An elected County official who has outside employment as the executive Director and chief operating officer of a non-profit agency requests guidance on whether the non-profit may lease space to a New Castle County agency.
The Commission finds that violation of the Ethics Code can be avoided in the matter of a contract between the official's non-profit agency and the County only by compliance with the notice and bid provisions of Section 2.03.103(C). The Commission does not believe that substitution of another signer or recusal on the part of the official would prevent the creation of an appearance of impropriety because the high standing of the official as the chief operating officer of the non-profit. Absent use of the notice and bid procedure, a reasonable member of the public would conclude that the contract was awarded to the non-profit because of the official's relationship to County government, not as a result of its merits.
Facts An elected County official maintains outside employment as Executive Director of a non-profit which is governed by a volunteer Board of Directors. The official has long been identified in the public mind with this particular non-profit. A County agency wishes to relocate from its current location and the official's agency has desirable space. The value of a lease between the parties would exceed $500.00.
Code or Prior Opinion:
Guidance regarding the business decisions of the non-profit agency is not within the jurisdiction of the Ethics Commission which is limited to enforcement of the New Castle County Ethics Code. The Ethics Code exists to provide guidance to public officers in order to assure the public that the financial interests of officials and employees do not conflict with the public trust. It rules are intended to be liberally construed to assure the impartiality and honesty of all County officials and employees. New Castle County Code Section 2.03.101. The conduct of any County official proposing to enter into or authorize a contract with a County agency is within the jurisdiction of the Commission.
The conflict of interest rule found at New Castle County Code Section 2.03.103(C) prohibits a County official from personally entering into any contract with the County in excess of $500.00 unless the contract was made or let after public notice and competitive bid. That section states:
C. Restrictions on contracting with the County. No County official or County employee or his or her spouse, child, parent, step-parent, or sibling of the whole or half-blood or any business with which the County official or County employee or his or her spouse, child, parent, step-parent, or sibling of the whole or half-blood is associated or who has a legal or equitable ownership of more than five (5) percent (more than one (1) percent in the case of a corporation whose stock is regularly traded on an established securities market) shall enter into any contract with the County (other than an employment contract) or any subcontract with a County contractor unless such contract or subcontract was made or let after public notice and competitive bidding. Such notice and bidding requirements shall not apply to contracts not involving more than five hundred dollars ($500.00) per year if the terms of such contract reflect arms' length negotiations, if the subcontractor is a sole source provider, or if there are exigent circumstances. There will be a rebuttable presumption of a knowing and willing violation of the section only if the contract or subcontract is awarded to a spouse or child of the County employee or official.
This prophylactic rule has two primary purposes: it prevents a County official or employee from using the authority of his or her office to unfairly advantage a private entity associated with him or his family, and it assures the public that a contracting County department has exercised impartial judgment in the expenditure of County funds. These public purposes are enhanced by the Code provision at Section 2.03.103(G) which permits a County Department to void any contract entered in violation of the provision.1
An additional restriction on the conduct of a County official is Code Section 2.03.103(B)(2)'s prohibition on representing the interest of a private enterprise before any agency of the County, other than in the exercise of official County duty.2 That provision prevents an official from participating in contract formation with the County on behalf of a private enterprise.
Finally, the Ethics Code's conduct rules in Section 2.03.104(A) recite prohibitions affecting the exercise of County authority by an official even when financial conflict is not the issue. That subsection prohibits exercise of official authority which creates an appearance that the decisions or actions of a County official or his or her department are influenced by factors other than the merits of the matter for decision. This prohibition exists because such conduct undermines public confidence in the impartiality of the governmental body with which the employee or official is associated.3 Just as an official may not exercise County authority regarding his outside employer without violating the conflict of interest rules, no County official may enter into a contract on behalf of the County which violates the appearance prohibition of the conduct rules.
Prior Commission Opinions
The Ethics Commission has advised officials who found themselves in the decision making chain for contracts involving family members or private enterprises with which the were associated to completely recuse from the exercise of County authority for the duration of the contract. In addition, it has advised them that if the contract came up for renewal or rebid in the future, the restrictions in Section 2.03.103(C) regarding public bidding would apply. See Advisory Opinions 06-14, 06-02, 05-04.
In this case, the contract has not yet been formed. Clearly, the Code prohibits the official from representing his agency before County government. A logical question would be whether ethical compliance could be maintained if some other member of the non-profit agency or its volunteer board could execute a contract with the County on behalf of the agency.
The Commission is persuaded that such a substitution would fail to protect the public trust and be a transparent subterfuge. The official has a long-standing history as the chief operating officer of his agency and is the person structurally responsible for satisfaction of the contract. Furthermore, as a result of the official's high standing in his agency, recusal would be an ineffective tool because a reasonable member of the public would understand that the Executive Director is the ultimate authority behind any subordinate or that the signature of a board member would not successfully shield the Executive Director from the details and control of the contract. Thus, while the subterfuge of another signer may appear to comply with the technical requirements of the conflict of interest rules, an appearance of impropriety would not be eliminated.
Furthermore, pursuant to Sec. 2.03.104(A), no member of County government may knowingly authorize the execution of a contract which creates the reasonable appearance that County government is showing favoritism to an individual or entity because of factors unrelated to the subject of the contract. "[T]he people have a right to be assured that the financial interests of holders of or nominees to or candidates for public office do not conflict with the public trust." Sec. 2.03.101. Use of the notice and bid provisions of the Code provide that assurance.
The Commission finds that violation of the Ethics Code can be avoided in the matter of a contract between the official's non-profit agency and the County only by compliance with the notice and bid provisions of Section 2.03.103(C). The Commission does not believe that substitution of another signer or recusal on the part of the official would prevent the creation of an appearance of impropriety because the high standing of the official as the chief operating officer of the non-profit. Absent use of the notice and bid procedure, a reasonable member of the public would conclude that the contract was awarded to the non-profit because of the official's relationship to County government, not as a result of its merits of its proposal.
In issuing this Advisory Opinion, the Ethics Commission is applying the New Castle County Code of Ethics, which establishes the minimum level of ethical conduct required of County officials and employees. The Commission cautions, however, that each County department, board, or other unit of County government is free to, and may impose as part of its own policy, additional or greater restrictions on its officials and employees than those set forth in this Opinion.
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 11th DAY OF APRIL 2007.
John McMahon, Chairperson
1New Castle County Code Section 2.03.103(G) Contracts voidable by court action.
In addition to any other penalty provided by law, any contract entered into with any County Department in violation of this Division shall be voidable by the County Department; provided, that in determining whether any court action should be taken to void such a contract pursuant to this subsection, the County Department shall consider the interest of innocent third parties who may be damaged thereby. Any court action to void any transaction must be initiated within thirty (30) days after the County Department involved has, or should have, knowledge of such violation.
2 New Castle County Code Sec. 2.03.103 B. Restrictions on representing another’s interest before the County.
1. No County employee or County official may represent or otherwise assist any private enterprise with respect to any matter before the County Department with which the employee or official is associated by employment or appointment.
2. No County official may represent or otherwise assist any private enterprise with respect to any matter before the County. This prohibition is to be considered personal to the County official and is not, for purposes of the New Castle County Ethics Code only, deemed to impact other members of a firm, business, or other employer by which the County official is employed.
3. This subsection shall not preclude any County employee or County official from appearing before the County or otherwise assisting any private enterprise with respect to any matter in the exercise of his or her official duties.
3New Castle County Code Sec. 2.03.104. Code of conduct, in pertinent part:
A. No County employee or County official shall engage in conduct which, while not constituting a violation of Section 2.03.103(A)(1) [conflict of interest], undermines the public confidence in the impartiality of a governmental body with which the County employee or County official is or has been associated by creating an appearance that the decision or action of the County employee, County official or governmental body are influenced by factors other than the merits. . . .