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New York State Ethics Commission
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Advisory Opinion No. 05-04:

Application of the two-year bar post-employment restrictions of Public Officers Law §73(8)(a)(i) to a retired scientist with the New York State Office of Mental Retardation and Developmental Disabilities who now is employed by the agency’s closely affiliated corporation and working on a federal grant for which he is the principal investigator.


Introduction

The following advisory opinion is issued in response to a request submitted by [a former State employee] concerning his receipt of State retirement at the same time that he is employed at a 90 percent rate by his former State agency’s closely affiliated research corporation. A request for an opinion concerning his circumstances has also been submitted by Dr. W. Ted Brown, the Director of the Institute for Basic Research (“IBR”), a facility of the New York State Office of Mental Retardation and Developmental Disabilities (“OMRDD”).

Pursuant to the authority vested in it by Executive Law §94(15), the New York State Ethics Commission (“Commission”) concludes that Public Officers Law §73(8)(a)(i) does not prohibit [the former State employee] from working on what is, in essence, his grant while at his former agency’s closely affiliated corporation.

BACKGROUND

[The former State employee] began his State service in 1969 at the State University of New York at Buffalo, and came to OMRDD in 1972 as a Research Scientist I. Thereafter, he was frequently promoted and eventually held the title of Research Scientist VII and was Chair of the Department of [ ] at OMRDD’s Institute for Basic Research. During that period, he received several grants from the National Institute of Health (“NIH”), which were administered by the Research Foundation for Mental Hygiene (“the Foundation”), the closely affiliated research corporation of OMRDD.1 As the Principle Investigator on those grants, [the former State employee] was responsible for their content, and grant funds could be spent only with his authorization.

In early 2003, [the former State employee] was notified that he was to receive a new five-year grant from NIH with a budget of more than $7,000,000. Then [ ] years old and a member of Tier 1 of the State’s retirement system, he concluded that it was time to retire from OMRDD and seek employment outside the State system. According to [the former State employee] and Dr. Brown, it is common practice for a Principal Investigator to take a grant with him upon relocating to another institution. Rather than lose [the former State employee’s] services and the grant funds, the then Director of IBR proposed an alternative: [the former State employee] would retire from State service, take a position with the Foundation, and continue his research through IBR. The arrangement would allow IBR to benefit from the funding and prestige of [the former State employee’s] grant without disadvantaging him financially. In May 2003, [the former State employee] retired from OMRDD and began working at the Foundation, where he receives 90 percent of his last OMRDD salary and administers his new grant.

APPLICABLE STATUTE

The post-employment restrictions applicable to former State officers and employees are found in Public Officers §73(8)(a). These restrictions set the ground rules for what individuals may do with the knowledge, experience, and contacts gained from public services after they terminate their employment with a State agency.

The statutory language setting forth the two-year bar is found in Public Officers Law §73(8)(a)(i), which provides as follows:

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.

The two-year bar prohibits former State officers and employees from appearing or practicing before their former agency or receiving compensation for services on behalf of any person, firm, corporation or association in relation to any case, proceeding, application or other matter before their former agency. 2

DISCUSSION

In Advisory Opinion No. 95-02, the Commission addressed the issue of whether the post-employment restrictions of 73(8) are applicable when an employee is transferred from OMRDD to the Foundation. After noting the “special relationship” that exists between OMRDD and the Foundation, the Commission concluded that “employees of the Foundation [should] be considered to be employees under the jurisdiction of [OMRDD]” for purposes of 73(8). The Commission wrote:


When an employee transfers to a State agency’s closely affiliated research arm, he or she will not secure unwarranted privileges. Since the interests of the agency and its research arm are similar, the employee’s skill and knowledge will continue to be used to benefit the agency. Thus, the purpose of 73(8) are met without imposing any restrictions.

The result of Advisory Opinion No.95-02 is that when an employee is transferred from OMRDD to the Foundation, the revolving door restrictions apply after he leaves the Foundation to go into the private sector and not after he leaves OMRDD to go to the Foundation.

[The former State employee’s] case, of course, is different in that he has not transferred from OMRDD to the Foundation, but rather retired from OMRDD and secured post-retirement employment with the Foundation. Closely on point is Advisory Opinion No. 02-03, in which the Commission addressed the question whether a retiree from the Department of Health (“DOH”) was barred by the two-year post-employment restriction from obtaining employment at the Health Research Incorporated (“HRI”), DOH’s closely affiliated research foundation. The Commission concluded that 73(8) did not bar the employment. Citing Advisory Opinion No. 95-02, it emphasized that the concerns that inform the revolving door provisions were substantially allayed because the former employee’s “skill and knowledge would continue to be used for the benefit of the State agency,” and not for a private employer.

Notably, in Advisory Opinion No. 02-03, there was no significant likelihood that the former employee was using the closely affiliated corporation to secure a “golden parachute” for himself upon retiring from State service. As the Commission observed in a footnote, HRI participated in the New York State Retirement System and is subject to the earnings limits of the Retirement and Social Security Law (“RSSL”). Thus, the retired employee could earn no more that $20,000 a year while drawing his State pension.3 Here, by contrast, the Foundation is not a participant in the State’s Retirement System and therefore the earnings limit, which gave the Commission comfort in Advisory Opinion No. 02-03, does not apply.

That difference, however, does not warrant a different conclusion in [the former State employee’s] case. There is no suggestion that [the former State employee] has “unfairly profit[ted] from or otherwise trad[ed] upon the contacts, associations, and special knowledge that [he] acquired during his tenure as [a] public servant,” [Forti v. State Ethics Commission, 75 N.Y.2d 596 (1990)], to gain employment at the Foundation. In Dr. Brown’s words, “[the former State employee] did nothing to garner unfair advantage and it [is] abundantly clear that he would have had no difficulty finding another position most likely with a salary well above that provided by the Foundation.” Put simply, his employment with the Foundation benefits the State, and is not an unwarranted privilege that he obtained by virtue of his former OMRDD position. On these unique facts, the Commission has no difficulty concluding that [the former State employee’s] employment at the Foundation does not violate 73(8). 4

CONCLUSION

The Commission concludes that Public Officers Law §73(8)(a)(i) does not prohibit [the former State employee] from working on what is, in essence, his grant at his former agency’s closely affiliated corporation.

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.
Carl H. Loewenson, Jr.
Lynn Millane
Susan E. Shepard,
Members

Dated: September 20, 2005

1 The Foundation is a private not-for-profit corporation that was created by OMRDD and functions as a research arm of the agency. Other State agencies, including the Department of Health, the State University of New York and the City University of New York, have similar closely affiliated research corporations.

2There is also a lifetime bar provision contained in Public Officers Law §73(8)(a)(ii) which prohibits a former State employee from (a) appearing, practicing, communicating or otherwise rendering services before any State agency, or (b) receiving compensation for any such services in relation to any case, proceeding, application or transaction with respect to which the former employee was directly concerned and in which he or she personally participated or which was under his or her active consideration while in State service.

3 A 2004 amendment to the RSSL has increased the earnings limit to $27,500.

4 [The former State employee] retired from OMRDD in 2003, a year before the Legislature granted the Commission authority to approve requests for exemption from post-employment restrictions where an agency head has certified that a former employee is expert in a particular matter and that the services the former employee would provide are needed by the agency and unavailable elsewhere at comparable cost [see, Public Officers Law 73(8-b)]. In the future, an agency head who wishes to employ a retired former employee at the agency’s closely affiliated research arm should consider seeking an exemption under the new law.

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