Advisory Opinion No. 2015-19 Rhode Island Ethics Commission Advisory Opinion No. 2015-19 Approved: April 14, 2015 Re: James V. Silvestri QUESTION PRESENTED: The Petitioner, a member of the Westerly Town Council, a municipal elected position, requests an advisory opinion regarding whether the Code of Ethics prohibits him from participating in Town Council matters involving the customers of the NAPA Auto Parts store that he owns in Westerly. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a member of the Westerly Town Council, a municipal elected position, is not prohibited by the Code of Ethics from participating in Town Council matters involving his customers, because such business transactions for the purchase of auto parts, in the ordinary course of business, do not rise to the level of a business associate relationship as that term is defined in the Code of Ethics, provided that there are no additional facts that would implicate the Code of Ethics. However, the Petitioner is required by the Code of Ethics to recuse from participating in any budgetary line items that relate to the maintenance of any Town vehicles. The Petitioner is a member of the Westerly Town Council (“Town Council”), having been elected in November 2014. He represents that he is the owner of Westerly Auto Parts Corporation, a NAPA Auto Parts (“NAPA”) store located in the Town of Westerly (“Town”). He states that he has owned this NAPA store for thirty years. He informs that his NAPA store is located on Granite Street, directly across the street from two other auto parts stores. He further states that his customers include a variety of local businesses and some Town Departments, such as the Police Department, the Highway Department, and the Parks & Recreation Department. The Petitioner represents that, in the ordinary course of business, he offers many of his customers the ability to have charge accounts at his NAPA store. He informs that this is a common practice in the auto parts industry as a convenience and courtesy to regular customers. He states the current practice is for the customer to complete a credit application, providing information about the business, its owners, and business/trade references. He represents that, thereafter, he sets the credit limit initially around $500 per month, but will raise or lower the limit depending on the customer’s business experience, references and business needs. He states that, apart from the credit application, which is primarily for informational purposes, the terms of the parties’ business dealings are informal and generally based upon a handshake and past business dealings.[1] The Petitioner informs that four of his regular customers are involved in litigation and/or zoning matters with the Town: (1) COPAR Quarries of Westerly, LLC (“COPAR”); (2) Westerly Granite Company, LLC, (“Westerly Granite”), listed in the Petitioner’s records as “Comolli Granite”; (3) R. Champlin Crane & Excavating, Inc. (“Champlin Crane”); and (4) SACCO Enterprises, Inc. (“SACCO”).[2] He represents that COPAR, Westerly Granite and some Town Departments currently have charge accounts at his NAPA store, while Champlin Crane and SACCO pay for their auto parts at the time of purchase. He states that he does not have a written agreement with COPAR or Westerly Granite, but rather, has established their charge account privileges based upon past practices and billing history. However, he states that neither the above listed private customers nor any of the Town Departments have contracts for the purchase of auto parts exclusively at his NAPA store. He represents that both his private customers and the Town Departments are free to purchase auto parts at any store of their choosing. Based upon the above representations, the Petitioner seeks guidance as to whether the Code of Ethics restricts his participation in Town Council matters involving his customers, specifically COPAR, Westerly Granite, Champlin Crane and SACCO. He represents that he does not believe his NAPA store will be financially impacted by the Town Council’s decisions involving these businesses. He further represents that he can participate in these matters in a fair and objective manner. The Petitioner also seeks guidance regarding whether he has to recuse from certain Town Budget matters if they are related to the various Town Departments that purchase auto parts from his NAPA store. Under the Code of Ethics, a public official must recuse himself from participation when his business associate or employer, or a person authorized by his business associate or employer, appears or presents evidence or arguments before his state or municipal agency. Commission Regulation 36-14-5002 (“Regulation 5002”); R.I. Gen. Laws § 36-14-5(f). The Code of Ethics also prohibits a public official from using his public office or confidential information received through his public office to obtain financial gain for himself, his family, his business associate, or any business by which he is employed or which he represents. Section 36-14-5(d). Additionally, 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. Section 36-14-5(a). A substantial conflict of interest exists if an official has reason to believe or expect that he, any person within his family, a business associate or an employer will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. Section 36-14-7(a). A business is defined as “a sole proprietorship, partnership, firm, corporation, holding company, joint stock company, receivership, trust or any other entity recognized in law through which business for profit or not for profit is conducted.” Section 36-14-2(2). A business associate is defined as “a person joined together with another person to achieve a common financial objective.” Section 36-14-2(3). A person is defined as “an individual or a business entity.” Section 36-14-2(7). First, in determining whether the relationships between the Petitioner and his customers constitute ongoing business associations, the Ethics Commission examines the nature of the associations and the scope of the business dealings between the parties. In prior advisory opinions, the Commission has found that the relationship between a business owner and the business’s customers does not rise to the level of a business associate relationship if the transactions occur in the ordinary course of business. For example, the Commission addressed a similar question asked by this same Petitioner in Advisory Opinion 1999-21, in which it opined that, as a member of the Westerly Town Council, he was not prohibited by the Code of Ethics from participating in the Town Council’s review and/or award of a contract for an administrator of the Town’s landfill, notwithstanding that some of the companies that could bid on the Town’s request for proposals were customers of his auto parts store.[3] There, the Commission concluded that selling auto parts to those companies in the ordinary course of business, in the absence of some direct and ongoing financial relationship, did not rise to the level of a business associate relationship under the Code of Ethics. See also A.O. 2002-28 (opining that the normal commercial dealings between Arnold Lumber and a building contractor for the provision of building supplies, in the absence of existing contracts or a specific business relationship with that contractor, did not rise to the level of a business associate relationship as defined in the Code of Ethics); A.O. 2001-7 (opining that a Westerly Town Council member was not prohibited by the Code of Ethics from participating in Town Council matters involving the customers of his haircutting business, where he provided haircutting services in the ordinary course of business and there was no indication that his business would be financially impacted by the Town Council’s decisions on matters involving his customers). In the present matter, the Petitioner represents that he owns a NAPA store, which sells auto parts, in the ordinary course of business, to individuals, businesses and Town Departments. He states that he offers many customers charge accounts for convenience, which he represents is a common practice in his industry. In particular, he states that he regularly sells auto parts to four companies that are presently involved in litigation and/or zoning matters with the Town: COPAR, Westerly Granite, Champlin Crane and SACCO. While COPAR and Westerly Granite have charge accounts at his NAPA store, he informs that they and any other customer are free to purchase auto parts at any other store of their choosing because he does not have an exclusive agreement with any of them. Finally, he represents that his NAPA store will not be financially impacted by the Town Council’s decisions relative to these customers. For all of these reasons, absent some direct and ongoing contractual relationship, the normal commercial dealings between the Petitioner and the customers of his NAPA store do not constitute a business associate relationship under the Code of Ethics. Accordingly, the Petitioner is not prohibited by the Code of Ethics from participating in Town Council matters involving his customers, specifically COPAR, Westerly Granite, Champlin Crane and SACCO, provided that there are no other facts that would implicate prohibitions within the Code of Ethics. Second, as to the various Town Departments that may purchase auto parts at the Petitioner’s NAPA store, they are considered to be municipal agencies under the Code of Ethics.[4] A public entity, such as a municipal agency, is not considered to be a “business,” as that term is defined in the Code of Ethics. Therefore, the “business associate” prohibitions that would otherwise constrain the Petitioner while carrying out his public duties do not apply with respect to the Town Departments that purchase auto parts at his NAPA store. See, e.g., A.O. 2014-23 (opining that neither the Board of Education Council on Elementary and Secondary Education nor Trinity Academy for the Performing Arts, a public charter school, was considered to be a “business” under the Code of Ethics). However, the Code of Ethics prohibits the Petitioner from participating in any matters as a member of the Town Council that will have a direct financial impact upon himself or his business. See section 36-14-5(a) & (d). Accordingly, the Petitioner is required to recuse from any Town budgetary line items relating to the maintenance of Town vehicles, given that he routinely sells auto parts to Town Departments on charge accounts and sends bills to each Town Department on a monthly basis. Nonetheless, the Petitioner may participate in the Town Council’s consideration and vote on the budget as a whole. In summary, it is the opinion of the Ethics Commission that the Petitioner is not prohibited by the Code of Ethics from participating in Town Council matters involving his customers, specifically COPAR, Westerly Granite, Champlin Crane and SACCO, provided that there are no other facts that would implicate prohibitions within the Code of Ethics. However, the Petitioner is required to recuse from any Town budgetary line items relating to the maintenance of Town vehicles. Notice of recusal shall be filed with the Ethics Commission in accordance with section 36-14-6.[5] This Advisory Opinion is strictly limited to the facts stated herein and relates only to the application of the Rhode Island Code of Ethics. Under the Code of Ethics, advisory opinions are based on the representations made by, or on behalf of, a public official or employee and are not adversarial or investigative proceedings. Finally, this Commission offers no opinion on the effect that any other statute, regulation, ordinance, constitutional provision, charter provision, or canon of professional ethics may have on this situation. Code Citations: § 36-14-2(3) § 36-14-2(2) § 36-14-2(7) § 36-14-2(8) § 36-14-5(a) § 36-14-5(d) § 36-14-5(f) § 36-14-6 § 36-14-7(a) Commission Regulation 36-14-5002 Related Advisory Opinions: A.O. 2014-23 A.O. 2002-28 A.O. 2001-7 A.O. 1999-21 Keywords: Business Associate Financial Interest Recusal [1] The Petitioner states that all charge accounts are billed on the 1st of the month with payments due on the 25th. He informs that any charge account that is not paid within 30 days is suspended, reverting to cash on demand status, until the outstanding balance is paid in full. He states that, in general, if a charge account has three late payments, the charging privileges will be revoked. [2] The Petitioner represents that Westerly Granite and COPAR, respectively the owner and operator of a quarry in Town, are presently involved in two separate court proceedings in which the Town is a party: COPAR and Westerly Granite’s appeal of a cease-and-desist order issued by the Town to cease all quarrying activity, which is presently pending at the Rhode Island Supreme Court; and a private law suit commenced by some residents of the Town against COPAR, Westerly Granite and the Town, which is presently pending in Rhode Island Superior Court. He further states that Champlin Crane has appealed a finding of a violation by the Town’s Zoning Board to the Superior Court. Finally, he informs that SACCO has applied for an amendment to the Town’s Zoning Ordinance to rezone certain combined parcels from Residential to Professional, to allow for the construction of multiple units for congregate and assisted living. [3] The Petitioner previously served as a member of the Westerly Town Council from 1998 until 2004. [4] Section 36-14-2(8)(ii) (defining “municipal agency” as any “division, agency, commission, board, office, bureau, authority [sic] quasi-public authority, or school, fire or water district within Rhode Island, other than a state agency and any other agency that is in any branch of municipal government and exercises governmental functions other than in an advisory nature”). [5] In his request letter, the Petitioner also asked if the Code of Ethics prohibits him from participating in the Town Council’s consideration of proposed amendments to the Town’s Street Vendor ordinance, given that his first cousin is currently defending charges of violating that same ordinance in Municipal Court. After discussing the matter with a Commission Staff Attorney, who also consulted with the Westerly Town Solicitor, the Petitioner represents that he will recuse from participating in the Town Council’s consideration, discussion and decision making relative to the proposed amendments to the Street Vendor ordinance, given the likelihood of financial impact upon his first cousin.