Advisory Opinion No. 2018-14 Rhode Island Ethics Commission Advisory Opinion No. 2018-14 Approved: February 27, 2018 Re: Carol Guimond QUESTION PRESENTED: The Petitioner, a member of the Tiverton Planning Board, a municipal appointed position, who in her private capacity is a real estate agent affiliated with Century 21 Topsail Realty in Tiverton, requests an advisory opinion regarding whether she may participate in the Planning Board’s consideration of land development projects brought by a developer who is working on the project with another real estate agent at Century 21 Topsail Realty. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a member of the Tiverton Planning Board, a municipal appointed position, who in her private capacity is a real estate agent affiliated with Century 21 Topsail Realty in Tiverton, must recuse from the Planning Board’s consideration of land development projects brought by a developer who is working on the project with another real estate agent at Century 21 Topsail Realty. The Petitioner is a member of the Tiverton Planning Board (“Planning Board”). In her private capacity she is a real estate broker and agent, and was the owner of Guimond Realty Group until 2016 when she sold her business to Century 21 Topsail Realty (“Topsail”). The Petitioner states that, prior to the sale of her business, other real estate agents, including Deborah Plant (“Plant”), worked at Guimond Real Group under the Petitioner’s broker’s license. One of Plant’s regular real estate clients was, and still is, a local developer named Robert Johnson (“Johnson”). As Johnson’s real estate agent, Plant receives a commission on the sale of each of Johnson’s properties that she lists for sale. Because Plant worked under the Petitioner’s broker’s license, the Petitioner received a percentage of Plant’s commissions. Given that the Petitioner had a financial interest in Johnson’s real estate that was listed for sale with Plant, she regularly and properly recused from any Planning Board matters involving any of Johnson’s development projects. Since the sale of the Petitioner’s business to Topsail in 2016, both the Petitioner and Plant have been working as real estate agents at Topsail. Since the Petitioner is no longer acting as Plant’s broker, she no longer receives a percentage of Plant’s commissions on Johnson’s real estate projects. However, as fellow real estate agents in the same office, the Petitioner concedes that it is reasonably foreseeable that she and Plant will work together on certain real estate listings such that she will receive a financial benefit from the sale of a property that Plant has listed, or vice versa. For example, if the Petitioner or Plant bring a buyer to purchase a property for which the other has a listing, they will share the commission. Given the end of the broker/agent relationship between the Petitioner and Plant in 2016, but also considering their new relationship as fellow real estate agents in the same office, the Petitioner seeks clarification as to whether she must continue to recuse from Planning Board matters involving Johnson or other of Plant’s clients. Under the Code of Ethics, a public official may not participate in any matter in which she has an interest, financial or otherwise, that is in substantial conflict with the proper discharge of her duties or employment in the public interest. R.I. Gen. Laws § 36-14-5(a). A substantial conflict of interest exists if an official has reason to believe or expect that she, any person within her family, a business associate or an employer will derive a direct monetary gain or suffer a direct monetary loss by reason of her official activity. Section 36-14-7(a). The Code of Ethics also prohibits a public official from using her public office or confidential information received through her public office to obtain financial gain for herself, her family, her business associate, or any person by which she is employed or whom she represents. Section 36-14-5(d). Finally, a public official must recuse herself from any matter in which her business associate appears or presents evidence or arguments before the municipal agency of which she is a member or by which she is employed. Commission Regulation 36-14-5002(a)(2). A “business associate” is defined as an individual or business entity joined together with another person to achieve a common financial objective. Section 36-14-2(3), (7). Here, the Petitioner no longer serves as Plant’s real estate broker and, therefore, she does not receive a percentage of Plant’s sales commissions. Accordingly, the Petitioner no longer has a personal financial interest in Johnson’s real estate endeavors. However, the anticipated and foreseeable commission sharing between Plant and the Petitioner creates a business association between them, such that the Petitioner will continue to be required to recuse from Planning Board matters in which Plant has a financial interest. In determining whether a relationship between two parties constitutes an ongoing business association, the Ethics Commission examines the nature of the association and the scope of the business dealings between the parties, and looks to, among other things, whether the parties are conducting ongoing business transactions, have outstanding accounts, or there exists an anticipated future relationship. A.O. 2015-49 (opining that a Zoning Official who had done private electrical work for the Fort Adams Trust in the past, and who planned to bid on future work, was a business associate of the Trust under the Code of Ethics). The impact of an anticipated real estate listing was at issue in Advisory Opinion 2003-12. There, an East Greenwich Town Council member was a part owner of a real estate business along with her brother-in-law, who also acted as a real estate agent for the business. Her brother-in-law had acted as an unpaid advisor to a local developer on a particular development project, and he hoped to obtain the real estate listing for the project. When the developer brought the project before the Town Council for a requested zoning change, the petitioner asked whether she was permitted to participate and vote on the matter. The Ethics Commission opined that the Town Council member must recuse because under the circumstances it was reasonably foreseeable that her brother-in-law would obtain the listing on the property. In the instant matter, the Petitioner indicates that as fellow real estate agents in the same office, it is reasonably foreseeable that she and Plant will work together on certain real estate listings such that one of them will receive a financial benefit from a property that the other has listed for sale. Such repeated and ongoing financial ties between agents in the same office amount to a business association between the Petitioner and Plant, requiring that the Petitioner recuse from any matters before the Planning Board that involve or financially impact Plant, including any development projects for which she serves, or reasonably anticipates serving, as the listing agent. See Regulation 36-14-6001 (defining a “reasonably foreseeable” conflict of interest). If Plant has an interest in Johnson’s development project that is coming before the Planning Board, for example by reasonably anticipating her service as the listing agent on the project, then the Petitioner must continue recusing from this matter before the Planning Board because the Planning Board’s actions will have a financial impact on Plant, who is the Petitioner’s business associate. Accordingly, it is the opinion of the Rhode Island Ethics Commission that the Petitioner is prohibited by the Code of Ethics from participating in the Planning Board’s consideration of matters in which Plant has a financial interest, including development projects in which Plant reasonably anticipates serving as the real estate listing agent. A notice of recusal shall be filed with the Ethics Commission pursuant to 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(3) § 36-14-2(7) § 36-14-5(a) § 36-14-5(d) § 36-14-6 § 36-14-7(a) Commission Regulation 36-14-5002 Commission Regulation 36-14-6001 Related Advisory Opinions : A.O. 2015-49 A.O. 2003-12 Keywords : Business Associate