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15-02

Business Relationships

Johanna Bishop, Beatrice Patton Dixon, Paula Jenkins-Massie, Sally Jensen, Christopher Simon

admin@nccethics.org

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Question:

            Whether the County may become a corporate sponsor of a non-profit entity in order to provide employees with a reduced rate for services from the non-profit.

Conclusion:

            Since similarly situated County businesses have not been afforded the opportunity to make presentations to the County for the use of their facilities, the County would create an appearance of favoritism and partiality by becoming a corporate sponsor and using its resources to encourage its employees to buy the non-profit’s services.

Facts:

            An Administrator proposes that a County department enter into an agreement under which New Castle County will agree to become a publicly advertised corporate partner with a private non-profit entity in order to procure a 20% reduced rate for employees who wish to buy a membership in the non-profit. Membership in the non-profit is open to the public and it provides a variety of desirable services. The agreement requires the County to advertise the non-profit’s services on its website for employees, strive to enroll 5% of employees, and offer some unspecified incentives to the County employees who use the non-profit’s facility on a regular basis. The non-profit will provide annual reports of total enrollment and facility access to support the unspecified County incentive. The requester specifically stated that the County had not budgeted any subsidy for the memberships and there was no suggestion in the request that the choice of this particular non-profit was a result of a Request for Proposal process (RFP) or something similar. The request did not include any comparisons with other New Castle County businesses which offer similar services.

Code or Prior Opinion:

Code provisions
 
             The Ethics Code’s conduct rules at Section 2.03.104(A) prohibit 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 individual or governmental body with which the employee or official is associated.1
 
             An improper appearance is created when a reasonable member of the public "with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, [would hold] a perception that the official's ability to carry out [official duties] with integrity, impartiality and competence is impaired." The standard for judging the creation of such an appearance for judicial public officials has been described in Delaware courts as "conduct [which] would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that the official's ability to carry out [official duties] with integrity, impartiality and competence is impaired." In re Williams, 701 A.2d 825, 832 (Del. Super. 1997). In determining the relevant circumstances, the courts advise the Commission to look at the totality of facts. The Commission has long applied this standard to the conduct of County officials and employees.
 
Prior Opinions
 
             In Advisory Opinion 95-02, November 7, 1995, a County agency proposed cosponsoring an educational seminar with an entity which conducted business with the County. It was one of several competing businesses which conducted such business. The Commission determined that cosponsoring a seminar with one of several private entities which conducted business with the County created the appearance of a cozy relationship between the Sponsor and the County which would enhance the Sponsor's public image. “This appearance would engender in the public a perception that the agency favors Sponsor over its competitors or officially sanctions Sponsor's activities. That the agency would not favor the Sponsor or exercise its authority to the special benefit of the Sponsor is assumed. But the appearance to the public is that the agency's official actions are subject to influence by factors other than the merits, - hence the appearance of impropriety. . . . For these reasons, while the official is encouraged to participate in the Sponsor's seminar, the agency is advised not to lend its official imprimatur to Sponsor by cosponsoring the seminar.”
 
            In Advisory Opinion 09-04, May 13, 2009, a County official asked whether he could provide access to his staff for a free service from a business of which he was a customer. The Commission noted that discount coupons have been distributed to County employees from private businesses and have been permitted under the Ethics Code because they are considered to be advertising promotions no different from those available to the general public. It also took notice that, pursuant to Ethics Code solicitation rules, businesses have donated prizes to the County to be awarded to employees as part of the County sponsored United Way campaign. See, Advisory Opinion 06-09 (guidelines for solicitation of donor groups which do business with or are regulated by the County). However, in Advisory Opinion 09-04, the Commission determined that fundraising and charitable interests were not involved and the proposed access was most akin to enabling the business to solicit County employees for future sales and use a public office for the private gain of the business. The Commission found that “in affording access to the employees, the official is personally endorsing the for-profit business in a manner different from other such businesses which are not provided such access. Although the business is not aiming its services at County government, as appears to be contemplated in the Code's representation restrictions, the official would be acting in an official capacity when making this endorsement and therefore using his office for the future gain of the private entity as prohibited by Section 2.03.104(D).” The Commission prohibited the official from providing access to the employees of his agency for the benefit of the private business.
 
             In Advisory Opinion 12-02, March 14, 2012, a requester was cautioned against excluding similarly situated vendors from a presentation if the occasion provided a significant business opportunity to the presenters. It held, “An improper appearance of favoritism would be created if the official selected one potential vendor over other similarly situated vendors. The official may invite relevant vendors as presenters but may not exclude similarly situated competitors when a reasonable business opportunity arises from the opportunity to present.”

Analysis:

            The Commission takes notice that a number of profit making and non-profit businesses offer similar services to the public in New Castle County. There is no evidence in the request that offers from these other businesses have been compared to that offered by the non-profit in question, such as in a process similar to the RFPs used for County vendors or other form of public survey. The proposed agreement would not create a paid employee benefit since the Official states that there are no funds budgeted for the services at this time.
 
             The Commission does not doubt the worthiness of this non-profit. However, its selection, without any opportunity for similar businesses to make presentations, certainly creates the appearance of favoritism for the non-profit. County sponsorship or partnering not only lends the County’s imprimatur to this business but likely adds to its bottom line, to the detriment of its competitors. Unlike in the RFP process, the Commission and the public have no way of determining whether the County’s use of its resources to urge its employees to pay for services from the non-profit is beneficial to the employee or the County taxpayer.
 
             The rules expressed in Advisory Opinions 95-02, 09-04, and 12-02 point at the same conclusion: the County may not create the appearance of favoritism by excluding similarly situated competitors when a reasonable business opportunity arises from the opportunity to present.” In this case such competitors appear to have been excluded.
 

Finding:

             Since similarly situated County businesses have not been afforded the opportunity to make presentations to the County for the use of their facilities, the County would create an appearance of favoritism and partiality by becoming a corporate sponsor and using its resources to encourage its employees to buy the non-profit’s services.
 
             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.
 
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION  
ON THIS 11th DAY OF FEBRUARY 2015.
 
  _______________________________
  Johanna P. Bishop, Chairperson
   New Castle County Ethics Commission
 
Decision: Unanimous
 

Footnotes:

1 New Castle County Code Sec. 2.03.104. Code of conduct.
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.


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