of the board of the directors of the Community Partnership Development Corporation ("CPD Corp."), from appearing or rendering services for compensation in matters before NY-HDC.

Pursuant to the authority vested in it by Executive Law §94(15), the New York State Ethics Commission ("Commission") renders its opinion that Public Officers Law §73(8)(a)(i) and (ii) apply to preclude [the former employee] from appearing or rendering compensated services on behalf of the HPD Corp. or the CPD Corp. in relation to matters before NY-HDC, his former agency. Although HPD Corp. and CPD Corp. could be said to perform a quasi-public function, neither was created by a government agency or is controlled by government officials or agencies. For that reason, the government-to-government exception to those ethical restrictions does not apply.

BACKGROUND

After [ ] years of service, [the former employee] recently left NY-HDC where he had served [as a senior official]. [The former employee] has taken [a senior position at] the HPD Corp. and also serves as a member of the board of directors for CPD Corp., an affiliate of the HPD Corp.

NY-HDC is a State agency constituting a public benefit corporation established in 1971 under the provisions of Article XII of the Private Finance Housing Law. The corporation consists of seven members: the Commissioner of the New York City Department of Housing Preservation and Development ("City HPD") who serves as the chair, the Commissioner of the New York City Department of Finance, the Director of the New York City Department of Management and Budget, two public members appointed by the New York City Mayor, and two public members appointed by the Governor.(1) NY-HDC was created to encourage the investment of private capital in housing through low-interest mortgage loans and to provide safe and sanitary dwelling accommodations for families and persons who cannot obtain financing from the private sector. NY-HDC's objectives and responsibilities include the development and implementation of low and middle income affordable housing programs, and the financial structuring and underwriting of loans for the development and operation of such programs.

HPD Corp. is a type "C" New York not-for-profit corporation which was created on March 2, 1983, by a corporation currently known as the New York City Partnership and Chamber of Commerce, Inc. ("Chamber"), in order to assist New York City in addressing its affordable housing problem and developing underutilized vacant City owned parcels. HPD Corp.'s goal is to increase home ownership opportunities for low and moderate income families who are priced out of the conventional real estate market.

CPD Corp. is also a type "C" New York not-for-profit corporation which was created on June 6, 1989, by the Chamber and HPD Corp. to assist New York City by facilitating the disposition and redevelopment of vacant land and buildings owned by or located in the City, and to assist the State and the federal government in neighborhood revitalization and community development.

While HPD Corp. and CPD Corp. have different boards of directors, they typically meet at the same time and are viewed as "sister" organizations. Nominating committees nominate individuals to serve on the boards who are knowledgeable and well respected in the fields of housing and community development. Two of HPD Corp.'s nineteen members are ex-officio directors, the Commissioners of City HPD and the New York City Department of City Planning. The board of CPD Corp. has six members, none of whom are government officials.

[The former employee] and [the State attorney] make several points to support their arguments that [the former employee] should be allowed, as an employee of HPD Corp. and a board member of CPD Corp., to appear before NY-HDC.(2) The first is that HPD Corp. and CPD Corp. are quasi-public in nature, in that their fundamental purpose is to assist governmental agencies in fulfilling their public missions. They note that the transactions undertaken by HPD Corp. and CPD Corp. are always in conjunction with governmental agencies. Unlike other §501(C)(3) organizations that are created and organized to do charitable work, HPD Corp. and CPD Corp. were organized solely for the purpose of assisting the City, State and federal governmental agencies on a temporary basis. If the governmental agencies did not need or use their assistance, HPD Corp. and CPD Corp. could no longer fulfill their organizational objectives. [They] argue that the fact that HPD Corp. and CPD Corp. have no purpose other than to assist governmental entities distinguishes them from other charitable organizations, and that, in a sense, makes them alter egos of the governmental entities that they service.

Moreover, [the former employee] and [the State attorney] report that HPD Corp. and CPD Corp. do not obtain any private benefit from their work and do not reap the fruits of the various governmental programs in which they participate. Specifically, there are no permanent institutional benefits for HPD Corp. or CPD Corp. They do not obtain a permanent interest in the housing created by the collaborative ventures with governmental agencies. Their sole role is to assist such governmental agencies by providing temporary participation in government programs in order to facilitate the cost-effective and expeditious development of affordable housing.

[The former employee] and [the State attorney] contend that the quasi-public nature of HPD Corp. and CPD Corp. is further evident by virtue of the fact that all of their work involves programs that are organized and funded under City and State housing and community development initiatives.(3)

In addition, [the former employee] and [the State attorney] argue that, because any appearance by [the former employee] before NY-HDC would be in conjunction with City HPD, the purpose of the revolving door statute will not be undercut since there is no possibility that he would misuse his knowledge and contacts for a private client.

[The former employee] and [the State attorney] further argue that NY-HDC and City HPD will incur unusually broad detrimental effects if [the former employee] is prohibited from appearing or practicing before NY-HDC. NY-HDC works very closely with City HPD to finance affordable housing for current and future generations of New Yorkers, and many joint NY-HDC and City HPD initiatives involve HPD Corp. and CDC Corp. [The State attorney] states that HPD Corp. has a role in several of the programs NY-HDC operates to increase affordable housing in New York City. That role was created by the City, acting through City HPD, pursuant to a Memorandum of Understanding between City HPD and the HPD Corp.(4) While the assistance provided by HPD Corp. to City HPD with respect to land disposition and title acquisition is invaluable, [the State attorney] states that it is clear that HPD Corp.'s role and participation in these projects is not related to and does not affect the decisions of NY-HDC and City HPD to fund a particular project. NY-HDC makes funding decisions after an underwriting of the project is performed to determine viability. [The State attorney] argues that since HPD Corp. does not apply to NY-HDC for funds and plays no part in the funding of projects under the Permanent Loan Program or any other projects in programs operated by NY-HDC, HPD Corp.'s participation will not adversely affect any party which seeks funds from the State agency. Therefore, she contends that [the former employee's] appearance and practice before NY-HDC in his new capacity will neither be a detriment nor a benefit to other entities seeking NY-HDC's resources.

APPLICABLE STATUTES

Public Officers Law §73(8)(a) provides:

(i) No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation or association in relation to any case, proceeding or application or other matter before such agency.

(ii) No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment, or which was under his or her active consideration.

Public Officers Law §73(8)(e), the government-to-government exception, provides:

This subdivision shall not apply to any appearance, practice or communication or rendition of services before any state agency . . . or to the receipt of compensation for such services, rendered by a former state officer or employee . . . which is made while carrying out official duties as an elected official or employee of a federal, state or local government or one of its agencies.

DISCUSSION

Section 73(8)(a)(i), quoted above, is known as the "two year bar." It prohibits former State officers and employees from appearing, practicing or rendering services for compensation in relation to any case, proceeding application or other matter before their former agency for two years following their separation from State service.

Section 73(8)(a)(ii), also quoted above, is known as the "lifetime bar." It prohibits a former State officer or employee from rendering services for compensation in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of the individual's State service or which was under his or her active consideration during that period.

These two bars are known as the revolving door rules. Paragraph (e) of §73(8) creates the government-to-government exception to the application of those rules.

[The former employee] has asked that the Commission apply its analysis in Advisory Opinion No. 95-2 to the HPD Corp. and CPD Corp. In that opinion, the Commission permitted an employee of the New York State Office of Mental Retardation and Developmental Disabilities ("OMRDD") to transfer to employment with the Research Foundation for Mental Hygiene ("Foundation") and appear before OMRDD. The Foundation is a private not-for-profit corporation that was created by OMRDD and functions as a closely affiliated research arm of the agency. That analysis, however, does not work for this situation. HPD Corp. and CPD Corp. were not incorporated by a City or State agency. Unlike the Foundation, the entities are not recognized in statute. Nor do employees of City HPD and NY-HDC regularly transfer between a government agency and a not-for-profit corporation, as is true of OMRDD and the Foundation.

In Advisory Opinion No. 98-17 the Commission considered whether the government-to-government exception should apply to the I-95 Corridor Coalition, a regional partnership of government transportation entities. The Coalition is a voluntary, unincorporated association. All of its voting members are governmental agencies; its staff is paid with government funds and, aside from its executive director, are on loan from governmental agencies; it develops public policy and spends government funds to implement that policy; its expenditures are made through government agencies. In reaching the conclusion that the Coalition is "governmental in nature," the Commission particularly considered the Coalition's role as an entity to develop public policy and to implement that policy through the expenditure of public funds. "It, in essence, does no more than what each of its governmental members could do acting separately . . . it is a public entity, and its employees should be covered by the government-to-government exception . . . ." HPD Corp. and CPD Corp. are not governmental in nature in the way that the I-95 Corridor Coalition is; indeed, they share virtually none of the attributes which the Commission found decisive to its conclusion in Advisory Opinion No. 98-17.

In another opinion considered at the same meeting, Advisory Opinion No. 98-18, the Commission was asked whether a former employee of the LIRR could work for Amtrak and participate on a subcommittee in which the former State agency would have a role and which involved potential matters subject to the lifetime bar. In that Opinion, the Commission stated:

In the situation presented here. . . the former LIRR employee, now works for Amtrak. The interests he proposes to serve by working on the Subcommittee dealing with the operation of Penn Station are not private interests in the usual sense. He is working for a quasi-public corporation, and the other two railroads with which he will be dealing are public entities. These considerations weigh heavily on the Commission, and they guide its approach in its analysis of the issues surrounding the two year and lifetime bars.

Advisory Opinion No. 98-18 may be distinguished from the request before us today. There, Amtrak's board consists of nine members, six of whom are appointed directly by the President of the United States and three more who are appointed by the President on the advice and consent of the Senate. The government currently holds all of Amtrak's preferred stock which it receives in exchange for its subsidization of Amtrak's losses. In contrast, neither NY-HDC nor any other government agency appoints any directors of HPD Corp. or CPD Corp. and the two not-for-profit corporations have issued no stock.

The Commission has considered certain opinions of the City of New York Conflicts of Interest Board ("Board") concerning the determination of "government agency" status for purposes of their government-to-government exception to the revolving door provisions. Although the Board has not rendered an opinion regarding a City HPD employee leaving that City agency to take a job with HPD Corp., it has interpreted its revolving door restrictions with respect to other situations in which a City employee has left city government to take a job with a quasi-governmental entity.(5)

In Advisory Opinion No. 94-7, citing its Advisory Opinion No. 93-13, the Board considered whether a local development corporation could be considered an arm of local government. It concluded that the factors to be considered are (1) the manner in which the corporation was formed; (2) the degree to which the corporation is controlled by the government officials or government agencies; and (3) the purpose of the corporation. Applying those factors, the Board held that it would not be a violation of the City's post-employment provisions for a former City employee to be employed by a local development corporation ("LDC") and, in carrying out his duties, appear before his former City agency or other City agencies.(6)

Applying those same factors to HPD Corp. and CPD Corp. supports the conclusion that the government-to-government exception of Public Officers Law §73(8)(e) does not pertain. HPD Corp. and CPD Corp. were not formed by government agencies and are not controlled by government officials. Thus, even though the two entities could be said to have a quasi-public function, the government-to-government exception of Public Officers Law §73(8)(e) does not apply.

CONCLUSION

The Commission concludes that Public Officers Law §73(8)(a)(i) and (ii) apply to preclude [the former employee] from appearing or rendering compensated services on behalf of HPD Corp. or the CPD Corp. in relation to matters before NY-HDC, his former agency. While we recognize that application of State ethics restrictions to [the former employee] may limit his effectiveness, any other ruling would expand the government-to-government exception far beyond its language or intended scope.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Paul Shechtman, Chair
Robert J. Giuffra, Jr.
Henry G. Gossel
Lynn Millane
O. Peter Sherwood, Members

Dated: November 10, 2000


Endnotes

1. See, Private Housing Finance Law §653. As NY-HDC members include two members appointed by the Governor, it is a State agency whose employees are State employees subject to Public Officers Law §§73, 73-a and 74; its members, being unpaid, are subject to Public Officers Law §§73(3)(b), 73-a and 74.

2. NY-HDC, through [the State attorney], supports [the former employee's] request for relief from the post-employment restrictions.

3. HPD Corp. and CPD Corp. have received the following State or federal grants: a 1999 U.S. Department of Housing and Urban Development grant to the HPD Corp. for $58,000 to conduct housing counseling services; a New York State Education Department grant to CPD Corp. for $645,583 to train welfare recipients for jobs; a U.S. Department of Labor grant to CPD Corp. for $5,000,000 to train welfare recipients; a U.S. Environmental Protection Agency grant to the New York City Economic Development Corporation of which $50,000 was sub-granted to CPD Corp. for assisting the City in its Brownfields Economic Redevelopment Initiative.

In addition to City HPD and AHC, HPD Corp. and CPD Corp. work closely with the Empire State Development Corporation, the Upper Manhattan Empowerment Zone and the State of New York Mortgage Agency. HPD Corp. also administers "seed" loans which are funded by the New York State Division of Housing and Community Renewal. HPD Corp. also works closely with the Federal National Mortgage Association ("Fannie Mae") on the development of home-ownership underwriting criteria. HPD Corp. receives grants from the Fannie Mae Foundation pursuant to its subsidized home ownership program in Harlem.

4. For example, NY-HDC's Permanent Loan Program, through which both agencies commit and fund projects together, was developed jointly by NY-HDC and City HPD. HPD Corp. plays a crucial role with respect to many of the Program projects with respect to land disposition and title acquisition.

5. City Charter Section 2604(d)(6) contains an exemption from the post-employment restrictions and provides that "the prohibitions on negotiating for and having certain positions after leaving city service, shall not apply to positions with or representation on behalf of any local, state or federal agency."

6. The City created the LDC, a not-for-profit corporation, to conduct various public and quasi-public functions and its three incorporators were City employees. The LDC's board of directors consists of nine members, a majority of whom are employees of the City. By law, all employees of the LDC are subject to the conflicts of interest provisions contained in the City Charter and many of the operations of the LDC are subject to the control of the City.

See also, Advisory Opinion No. 94-21, where the Board concluded that a former high-level City employee could accept employment with a new business improvement district ("BID") and appear before his former City agency. As in Advisory Opinion No. 94-7, the Board applied the factors it cited in Advisory Opinion No. 93-13 to support its determination. The New York City Administrative Code ("Code") governs the manner of formation, the financial aspects, the governing board and the manner of governmental approval of the BID and all other business improvement districts. The Code provides that the board of directors of a BID must include one member appointed by each of the following: the Mayor; the City Comptroller; the applicable Borough President; and the City Council member representing the council district in which the proposed BID is located. The City appointed board members serve as incorporators of the BID.

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