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New York State Ethics Commission
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Advisory Opinion No. 01-2: When certain NYSTAR Advisory Council members may discuss and vote on certain grant applications, given the express statutory language.

INTRODUCTION

This advisory opinion is issued in response to a request by Megan Levine ("Levine"), General Counsel at the New York Office of Science, Technology and Academic Research ("NYSTAR"). Levine asks a series of questions concerning whether various members of the NYSTAR Advisory Council ("Advisory Council") may participate in discussions prior to the submission of, and may discuss and vote on, grant applications submitted to the Advisory Council by certain entities with which they are affiliated.

Pursuant to the authority vested in it by Executive Law §94(15), the New York State Ethics Commission ("Commission") renders its opinion that the members of the Advisory Council may discuss and vote on all applications except those from entities where the member is employed or where the member has a direct relationship with the applicant. All members may discuss applications with applicants prior to their submission to the Advisory Council.

BACKGROUND

NYSTAR was created in 1999 to promote New York as a leader in academic research and economic development within the field of high-technology.(1) The goals of NYSTAR are to: (i) create state-of-the-art research centers; (ii) modernize existing research centers; (iii) fund academic research and economic development; (iv) increase the availability of federal grants monies to New York; and (v) promote effective transfer of advances in technology to the commercial marketplace.

The Advisory Council was established by Executive Law §209-b, Chapter 624 of the Laws of 1999 to, among other things, recommend approval of grants to institutions of higher learning, in accordance with two NYSTAR programs: (1) the Capital Facility Program, geared toward the construction and rehabilitation of facilities and the acquisition of state-of-the-art technology and research equipment, and (2) the Faculty Development Program aimed at attracting and retaining quality research faculty by providing grants to colleges and universities. The Advisory Council is also authorized to provide written policy advice and recommendations on science, technology and academic research to the New York State Board of Regents with copies to the Governor and Legislature.

The Advisory Council consists of eleven members: one trustee from the State University of New York ("SUNY"), one trustee from the City University of New York ("CUNY"), one member of the Council of Governing Boards of Independent Colleges and Universities ("Council of Governing Boards"),(2) the Commissioner of Economic Development and seven public members(3) (Executive Law §209-b[1]). Members receive no compensation for their services, but are reimbursed for their expenses.(4) The Advisory Council has been designated as a policy-making entity.

At its November 15, 2000 meeting, the Advisory Council adopted a code of ethical conduct governing its members, which among other things, reaffirms that members must abide by Public Officers Law §74. One standard with implications for the seven public members of the Advisory Council is section 4(c) of the Advisory Council's code of ethical conduct, which states:

Unless otherwise provided in Article 10-B of the Executive Law, a member who becomes aware that he or she has a fiduciary relationship with a grant applicant, or an applicant's collaborative partner identified by the applicant in the application that would be involved with the funded project, or is considering acquiring a fiduciary interest in the applicant (or such collaborative partner) shall not participate in any discussion or vote with respect to the recommending of an award to such applicant. For purposes of this section, a "fiduciary relationship" means membership on a governing board of directors or trustees, or holding an office in the entity in question.

QUESTIONS PRESENTED

The questions posed to the Commission are as follows:

  1. Whether members of the Advisory Council who are appointed by virtue of their membership on the Boards of Trustees of either SUNY or CUNY may as a member of the Advisory Council participate in deliberations and vote on grant applications submitted by colleges or universities which comprise their respective institutions?

  2. Whether members of the Advisory Council who are appointed by virtue of their membership on the Boards of Trustees of either SUNY or CUNY may, in the course of their ordinary duties as trustees of their respective institutions, discuss grant applications and grant strategies involving the colleges and universities which comprise their respective institutions prior to their submission to NYSTAR? In their roles as trustees, such members are sometimes called upon to participate in both policy discussions and discussions regarding specific projects.

  3. Whether a member of the Advisory Council who is appointed by virtue of his or her membership on the Council of Governing Boards may as a member of the Advisory Council participate in deliberations and vote on grant applications from institutions of higher education which are members of the Council of Governing Boards?

  4. Whether members of the Advisory Council who are full or part-time State employees may participate in deliberations and vote on a grant application submitted by their respective employer agency or institutions?

  5. Whether members of the Advisory Council who are State employees may, in the course of their role as a State employee discuss grant applications and grant strategies with their respective employer agency or institution, which is considering applying for a NYSTAR grant?

  6. Whether a member of the Advisory Council who sits on the board of trustees (or other governing board) of a private institution of higher education may as a member of the Advisory Council participate in deliberations and vote on grant applications submitted by the member's respective institution?

  7. Whether a member of the Advisory Council who sits on the board of trustees (or other governing board) of a private institution of higher education may within the course of the member's duties as a trustee of the respective institution of higher education, discuss grant applications and grant strategies prior to their submission to NYSTAR?

APPLICABLE STATUTES

Executive Law §209-b(5) states that:

Notwithstanding any inconsistent provision of any general, special or local law, ordinance, resolution or charter, no officer, member or employee of the state or of any public corporation shall forfeit his or her office or employment as a member of the advisory council, nor shall service as such advisory council member be deemed incompatible or in conflict with such office or employment.

The members of the Advisory Council are State officers covered by Public Officers Law §74, the code of ethics. The rule with respect to conflicts of interest, contained in Public Officers Law §74(2), states:

No officer or employee of a state agency . . . should have any interest, financial or otherwise, direct or indirect, or engage in any business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest.

The standards of conduct relevant to this inquiry are the following:

d. No officer or employee of a state agency . . . should use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others.

e. No officer or employee of a state agency . . . should engage in any transaction as representative or agent of the state with any business entity in which he has a direct or indirect financial interest that might reasonably tend to conflict with the proper discharge of his official duties.

g. An officer or employee of a state agency should abstain from making personal investments in enterprises which he has reason to believe may be directly involved in decisions to be made by him or which will otherwise create substantial conflict between his duty in the public interest and his private interest.

h. An officer or employee of a state agency . . . should endeavor to pursue a course of conduct which will not raise suspicion among the public that he is likely to be engaged in acts that are in violation of his trust.

DISCUSSION

NYSTAR was created to promote and foster the relationship between academic and business communities in New York State with the goal of stimulating high-tech academic research and economic development. The role of the Advisory Council is to facilitate this mission by awarding grants to institutions of higher learning.(5) The statutory scheme of NYSTAR and the Advisory Council, in particular, necessitates that academic leaders both within the SUNY and CUNY systems and in the private academic community have a say as to which academic institutions in New York State will receive grant awards. The statute mandates that a trustee from SUNY and from CUNY serve as members of the Advisory Council and provides that such service should not be deemed incompatible or in conflict with any other public service or employment (Executive Law §209-b). Moreover, the Legislature has determined that at least a portion of the Capital Facilities Program funding will be awarded to SUNY institutions. The Legislature also established criteria by which the Capital Facilities Program(6) and Faculty Development Program funding(7) will be awarded.

Public Officers Law §74 prohibits acts that have the appearance of a conflict of interest between a State officer's or employee's obligations towards the State and his or her private or other interests. The Commission has previously held that the potential for a conflict of interest is greatest when a State officer or employee has competing interests between his or her State employment and his or her outside employment or affiliation with a private, for-profit entity.

Section 74 also governs where a State officer or employee's actions in two public capacities may be in conflict. However, the potential for the appearance of a conflict of interest is diminished when "an individual is engaged in dual service for the State . . . or another public entity other than the State . . . because neither the individual nor . . . the public entity reap a profit and the public's interest may be advanced by the dual service." (See, Advisory Opinion No. 93-4 in which the Commission determined that there was no per se conflict of interest posed where one individual served as both Executive Director of the Consumer Protection Board and Chair of the Long Island Power Authority.)

In Advisory Opinion No. 95-13, the Commission considered the membership of the New York State Thoroughbred Breeding and Development Fund Corporation, where certain directors were eligible to receive awards from the Fund. The directors, by statute, were authorized to participate in matters involving allocation of the Fund's resources without violating Public Officers Law §74. The Commission concluded that to disqualify directors from the function of allocating resources would "clearly frustrate the legislative intent" of putting decision making authority in the hands of industry members. The Commission also held, however, that such directors should recuse themselves from deliberating and voting on any matter from which they might directly and personally benefit.

Against this backdrop, we do not read §209-b(5) as a legislative directive for this Commission to ignore §74 and allow self-dealing (or the appearance thereof) by State officers and employees. The Legislature is "presumed to have intended that good will result from its laws, and a bad result suggests a wrong interpretation." McKinney's Statutes §141. The "good" that the Legislature intended here is that the Advisory Council function effectively to promote economic development and do so in a manner that ensures public confidence in its deliberative process. In applying §74 in this context, we are mindful of both those considerations.

CONCERNING DISCUSSION AND VOTE BY THE SUNY AND CUNY TRUSTEES AND OTHER STATE EMPLOYEE ADVISORY COUNCIL MEMBERS WITH RESPECT TO GRANT APPLICATIONS AND WITH RESPECT TO STRATEGIES PRIOR TO SUBMISSION [Questions 1, 2, 4 and 5]

There are three categories of Advisory Council membership in which a State officer or employee may serve: as a SUNY or CUNY trustee; as the Commissioner of Economic Development; or, as one of the seven "public" members (a SUNY professor has been named as an Advisory Council member).

We believe that SUNY and CUNY trustees should be able to discuss grant applications and strategies with the colleges and universities that comprise their respective institutions prior to their submission to NYSTAR and to discuss and vote on such applications as members of the Advisory Council. While SUNY and CUNY as institutions may have interests in the actions taken by the Advisory Council, to interpret Public Officers Law §74 so as to preclude the SUNY and CUNY trustees from performing their duties as members of the Advisory Council would prevent the Advisory Council from functioning effectively. Furthermore, SUNY and CUNY trustees are not paid by the individual institutions they represent and have little or no inherent predisposition to any one of the entities which make up their respective university systems. As a result, the concern is alleviated that actions taken by the trustees as members of the Advisory Council, either before a grant application is submitted or when it is deliberated and voted on, would result in a conflict of interest or the appearance of a conflict.(8)

The actions of the Commissioner of the Department of Economic Development ("DED"), who is a statutory member of the Advisory Council, are subject to the same analysis as those of the SUNY and CUNY trustees. As DED is not eligible to be an applicant, the concerns regarding conflicts of interest based on that relationship are not present.

The considerations involving the remaining member who is a State employee are somewhat different, in that the individual is employed by an institution eligible for grant funding. The Commission consistently has raised concerns where a State officer or employee has an employment relationship with a person or entity which may financially benefit from his or her official actions. In Advisory Opinion No. 93-16, the Commission ruled that an individual serving as an uncompensated member of a State board had to recuse himself from voting on applications submitted by the participating members of two organizations, each of which employed the board member as its second-highest ranking officer. The Commission held that based on the nature of the individual's employment and his position on the State board, "it is foreseeable that the public might suspect that he is favorably disposed toward [the two entities'] applicants when making [] determinations."

In Advisory Opinion No. 94-11, the Commission concluded that in certain situations, a prior employment or direct business relationship could pose a conflict of interest. In that opinion, members serving on a board which awarded grant monies to applicants were required to disclose to the board any prior employment or business relationship with an applicant within the last two years, and, unless special factors surrounding the prior relationship were present, recuse themselves from participating in any board action. The Commission concluded that the board member's vote could raise suspicion among the public that the action constituted inappropriate behavior in violation of his or her trust; that questions would likely emerge as to the board member's motivation for voting to either approve or disapprove the grant award; and that he or she might still be in a position to be influenced by the former employer or client, thereby raising further suspicion concerning the board member's action.

The analysis of Advisory Opinions Nos. 93-16 and 94-11 is instructive in the circumstances presented here. Public Officers Law §74 still must preclude those acts which are in substantial conflict with the proper discharge of duties in the public interest. As noted above, we do not read the §209-b(5) exception to require us to ignore the evils Public Officers Law §74 is intended to prevent and to exonerate self-dealing by State officers and employees.

Accordingly, the Commission concludes that a State employee serving as an Advisory Council member may not participate in discussions and votes on grant applications from his employing institution, because, in doing so, the member would have an interest in a transaction in substantial conflict with the proper discharge of his duties in the public interest, in contravention of §74(2), and would be engaged in a course of conduct which would raise suspicion that he is engaged in acts that are in violation of his trust, in violation of §74(3)(h).(9) To allow that member to vote would give reasonable basis for the impression that his institution could improperly influence him or unduly enjoy his favor in the performance of official duties. Nothing, however, prevents the member from discussing with his institution grant applications to be submitted to the Advisory Council.

CONCERNING DISCUSSION AND VOTE BY THE ADVISORY COUNCIL MEMBER WHO IS A MEMBER OF THE COUNCIL OF GOVERNING BOARDS WITH RESPECT TO GRANT APPLICATIONS AND WITH RESPECT TO STRATEGIES PRIOR TO SUBMISSION [Question 3]

The Council of Governing Boards is not a governmental entity or public corporation and Executive Law §209-b(5) does not speak directly to it. However, the Council of Governing Boards is also not an entity eligible to receive funding under the NYSTAR programs. The member of the Council of Governing Boards, like the SUNY and CUNY trustees, represents the interests of their member institutions. As such, like the SUNY and CUNY trustee members, these members have no direct interest in the grant applications or awards. Because there is no substantial conflict of interest inherent in their public and private duties, these members may discuss and vote on grant applications submitted by their member institutions and may strategize concerning the applications prior to their submission.

CONCERNING DISCUSSION AND VOTE BY A MEMBER OF THE ADVISORY COUNCIL WHO ALSO SITS ON THE BOARD OF TRUSTEES OF A PRIVATE INSTITUTION OF HIGHER EDUCATION WITH RESPECT TO GRANT APPLICATIONS AND WITH RESPECT TO STRATEGIES PRIOR TO SUBMISSION [Questions 6 and 7]

Unlike the SUNY, CUNY and Council of Governing Board Trustees, an Advisory Council member who is a trustee of a private institution of higher learning does represent the interests of a specific education institution that may be eligible for NYSTAR funding. He or she may therefore have, or be perceived to have, a predisposition toward that institution. In light of his or her direct relationship to the private institution, such a member should be treated in the same way as a State University employee-member. He or she should not vote or participate in the Advisory Council's deliberations with regard to an application submitted by his or her private institution. The member may, however, discuss the application with members of his or her institution prior to its submission to the Advisory Council.

CONCLUSION

The Commission concludes that the members of the Advisory Council may discuss and vote on all applications except those from entities where the member is employed or where the member has a direct relationship with an applicant. All members may discuss applications with applicants prior to their submission to the Advisory Council.

This opinion, unless and until 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, Members

Dated: April 30, 2001


Endnotes

1. See, Executive Law Article 10-b, L. 1999, c. 624, effective November 10, 1999. The legislative intent for chapter 624, known as the "Jobs two thousand for New York State (J2K) Act" recognizes that "research performed at an institution of higher education has played a valued and implicit role in the welfare and success of our economy. In addition it is recognized that in order to serve the best interests of higher education institutions and business in New York State, it is important to foster university industry relationships, and remove those barriers that impede or slow the development of these relationships."

2. The Council of Governing Boards is a not-for-profit, statewide association representing the interests of more than 3,000 trustees from more than 100 independent colleges and universities in New York State. The Council works with the Commission on Independent Colleges and Universities ("cIcu"), a consortium of these same independent colleges and universities. cIcu members are generally represented by the chief executive officers, usually the president, of each member institution.

3. Public members must have at least five years of scientific or entrepreneurial experience with technologically oriented business. As of this writing, one of the public members is an adjunct professor from a SUNY campus.

4. Because Advisory Council members are unpaid, they generally are exempt from coverage under Public Officers Law §73, which places restrictions on the business and professional activities of State officers and employees. The one exception is §73(3)(b), which bars those members who are required to file an annual financial disclosure statement from receiving compensation for appearing or rendering services against the interests of the entity on which they sit in relation to any matter in the Court of Claims.

5. Grant proposals will be submitted not only by individual institutions of higher education, but also by consortia of research entities. NYSTAR anticipates that SUNY and CUNY entities will apply both as lead institutions and consortium members.

6. Those criteria include the potential for future growth and economic impact in New York State; available expertise at the campus; ability of research to aid existing business and create new business in New York State; ability of the proposal to leverage and attract federal funds, venture capital and private university funds (Executive Law §209-p[4]).

7. Those criteria include the ability of the faculty member to leverage and attract federal funds, venture capital and private industry funds, and the willingness of the faculty member to pursue entrepreneurial enterprises resulting in new business or the expansion of existing business in New York State (Executive Law §209-p[3]).

8. The Commission notes that the SUNY Trustees oversee a system comprised of 4 university centers, 13 university colleges, 4 centers for health science, 5 colleges of technology and 5 specialized colleges. (The 5 SUNY statutory colleges and 30 SUNY community colleges are not defined as State agencies in Public Officers Law §73.) The CUNY system comprises 11 senior colleges, 6 community colleges, a graduate school, a law school and a medical school.

9. Section 74 would also preclude a private sector member of the Advisory Council who is employed by an entity which is an applicant from discussing and voting on an application submitted by an entity which is his or her employer. The Advisory Council's code of conduct also would preclude such action. Like the State employee, the private sector member may engage in discussions concerning an application from his employer prior to its submission to the Advisory Council, provided he recuse himself from any vote on an application.

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