Advisory Opinion No. 2011-40 Advisory Opinion No. 2011-40 Re: The Honorable Angel Taveras QUESTION PRESENTED The Petitioner, the Mayor of the City of Providence, a municipal elected position, who in his mayoral capacity serves as chairman of the Providence Economic Development Partnership, requests an advisory opinion regarding the appropriate process for handling a certain loan application before the Providence Economic Development Partnership relating to legal work he performed in his private capacity, prior to his election as Mayor. RESPONSE It is the opinion of the Rhode Island Ethics Commission that the proposed recusal procedure set forth by the Petitioner, the Mayor of the City of Providence, a municipal elected position, is both reasonable and sufficient to avoid potential conflicts of interest given his personal interest in the particular loan application before the Providence Economic Development Partnership. The Petitioner is currently the Mayor of the City of Providence (“City”). Prior to his election in November of 2010, the Petitioner was a practicing attorney. He represents that he served as co-counsel and performed numerous hours of legal work for a client who was rendered a paraplegic due to the alleged negligence of several parties, including that of a commercial business in the City, located at 122 Fountain Street (“commercial property”), and its owner. He informs that because the commercial property owner (“property owner”) did not have insurance coverage any financial recovery would be from the property owner’s personal funds. He states that the property owner owns this commercial property free and clear of any liens; therefore, the Petitioner obtained a restraining order to prevent the property owner from selling this commercial property, ensuring that any funds from the sale would be used to pay legal damages to his client. The Petitioner represents that, as of the date of this advisory request, the restraining order remains in effect and the commercial property has not been sold. The Petitioner informs that the sale of this commercial property could result in a direct financial benefit to him in the form of payment for legal services previously rendered to his former client. The Petitioner represents that a potential buyer is interested in purchasing the subject commercial property. He informs that this potential buyer has asked the City’s Planning Department for assistance from the Providence Economic Development Partnership (“PEDP”) in financing the purchase or development of the property. The Petitioner advises that, due to his status as Mayor, he is the Chairman of the PEDP Board of Directors (“Board”). He informs that the PEDP is a registered 501(c)(3) corporation, serving as the primary economic development policy making body of the City. The PEDP’s purposes include assistance in business expansion, retention, and attraction; real estate development; work force development; neighborhood revitalization; improvement in the City’s competitive position in the region through outreach; small business and entrepreneur encouragement and assistance; and positioning the City for the 21st Century by promoting the Creative/Knowledge Economy.[1] The Petitioner represents that the PEDP Board has fifteen (15) members, one (1) alternate member, and requires eight (8) members for a quorum. All of the PEDP Board members are appointed by the Mayor and do not receive any compensation for their service. He informs that the PEDP Board approves or denies all applications for loans from the PEDP Revolving Loan Fund for amounts greater than $150,000. He states that the PEDP Revolving Loan Fund is comprised of federal funds from the Department of Housing and Urban Development (“HUD”) and the U.S. Economic Development Administration (“EDA”). He advises that once a decision is made by the PEDP there is no further involvement by the PEDP Board, nor is there any review by the City Council or the Mayor. Given that the interested party seeks financing assistance from the PEDP in an amount greater than $150,000, this loan application would go before the full PEDP Board for review. Cognizant of the fact that it would be a conflict of interest for him to participate, in his capacity as Mayor and PEDP Chairman, in the PEDP Board’s review and eventual approval or disapproval of the loan application for the commercial property enjoined in his former client’s lawsuit, the Petitioner proposes to recuse from any and all matters related to this specific commercial property that may come before the PEDP. The Petitioner asks if his proposed recusal is sufficient to insulate him from conflicts of interest. Pursuant to the Code of Ethics, a public official may not participate in any matter in which he has an interest, financial or otherwise, that is in substantial conflict with the proper discharge of his duties or employment in the public interest. R.I. Gen. Laws § 36-14-5(a). An official will have an interest in substantial conflict with his official duties if it is reasonably foreseeable that a “direct monetary gain” or a “direct monetary loss” will accrue, by reason of his official activity, to the official, a family member, a business associate, an employer or any business which the public official represents. Section 36-14-7(a). Furthermore, a public official may not use his public office or confidential information received through his office to obtain financial gain, other than that provided by law, for himself, his family members, his employer or any business associate. Section 36-14-5(d). Finally, a public official must recuse from participating in his agency’s consideration of a matter in which his business associate represents itself. Section 36-14-5(f). In a somewhat analogous recent advisory opinion, the Commission approved the proposed recusal procedures set forth by the Medical Director of the Department of Corrections, who was also serving as Interim Director of the Department of Health (“DOH”). A.O. 2011-27 (opining, inter alia, that the petitioner’s proposed recusal from DOH physician licensing matters involving his former medical practice, from which he continues to received fixed monthly buy-out payments, was sufficient to insulate him from conflicts of interest while serving as Interim Director of DOH). In the present matter, the Petitioner’s financial interest in the loan application before the PEDP, given his right to legal fees previously earned for services rendered, is in substantial conflict with his official duties as Chairman of the PEDP Board because it is reasonably foreseeable that a direct monetary gain could accrue to him by reason of his official activity. However, a substantial conflict of interest such as this can be appropriately avoided by recusing from any official activity that may result in a substantial conflict. Furthermore, the Petitioner represents that no further action will be required of him as Mayor given that the PEDP Board makes the final decision to approve or deny this loan application. Therefore, it is the opinion of the Rhode Island Ethics Commission that the Petitioner’s proposed recusal from the PEDP’s consideration of any and all matters relating to the commercial property enjoined in his former client’s lawsuit is both reasonable and sufficient to insulate him from conflicts of interest relating to his personal interest in the particular loan application before the PEDP. Notice of recusal should be filed in accordance with section 36-14-6. Code Citations: § 36-14-5(a) § 36-14-5(d) § 36-14-5(f) § 36-14-6 § 36-14-7(a) Related Advisory Opinions: A.O. 2011-27 Keywords: Financial Interest Recusal [1] For purposes of this advisory opinion, the Commission and the Petitioner assume that the PEDP is a public or quasi-public municipal entity subject to the Code of Ethics. A similar question, though not relevant to the instant advisory opinion, relates to whether the members of the PEDP Board are subject to the financial disclosure mandate set forth in R.I. Gen. Laws § 36-14-16. The Commission Staff has formally requested that the City of Providence, through its law department, provide further information concerning the PEDP’s members and staff, and its origin, authority, and activities, to determine the answers to these questions.