Advisory Opinion No. 2015-33 Rhode Island Ethics Commission Advisory Opinion No. 2015-33 Approved: July 21, 2015 Re: Geoffrey A. Marchant QUESTION PRESENTED: The Petitioner, the Director of the Community Development Consortium, a municipal employee position, requests an advisory opinion regarding whether he can participate in the Consortium’s approval of payments to the Washington County Community Development Corporation, given that he is a member of the Washington County Community Development Corporation’s Board of Directors. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, the Director of the Community Development Consortium, a municipal employee position, is prohibited by the Code of Ethics from participating in the Consortium’s approval of payments to the Washington County Community Development Corporation, given that he is a member of the Washington County Community Development Corporation’s Board of Directors. The Petitioner is the Director of the Community Development Consortium (“Consortium”), which is coordinated by the Town of East Greenwich. He states that the Consortium manages the United States Department of Housing and Urban Development, Community Development Block Grant (“CDBG”) programs for ten Towns: East Greenwich, West Greenwich, Exeter, Hopkinton, North Kingstown, Charlestown, Richmond, Westerly, Narragansett and South Kingstown. He informs that each member Town has entered into a letter of agreement with the Town of East Greenwich and contributes to the operating costs of the Consortium. The Petitioner states that he is an employee of the Town of East Greenwich and is the only full-time employee of the Consortium. He represents that he was hired by the Town of North Kingstown in 1996, where the Consortium was originally located, and he was transferred to the Town of East Greenwich when the Consortium office moved there in 1998. He represents that the Consortium also has a quarter-time clerk and an hourly inspector. He informs that he coordinates with the Rhode Island Department of Administration, Office of Housing & Community Development (“State”) to manage each Town’s CDBG funding and funding from other sources as necessary. He states that he has more than twenty-five years of experience working with CDBG funding. In his private capacity, the Petitioner represents that he is the president of the Board of Directors of the Washington County Community Development Corporation (“WCCDC”), a non-profit organization that was incorporated in 2005 for the purpose of creating affordable housing in Washington County and West Greenwich. He states that he serves as a volunteer, and he derives no financial benefit from serving as president of the Board of Directors. He informs that the WCCDC applied to the Town of Charlestown (“Charlestown”) for funding for a senior housing project called ChurchWoods. He states that the Charlestown Town Council approved the WCCDC project for CDBG funds in April 2014, and forwarded the project to the State for review. He represents that in August 2014, Charlestown was advised by the State that it had been awarded $4,396,067 in CDBG Disaster Recovery funds for the WCCDC’s ChurchWoods project. Cognizant of the Code of Ethics, the Petitioner represents that he has recused from the WCCDC’s dealings with Charlestown, and the WCCDC authorized its vice-president to sign all agreements with Charlestown relative to this and other funding. As Director of the Consortium, the Petitioner represents that he is the intermediary between Charlestown and the State with respect to the contract that Charlestown has entered into with the WCCDC to fund the ChurchWoods project. At this time, he states that the WCCDC has acquired the land for ChurchWoods and will proceed with construction. He represents that, over the course of the project, as the WCCDC incurs expenses for building supplies and contractors, it will submit invoices to the Consortium for payment. He states that, as the Director of the Consortium, he will review each invoice to determine if the expenses are eligible for payment under the terms of the grant. If the expenses are eligible, he states that he would approve the invoice for payment and forward it to the Charlestown Treasurer. He further states that, in order to pay the invoice, once approved by Charlestown, he would initiate a draw-down request from the State to transfer the funds to Charlestown, which would then reimburse the WCCDC. Based upon the above representations, the Petitioner seeks guidance as to whether he can evaluate and approve invoices submitted by the WCCDC to the Consortium, in its capacity as the CDBG grant manager for Charlestown, given that he is the president of the WCCDC’s Board of Directors. Under the Code of Ethics, a public official is prohibited 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. R.I. Gen. Laws § 36-14-5(d). A public official must recuse himself from participation when his business associate or employer appears or presents evidence or arguments before his state or municipal agency. Commission Regulation 36-14-5002(a)(2) (“Regulation 5002”); Section 36-14-5(f). Finally, a public official shall not have any interest, financial or otherwise, or engage in any business, employment, transaction or professional activity, or incur any obligation of any nature, which 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). The Commission has previously opined that persons are “business associates” of the entities for which they serve as either officers or members of the Board of Directors, or in some other leadership position that permits them to affect the financial objectives of the organization. See, e.g., A.O. 2014-14 (opining that the Director of the Rhode Island Department of Environmental Management (“DEM”), who was also a Director of the Rhode Island Boy Scouts (“Boy Scouts”), was a business associate of the Boy Scouts and was, thus, required to recuse from participating in any DEM decisions that would financially impact the Boy Scouts, as well as from any matters in which a Boy Scout representative appeared to represent the organization’s interests); A.O. 2012-28 (opining that a Tiverton Planning Board member, who was also a member of the Board of Directors of the Tiverton Yacht Club (“TYC”), was a business associate of the TYC and, therefore, was required to recuse from participating in the Planning Board’s consideration of a proposed amendment to the Tiverton Zoning Ordinance that was requested by the TYC). In contrast, however, the Commission has generally held that mere membership in an organization, as opposed to the holding of a leadership position as a director or officer, does not create a business association requiring recusal. For example, in Advisory Opinion 2014-29, the Commission opined that a member of the North Smithfield Planning Board, who was also a general member of the North Smithfield Land Trust (“Land Trust”), a private non-profit organization, having recently resigned his position as a member of the Land Trust’s Board of Directors, was not required by the Code of Ethics to recuse from Planning Board matters involving the Land Trust, because being a general member of the Land Trust did not constitute a business association. See also A.O. 2009-39 (opining that the Barrington Town Planner’s general membership in the Bayside Family YMCA (“YMCA”), where he did not serve in any leadership position, did not constitute a business associate relationship with the YMCA and, thus, he was permitted to participate in Barrington’s review of the YMCA development proposal and plans). In the present matter, the Petitioner’s role as the president of the WCCDC’s Board of Directors makes him a “business associate” of the WCCDC under the Code of Ethics. Accordingly, it is the opinion of the Ethics Commission that the Petitioner is required by the Code of Ethics to recuse from participating in all Consortium decision making that will financially impact the WCCDC, including reviewing and approving invoices, given that he is a member of the WCCDC’s Board of Directors. Upon recusal, the Petitioner is instructed to file a “Statement of Conflict of Interest” with the Ethics Commission in accordance with section 36-14-6. 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(2) § 36-14-2(3) § 36-14-2(7) § 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. 2014-29 A.O. 2014-14 A.O. 2012-28 A.O. 2009-39 Keywords: Business Associate Recusal