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.
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.
BY AND FOR THE ETHICS COMMISSION ON JULY 14, 2004.
Dennis S. Clower, Chairperson