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Ethics Code Complaint

Commissioners: Dennis S. Clower, Wendy Jamison, V. Eugene McCoy, John McMahon, Ernest Price


Order Text:

Whether the continuation of a no-bid contract with a risk management firm which subcontracts with a close relative of a senior County official to perform all its legal business for the County creates an appearance of impropriety.
          A continuing contract for professional services executed by the County Administration with a contractor who subcontracts services for certain County business with a law firm in which a sibling of a senior administrative official who has oversight for that contract is a principal, and which was specifically approved by County Council and subject to continued review by Council after public disclosure of the relationship involved, does not create an appearance that the decision to continue the contract was made on factors other than the merits. If the contract had been formed without specific authority from and continuing approval of County Council, the Commission believes it would violate the appearance of impropriety section of the Ethics Code.
Substantiated Facts
          The subject of the complaint is a senior County administrative official who has authority over the contract and its continuation. The Commission received a sworn complaint that the official caused the County to continuously renew a 1997 non bid contract with a risk management firm which subcontracted with a business associated with a sibling of the official.1
          The New Castle County Code did not require professional services contracts such as the one at issue to be bid and this contract was specifically approved by County Council at its inception in 1997.2 Pursuant to the contract, a professional risk manager was authorized to subcontract for private legal services to represent the County in certain labor matters.3 Subsequently, the risk manager subcontracted for the exclusive services of a small law firm in which the brother of the senior administration official is one of two principals.
          The contract, as well as the subcontract, has continued with the same risk manager since inception. Newspaper articles were published in 1999 disclosing the family relationships involved in the subcontract and the law firm has continued to act in a public posture for the County government in regard to the labor matters. In an editorial in April, 2004, the News Journal reported that the risk manager said "he had a successful working relationship with [the law firm] before he took the County's business, and employing the firm was not a condition of his contract."
          A County Procurement Practices Audit Report determined that this contract is unique in that almost all other outside law firms employed by the County Administration to represent its interests are selected and reviewed by the County Attorney.4 The Audit report noted that this contract was not in violation of the Code but made a recommendation that "the County Attorney review the Risk Management contract including any subcontract arrangements such as the legal work [related to this contract]. In addition, we recommend that all legal work should be contracted directly with the County to assure professional oversight and cost control." 5
          The County expended substantial sums under the contract: between its inception and March, 2004, $1.5 million dollars was spent on the legal services portion alone. However, the County administration is unrebutted in its assertion that significant financial benefits have accrued to the County from the services of the law firm including a reduction in claims, a one-time savings of $1.5 million dollars in pension expenses, and other substantial yearly savings as a result of increased subrogation efforts by the law firm.
Application of Ethics Code Provisions
          The New Castle County Code has two main provisions: conflict of interest and appearance of impropriety. The conflict of interest provisions do not apply to these facts because the subcontractor, the principal of the law firm, is the senior official's brother. The Code extends the imputed barrier of conflict only to members of the official's immediate family, which is defined in New Castle County Code section 2.03.102 as "a spouse or dependent child of a County official or employee whether by blood or operation of law".6 The Code also specifically recites in section 2.03.103C that only those contracts in excess of $500.00 with an official, his or her spouse or child must be publicly bid.7
          The appearance of impropriety provision, found at New Castle County Code section 2.03.104A, is far more problematic. An appearance of impropriety can exist even where there is no conflict of interest and no wrongdoing on the part of an employee or official.That provision states:
No County employee or County official shall engage in conduct which, while not constituting a violation of Section 2.02.103(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 a appearance that the decision or action of the County employee, County official or governmental body are influenced by factors other than the merits.
          In Advisory Opinion 92-07, this Commission considered the question of whether the hiring of a cousin of a department head for a temporary job within that department created an appearance of impropriety. It found that the conflict of interest provisions were not implicated by that relationship and that the relationship was not close enough to create an improper appearance. However, the Commission reasoned that this would not be the case if the individual were a "sibling or parent". In the matter complained of in this case, the relationship is that of sibling to the high County official.
          In Advisory Opinion 94-01, the Commission addressed a situation in which the adult stepchild of a County official worked for a temporary agency which assigned him to work for a company which had a County contract for the provision of services. The Commission addressed the definition of immediate family and found no conflict of interest arising as a result of the relationship between the official and adult child. It further held that "since the county official does not have the authority to select the Company, there is no decision or action to which an appearance of impropriety' could attach".8[Emphasis added]
         In the case now before the Commission, the senior official had the authority to be involved in the selection of the risk manager and has continued oversight for the contract. Therefore, if the contract had been formed without specific authority from and continuing knowledge of County Council, the Commission believes it would have violated the appearance of impropriety section of the Ethics Code, based on the reasoning of the prior opinions. In such a case, despite the unrebutted facts regarding the successful performance of the law firm under the contract, a reasonable member of the public could believe that the decision to continue the contract was not made on the basis of its successful performance but was influenced by the County official's relationship with the law firm principal.
          However, County Council's review and funding of the continuing contract in light of the public disclosure of the sibling relationship dissipated the appearance that the continuation of the contract was not based on its merits. To hold otherwise would be to invade the legislative authority of Council, which the Ethics Commission may not do.
          The complaint is dismissed.
Dennis S. Clower, Chairperson
Decision: Unanimous


1The Ethics Commission may not conduct an investigation if more than five years have passed after the alleged occurrence of a violation. See New Castle County Code section 2.04.103(L). In this matter, the Commission does not address the inception of the contract 1997 but only its continuing nature within the statutory period.
2The New Castle County Code at section 2.05.502 A (7) states that the purchase of professional services and insurance shall not be subject to competitive bid requirements. Code section 2.02.004 states that all contracts for professional services involving the expenditure of funds by the County in excess of fifty thousand dollars ($50,000) which are not subject to the requirement of competitive bidding shall require the approval of County Council. Council Resolution 97-054 approved this contract.
3An investigation of this matter was conducted by the County Auditor’s Office which published its findings and recommendations on April 19, 2004. In lieu of conducting its own investigation, the Commission has relied on that report since it contains the response of the Administration to the findings of the Auditor.

4One exception is the Counsel to the Ethics Commission who is selected by the Commission pursuant to New Castle County Code section 2.04.101(I) and whose performance is not subject to review by the County Attorney or the Administration.
5Report on New Castle County Procurement Practices at 10 (April 16, 2004).
6The conflict of interest provision, New Castle County Code section 2.03.103 A (1), (2), states in pertinent part:
(1)      No County official or County employee shall use the authority of his or her office or employment or any confidential information received through his or her holding County office or employment for the personal or private benefit of himself or herself, a member of his or her immediate family or a business with which he or she is associated. . . .
(2)      In any case where a person has a legal and/or statutory responsibility with respect to action or nonaction on any matter where the person has a personal or private interest and there is no provision for the delegation of such responsibility to another person, the person may exercise responsibility with respect to such matter, provided that promptly after becoming aware of such conflict of interest, the person files a written statement with the Commission fully disclosing the personal or private interest and explaining why it is not possible to delegate responsibility for the matter to another person. If the matter is one in which the legal and/or statutory responsibility requires the person to vote upon the issue, the written statement filed with the Commission shall be read into the public record prior to the time the person’s vote is cast. Any person choosing to abstain from voting on an issue where [he] or she has a conflict shall state the reasons for his or her conflict on the record; an abstaining voter need not file the written statement with the Commission required when acting on, rather than abstaining from, an issue involving a conflict.
Section 2.03.102 Definitions, in pertinent part:
           The following words, terms and phrases, when used in this Division, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning:
. . .
Business means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit.
. . .
Business with which he or she is associated means any business in which the person is a director, officer, owner or employee; or a business in which a member of the person’s immediate family is a director, officer, owner or has a financial interest.

C. Restrictions on contracting with the County.
No County official or County employee or his or her spouse or child or any business with which the County official or County employee or his or her spouse or child 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) unless such contract 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 contact reflect arms’ length negotiations.

8This Opinion interpreted the predecessor code section for 2.03.103C, Restrictions on Contracting with the County, to use the word “child” in the sense of dependent child and held that “an adult emancipated stepchild is not a ‘child’ for purposes of the Code section on contracting with the County.