|Advisory Opinion No. 93-17:||Application of Public Officers Law §§73 and 74 to a member of a State board and his law firm which seeks to represent private clients before the State agency whose regulatory actions are subject to review by the same State board or who seek to represent clients in litigation to which the State agency is a party.|
Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by §94(15) of the Executive Law, the Commission hereby renders its opinion that
The Board is located in [the State agency](5) and consists of five members, all appointed by the Governor. No member of the Board may be an employee of the State or any of its political subdivisions. The chair and at least two other Board members must be attorneys admitted to practice before the New York State Supreme Court.(6) Appeals are heard by one member of the Board in one of the counties where the [ ] affected by the appeal are located, although a majority vote of the members of the entire Board is necessary for the determination of an appeal.
Each member of the Board, including the chair, is reimbursed for expenses and compensated for services at the rate of $250 per day, not to exceed $15,000 per year for members, $20,000 per year for the chair.
The Board has special powers to review orders and decisions of the [the State agency] Commissioner concerning [areas] in Richmond County.(7) As prescribed by [the law], the Board also has the power to hear appeals taken by any party to a proceeding before the [State agency] Commissioner or local jurisdiction and to review any decision or order by the Commissioner or local government issued or made pursuant to Article §[ ].(8) The Board mayaffirm, reverse, stay, or remand any order or decision of the Commissioner or local government.(9)
The Board may receive legal briefs, hear oral arguments, and require the submission of the entire record on which the appeal is based. The Commissioner or localgovernment is bound by the decisions of the Board unless the decision of the Board is reversed by a court of competent jurisdiction. The Commissioner, or any party, may appeal any determination, decision, or order of the Board, pursuant to Article 78 of the Civil Practice Law.
[A]ny state department or division, board, commission, or bureau of any state department, any public benefit corporation, public authority or commission at least one of whose members is appointed by the governor . . . .
Public Officers Law §73(1)(i)(iii) defines "state officer or employee" to include:
officers and employees or state departments, boards, bureaus, divisions, commissions, councils or other state agencies other than officers of such boards, commissions or councils who receive no compensation or are compensated on a per diem basis; (emphasis added)
Public Officers Law §73(3)(b) states:
no state officer or employee who is required to file an annual statement of financial disclosure pursuant to the provisions of §73-a of this article, and is not otherwise subject to the provisions of this section, shall receive, directly or indirectly, or enter into any agreement express or implied, for any compensation, in whatever form, for the appearance or rendition of services by himself or another against the interest of the state agency by which he is employed or affiliated in relation to any case, proceeding, application or other matter before, or the transaction of business by himself or another with, the court of claims.
State employees who are disqualified by certain provisions of §§73 or 74 from performing certain services are also barred by Public Officers Law §73(10) from sharing in the net revenues generated by others performing such services:
Nothing contained in this section. . . shall be construed or applied to prohibit any firm, association or corporation, in which any present or former statewide elected official, state officer or employee. . . is a member. . . from appearing, practicing, communicating or otherwise rendering services in relation to any matter before, or transacting business with a state agency. . . where such state officer or employee. . . does not share in the net revenues, as defined in accordance with generally accepted accounting principles in relation to persons subject to their respective jurisdictions, resulting therefrom, or, acting in good faith, reasonably believed that he or she would not share in the revenues as so defined . . . .
Public Officers Law §74, the code of conduct for State officers and employees, defines "state agency" as:
any state department, division, board, commission or bureau of any state department or any public benefit corporation or public authority at least one of whose members is appointed by the Governor.
The rule with respect to conflicts of interest is found in Public Officers Law §74(2) which states, in relevant part, the following:
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.
This rule with respect to conflicts of interest is further explained by standards set forth in §74(3). Five of these standards are particularly pertinent:
Based on these provisions, the Commission concludes that [the State agency] and the Board are State agencies for Public Officers Law §§73 and 74 purposes. Employees and officers of [the State agency] are covered by Public Officers Law §§73 and 74, as are employees of the Board. Members of the Board are not, however, covered by §73, although they are subject to §74.
Board member's appearance before the Board and [the State agency]
The Board member's first question is whether he may represent clients in actions before [the State agency]. Before addressing that issue, the Commission determines that the Board member may not represent clients in cases before the Board or be involved in any fashion in a matter before the Board except in his capacity as a Board member. Public Officers Law §74(3)(h) directs State officers and employees to conduct themselves so as not to raise suspicions that they are likely to be acting in violation of their public trust. Public Officers Law §74(3)(f) warns against conduct which can suggest that a public officer or employee can be influenced in his public duties by any relationship.
The Commission now turns to whether the Board member may represent clients in actions before [the State agency]. (The Commission will interpret the term, "actions" broadly to include not only lawsuits but any appearances, applications and representations of whatever nature involving the [the State agency].)
The Attorney General, in commenting on the outside activities of a State employee which would lead to a conflict of interest, stated the following:
[A] public official must not only be innocent of any wrongdoing, but he must be alert at all times so that his acts and conduct give the public no cause for suspicion. He must give no appearance of a potential conflict between his official duties and personal activities even though an actual conflict is not present.(10)
The Commission applied such reasoning in Advisory Opinion No. 91-16 when it concluded that §74 prohibited an administrative law judge from representing private clients before other administrative law judges in his own agency or before other courts. The Commission reasoned that:
to be successful, a private defense attorney must aggressively defend persons in court using every advantage legally available. Yet, in another forum, the same attorney, in the very same type of cases, must render unbiased and impartial decisions as an (administrative law judge) to enforce the law and, in those appropriate cases, punish undesirables whom he is advertising to defend. The Commission must conclude that the private practice of law (in the same type of cases) by an (administrative law judge) would violate Public Officers Law §74(3)(h) . . . .
The [law] encompasses a broad range of [ ] subjects, many of which do not relate to [the areas in question]. However, the Commission finds that for a Board member to represent private clients in matters before [the State agency]--whether on [certain areas] or other issues--would create the appearance of a conflict of interest. This is so because the power to review and reverse the Commissioner's decisions is incompatible with representing clients seeking something of that very Commissioner. If the Board member were to engage in private practice before [the State agency], the public might well infer that, in his role as Board member, he was affected or even influenced by his clients', not the public's, interests. By the very nature of the Board member's position and authority, there would always be the suspicion that the Commissioner or any party before the Board could be treated either favorably or unfavorably depending upon the Board member's success in his representation of private clients before the [the State agency].(11)
Further, a Board member, sitting in judgment of the decisions and orders of the Commissioner, is in a position where he might receive confidential information that, if used, could enhance his ability to represent private litigants before [the State agency].(12) Whether the Board member would, in fact, take advantage of his State position to obtain or use confidential information is only partly relevant, as §§74(3)(f) and (h) prohibit actions which can lead to the public's perception that the State officer's actions result in a conflict of interest. The public might reasonably perceive that the Board member's representation of clients before [the State agency] would be more successful because of his position on the Board.
For all the foregoing reasons, Public Officers Law §74 precludes the Board member from representing clients in any action before the Board or the [State agency].
Board member's law firm appearing before [the State agency]
The second inquiry concerns whether any other member of the Board member's law firm may represent, for any reason, clients before [the State agency]. The Board member's law firm, its members and employees are not subject to the provisions of Public Officers Law §§73 or 74 and thus are not prohibited from representing clients before [the State agency] in any matter, whether or not it relates to [areas subject to the Appeals Board.]
Although the requestor did not pose the question, members and associates of his law firm may represent clients before the Board, but only under certain conditions. It would be a clear conflict of interest were the Board member to participate to any degree on a matter before the Board in which a member or associate of his firm represented a party. Even disclosing his relationship to his colleagues, to all parties and the Board would not cure the nearly inevitable suspicion that the Board member could, in so participating, be acting in violation of his trust. Consequently, in such instances, he should recuse himself from participation in any Board proceeding which involves his law firm. Furthermore, he must not communicate with the firm's lawyers concerning the matter before the Board or share in the net revenues generated from such appearances.(13)
Representing clients in litigation to which [the State agency] is a party
The Board member's final inquiry is whether he or his firm may represent any clients in litigation to which [the State agency] is a party. Public Officers Law §73(3)(b) absolutely prohibits any non-paid or per diem State officers or employees who file a financial disclosure statement from rendering, for compensation, any services "against the interest of the state agency by which he is employed or affiliated in relation to any case, proceeding, application or other matter before, or the transaction of business by himself or another with, the Court of Claims." Consequently, the Board member may not represent clients before the Court of Claims whose interests in litigation may be opposed to those of [the State agency].
Finally, the Board member should avoid representing clients in matters that, even though they are not currently before the Board or [the State agency] or against their interests in the Court of Claims, might reasonably so evolve.
Regarding whether members and associates of his law firm may represent such clients, we presume that they are not State officers or employees, and therefore are not bound by Public Officers Law §§73 or 74. Consequently, there is no Public Officers Law limitation on their actions. In fact, Public Officers Law §73(10) specifically allows partners and business associates of those State officers and employees who are prohibited by §73 from rendering certain services to render such services as long as the disqualified public servant does not share in the net revenues derived from such work (see Advisory Opinion No. 90-14 for a discussion and definition of net revenues.) Of course, should any such case on which the Board member's firm worked come before the Board, the Board member must recuse himself, disclosing to the Board and parties the reason for his recusal.
Pursuant to Public Officers Law §73(3)(b), the Board member may not represent clients in litigation before the Court of Claims when the interests of the client are opposed to those of the [State agency].
There is no violation of Public Officers Law §74 for the Board member's law firm to appear before [the State agency], including the Board, as long as the Board member recuses himself from any involvement in any Board proceeding in which the law firm has an interest. Further, the conflict of interest provisions do not preclude the law firm from representing clients in litigation in which [the State agency] is a party, however the Board member may not share in the net revenue so generated.
This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding, unless material facts were omitted or misstated by the person in the request for opinion.
Joseph M. Bress, Chair
Barbara A. Black
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell, Members
Dated: October 14, 1993
1. [Footnote deleted.]
2. [Footnote deleted.]
3. In fact, very few of the localities within the State have enacted local ordinances.
4. [Footnote deleted.]
5. [Footnote deleted.]
6. [Footnote deleted.]
7. [Footnote deleted.]
8. It is important to note that Board review is one option for an aggrieved party. The Act provides an aggrieved party the right to seek direct review of the Commissioner's action in an Article 78 proceeding.
9. [Footnote deleted.]
10. 1979 Op. Atty. Gen. 66.
11. See Advisory Opinion No. 92-12, where the Commission disallowed the request of a State employee who wished to engage in an outside activity over which the individual had regulatory or enforcement authority, and Advisory Opinion No. 90-5, where the Commission prohibited a certain outside activity because the State employee had the opportunity to develop client lists through his State employment.
12. For example, "insider" information could be obtained through the board member's being privy to confidential settlement negotiations between the Commissioner and aggrieved parties before the Board, his hearing of evidence later determined to be inadmissible, or his being able to review matters in the entire record on appeal that would not otherwise be available to the public.
13. See Advisory Opinion Nos. 90-14 on net revenues and 92-11 on recusal mechanisms. In Advisory Opinion No. 90-14, the Commission concluded that members of law firms who are "disqualified" by certain provisions of Public Officers Law §§73 or 74 from performing certain services may be paid from the fees generated by a matter from which the disqualified member is "screened" in the limited circumstances where such fees are part of the fixed salaries and expenses of all firm members or associates and are a small percentage of both the firm's total revenues and the disqualified individual's fixed salary and expenses. For a disqualified member who, as a partner or principal in the firm, is eligible to share in revenues from work performed or generated by others, the amount of profits to be distributed to all the partners of the firm must be proportionately reduced, by the amount received from screened fees, when distributed to a disqualified partner or principal.