New York State
Ethics Commission


Advisory Opinion No. 99-10: Application of the lifetime bar to a former employee of the Division of the Lottery who is now employed by a company which expects to submit a proposal to Lottery.

INTRODUCTION

The following advisory opinion is issued in response to a request from the law firm of Oppenheimer Wolff & Donnelly LLP on behalf of James Nielsen, a former employee of the New York State Division of the Lottery ("New York Lottery") who is now employed by Automated Wagering International, Inc ("AWI"). The law firm serves as counsel to AWI. AWI expects to submit a proposal to the New York Lottery on or before June 28, 1999 in response to a Request for Proposal which the New York Lottery has issued (the "1999 RFP") seeking a contract to supply the New York Lottery with on-line/instant gaming systems and services. The State Ethics Commission ("Commission") issued an informal opinion on May 25, 1999 addressing this inquiry, and the law firm has requested that the Commission issue a formal opinion.

Pursuant to the authority vested in the Commission by Executive Law 94(15), the Commission hereby renders its opinion that the lifetime bar post-employment restrictions of Public Officers Law 73(8)(a)(ii) do not prohibit Nielsen from being named as AWI's proposed account executive in AWI's response to the 1999 RFP and from subsequently having responsibility for the overall management of AWI's New York Lottery operations should AWI be awarded the contract, as the 1999 RFP is a different transaction from a 1985 RFP on which Nielsen worked while in State service.

BACKGROUND

AWI designs, manufactures, installs, operates and maintains computer-based networks for state lotteries. These computer networks include, inter alia, hardware, software and retailer terminals that enable state lotteries to generate "on-line" game lottery tickets, track on-line game and "instant" game tickets, and validate on-line game and instant game tickets. AWI is currently under contract to provide gaming systems and services to state lotteries in Delaware, Florida, Indiana, Maryland, Minnesota, Pennsylvania and South Dakota. These types of contracts are awarded through public procurements under which state lotteries require that the incoming vendor provide and operate a new gaming system. Such contracts usually have a term of between five to ten years.

AWI and its predecessor in interest served the New York Lottery as on-line vendor between 1980 and 1993. The New York Lottery's last public procurement for a lottery system and services was begun in 1991 and completed in 1993 and resulted in award of a contract to a competitor of AWI (the "1991 Procurement"). That contract will terminate on or about January 31, 2002. Accordingly, the New York Lottery has issued the 1999 RFP seeking a contract to supply the New York Lottery with on-line/instant gaming systems and services.

Under the 1999 RFP, prospective vendors are required to effect a conversion from the existing on-line system to its new system. The New York Lottery also requires that all proposed hardware, terminals, diagnostic equipment, and other equipment be new and unused. Thus, the new gaming system to be provided under the 1999 RFP will completely replace the system provided by AWI's competitor pursuant to the Lottery's 1991 Procurement. Under the 1999 RFP, each prospective vendor must also provide information which documents its organizational structure and staffing with which Lottery operations will be implemented and run.

AWI intends to submit a proposal in response to the 1999 RFP and would like to name Nielsen as AWI's proposed account executive. AWI anticipates that its account executive under a contract with the New York Lottery would be responsible for the overall management of AWI's New York Lottery operations. The account executive's specific responsibilities would include oversight of the new gaming system to be provided under the 1999 RFP; contract compliance; addressing questions raised by Lottery personnel; and management of general project operations, including computer operations, security and customer service. Nielsen would also provide support to the New York Lottery in the development of game designs, marketing strategies, promotions, point-of-sale activities, budgeting, cost control and human resource management. Within AWI, Nielsen would report to AWI's Vice President of Domestic Operations.

Nielsen was employed by the New York Lottery between December 1978 and December 1988. Between June 1983 and December 1988, Nielsen served as the Lottery's Director of On-line Games. In this role, Nielsen supervised the operation of on-line games, including the performance of the Lottery's on-line vendors. Nielsen also assisted in drafting the New York Lottery's 1985 request for proposals for an on-line gaming system (the "1985 RFP") and served as a member of the Lottery's evaluation committee for that procurement. The gaming systems provided pursuant to the Lottery's 1985 RFP were implemented during Nielsen's tenure at the New York Lottery but were replaced in their entirety by the current gaming system which has been provided by a competitor of AWI pursuant to the 1991 Procurement. This current gaming system will, in turn, be replaced in its entirety by the gaming system to be provided pursuant to the 1999 RFP.

The new gaming system to be implemented under the 1999 RFP will be the product of a new RFP with substantially different plans and specifications than those that applied when Nielsen was in State service. For example, the 1999 RFP requires that the successful vendor support the New York Lottery's "Quick Draw" monitor game. This game was not offered by the New York Lottery while Nielsen was employed there. The 1999 RFP also requires that the successful vendor implement its gaming system using the State's "Empirenet" communications network while the 1985 RFP required vendors to provide their own communications network.

In addition, the 1999 RFP requires the successful vendor to provide telemarketing services to support the Lottery's sale of instant game tickets; a secondary computer site, known as a "hot backup," capable of taking over operations from the primary computer site; and on-line player registration. None of these requirements applied when Nielsen worked at the Lottery.

Moreover, the 1999 RFP requires vendors to propose a system which is capable of performing specified tracking and validation functions for instant game tickets via on-line and specialized instant ticket terminals; the 1985 RFP contained no such requirements.

Further, in the 1985 RFP, the Lottery required that vendors' gaming systems be able to process 40,000 wagers per minute on a system with an average of 4,000 retailer terminals. The 1999 RFP requires vendors to process 150,000 wagers per minute on a system with a minimum of 15,000 retailer terminals.

APPLICABLE LAW

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

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.

Under this provision, a former employee is prohibited from appearing, practicing, communicating or otherwise rendering services before any State agency, or receiving compensation for such services rendered anywhere, in relation to any case, proceeding, application or transaction involving a matter in which he or she was directly concerned and personally participated or which was under his or her active consideration while in State service. The critical question when examining the lifetime bar is whether a case, proceeding, application or transaction on which a former State employee proposes to work is the same as one on which he or she worked while in State service.

DISCUSSION

The question before the Commission is whether Nielsen's involvement as account executive in AWI's response to the New York Lottery's 1999 RFP constitutes his working on the same transaction in which he personally participated while in State service.

In Advisory Opinion No. 95-7, the issue was whether a rate case convened to consider the reasonableness of rates of a utility for a specified period is distinct from every other rate case for that utility. The Commission concluded that it was a new transaction. In reaching this conclusion, the Commission noted that successive rate proceedings involve substantially different fact situations: operating costs may decline as a result of technological innovations and efficiencies; finance costs may vary with changes in investor perceptions of risk and the vagaries of world capital market activity; and customer demand may change, as new products are offered or competition expands.

The Commission concluded that, since the Public Service Commission, in considering whether to change rates for a specified future period, must re-estimate every component of a utility's revenue requirements for the new rate period and determine the rate elements and rate structure that will best recover the revised revenue requirements in the new prospective rate period, successive utility rate cases should be considered different "cases, proceedings, applications, or transactions" for the purposes of the lifetime bar.

Similarly, in Advisory Opinion No. 95-15, the Commission considered cost indices that are supplied to the Office of Real Property Services ("ORPS") every six months. The indices are used to trend historical cost information to current assessment year cost levels. Each new cost index requires separate index research and preparation on the part of the supplier. The Commission held that, since the biannual submissions do not modify existing indices and are not dependent on any previous index, but rather are completely recalculated, each new cost trending index is a new transaction for purposes of the lifetime bar. Likewise, with regard to functional obsolescence studies presented to ORPS, for each valuation year a new study with new and updated facts, completely divorced from any prior statistical presentation, must be prepared and presented. Since each new valuation year creates the need for a new study with new facts and analysis, each such study was determined to be a new transaction for purposes of the lifetime bar.

Following these precedents, in Advisory Opinion No. 95-32 the Commission held that each annual State budget, as defined, constitutes a new and separate transaction for purposes of the lifetime bar:

The development of each year's budget is a lengthy multi-layered process culminating in the passage of legislation. The myriad of variables which must be considered annually -- revenue estimates, fiscal climate, changes in federal aid and revenue-sharing, new mandates -- coupled with an ever-changing number of persons interested in and affected by the budget's outcome render it significantly different from work on any single piece of legislation. The Commission, therefore, concludes that, although part of the legislative process, each budget should be considered a separate and distinct transaction for purposes of the lifetime bar. By the budget, the Commission means the money to be raised and expended by the State during the fiscal year and the appropriation bills authorizing expenditures. It does not include as part of the budget, for purposes of this analysis, bills passed at the same time as appropriation bills or even specific sections of budget bills that create new programs, substantially amend existing programs or change substantive State law.

In Advisory Opinion No. 99-6, a former employee of the State Department of Transportation ("DOT") asked whether the lifetime bar restrictions of Public Officers Law 73(8)(a)(ii) would preclude him from becoming involved with an RFP for road weather information systems to be awarded by DOT, given that he had personally participated while at DOT in preparing a draft RFP for an earlier generation of systems. The Commission held that the current RFP was different because it had vastly changed in scope, because of technological advancements, and because federal standards that were not in place at the time of the draft RFP were subsequently established. Because the transaction was not the same as one in which he personally participated while in State service, the lifetime bar did not prohibit the former DOT employee from working as a project manager for a subcontractor of one of the proposers responding to his former agency with respect to the RFP.

Turning to the facts in the instant case, the gaming system with which Nielsen was involved while in State service (the 1985 RFP) is no longer in use by the New York Lottery, having been completely replaced pursuant to the 1991 procurement after Nielsen left the Lottery. The current gaming system which has been provided by a competitor of AWI pursuant to the 1991 Procurement will, in turn, be replaced in its entirety by the gaming system to be provided pursuant to the 1999 RFP.

Since the 1999 RFP requires complete replacement of the current gaming system which in turn replaced the system last in place during Nielsen's tenure at the New York Lottery, the scope of Nielsen's work will not be at all dependent upon, or a continuation of, the gaming system that was in place during Nielsen's tenure at the New York Lottery. Thus, the current situation is much like the cost trending indices which were submitted biannually to ORPS that did not modify existing indices and were not dependent upon any previous index (Advisory Opinion No. 95-15).

Moreover, the specifications are vastly different in the 1999 RFP from the 1985 RFP. In addition to factors which did not exist at that time, such as the "Quick Draw" game and the State's "Empirenet" communications, there are new requirements such as "hot backup", telemarketing, and tracking and validation functions. Further, there have been vast technological changes in the requirements for the system capability, from 40,000 wagers per minute from 4,000 retailer terminals to 150,000 wagers per minute from 15,000 retailer terminals. In this regard, the instant case is like the PSC re-estimating every component of a utility's revenue requirements (Advisory Opinion No. 95-7), each year's State budget which is based on a myriad of changing variables (Advisory Opinion No. 95-32), and the RFP in Advisory Opinion No. 99-6 which was found to be a different transaction from an earlier draft RFP because it had vastly changed in scope, because of technological advancements, and because of new federal standards.

In sum, Nielsen's responsibility as account executive for AWI would involve an entirely new gaming system that is the product of new RFP specifications pursuant to a new procurement. The gaming system for which he would have responsibility will be the product of new, substantially upgraded and refined technology and greatly expanded in scope from that with which he was familiar when employed by the New York Lottery.

Therefore, the Commission concludes, based on its precedents, that the 1999 RFP is a different transaction from the 1985 RFP on which Nielsen worked while in State service. Thus, the lifetime bar post-employment restriction of Public Officers Law 73(8)(a)(ii) does not prohibit Nielsen from being named as AWI's proposed account executive in AWI's response to the 1999 RFP and from subsequently having responsibility for the overall management of AWI's New York Lottery operations should AWI be awarded the contract.

CONCLUSION

The Commission concludes that the lifetime bar post-employment restrictions of Public Officers Law 73(8)(a)(ii) do not prohibit Nielsen from being named as AWI's proposed account executive in AWI's response to the 1999 RFP and from subsequently having responsibility for the overall management of AWI's New York Lottery operations should AWI be awarded the contract, as the 1999 RFP is a different transaction from a 1985 RFP on which Nielsen worked while in State service.

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
O. Peter Sherwood, Members

Dated: June 16, 1999


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URL: http://www.nysl.nysed.gov/edocs/ethics/99-10.htm