Advisory Opinion No. 2019-32 Rhode Island Ethics Commission Advisory Opinion No. 2019-32 Approved: May 21, 2019 Re: Mary Adams QUESTION PRESENTED: The Petitioner, a member of the Westerly School Committee, a municipal elected position, who in her private capacity owns and operates J. Mack Studios, LLC, seeks an advisory opinion regarding whether her business may continue to sell custom decorated apparel and promotional products to various individuals and groups associated with the Westerly Public Schools, as well as to the Westerly Public Schools and the Town of Westerly, or any of their departments. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a member of the Westerly School Committee, a municipal elected position, who in her private capacity owns and operates J. Mack Studios, LLC, may continue to sell custom decorated apparel and promotional products to various individuals and groups associated with the Westerly Public Schools, provided that such transactions are paid for by the individuals and groups directly and are not paid from the Westerly Public Schools’ funds. Further, the Code of Ethics does not prohibit the Petitioner’s business from providing its products to both the Westerly Public Schools and the Town of Westerly, or any of their departments, provided that any such transactions are subject to an open and public process as required by R.I. Gen. Laws § 36-14-5(h). The Petitioner was elected to the Westerly School Committee (“School Committee”) in November 2018. For the past 17 years, the Petitioner and her spouse have owned and operated J. Mack Studios, LLC (“J. Mack Studios”), a professional design and print business located in Westerly, RI, that provides screen printing, embroidery, promotional items and custom apparel.[1] Over the past 17 years, J. Mack Studios has periodically provided its products and services to individuals and groups associated with the Westerly Public Schools (“Public Schools”), as well as departments within the Public Schools and the Town of Westerly (“Town”). The Petitioner represents that her company does not have any contracts with any municipalities or school districts in Rhode Island. The Petitioner advises that each order placed with J. Mack Studios is custom and unique. Although her company generally does not require a purchase order, a 50% payment is needed to place an order, with the balance due when the order is picked up. The Petitioner states that customers may provide their own artwork to be printed on the items or, for a fee, J. Mack Studios can provide the artwork to be utilized. The minimum order for apparel items is usually 12 pieces, although an order for one or two pieces has been permitted on occasion. As to promotional products, the Petitioner informs that the minimum order will vary depending upon the requirements of the vendors from whom her company obtains the items. First, the Petitioner seeks guidance as to whether J. Mack Studios may continue to provide custom apparel and promotional products directly to students, student groups, parents, coaches, staff, school booster organizations, and parent/teacher organizations connected to, but not managed by, the Public Schools or the School Committee, as it has done for the past 17 years. She represents that, as a member of the School Committee, she has no authority, financial or otherwise, over purchasing decisions made by such individuals or groups. The Petitioner states that such purchases are paid for by the individuals or groups and are not paid for with the Public Schools’ funds. The Petitioner states that such purchases may involve orders for athletic apparel for students. She informs that the Public Schools provide sport team uniforms, which are neither purchased from nor customized by her company. She explains that students and parents come into her business to order athletic apparel items that were not provided by the School Department, such as warm-up jackets for the soccer team. Coaches have also periodically ordered such items for their athletes or personally paid to have a logo printed on apparel. The Petitioner further states that individual students, student groups, or teachers may place orders for t-shirts for various spirit events. She advises that her company has no contracts or agreements to provide these items, which represent the purchasing decisions of these individuals or groups. The Petitioner considers the individual placing the order, who pays by cash, personal check, or personal credit card, to be her customer. The amount of such orders will vary with each transaction. During 2018, the Petitioner indicates that parent orders averaged approximately $500, and her company had one (1) order placed by a coach in the amount of $125. Commission Regulation 520-RICR-00-00-1.4.4 Transactions with Subordinates (36-14-5011) (“Regulation 1.4.4”) prohibits individuals subject to the Code of Ethics from engaging in a financial transaction, including participating in private employment or consulting, with a subordinate over whom he or she exercises supervisory responsibilities in the course of his or her official duties. A “subordinate” is an employee, contractor, consultant, or appointed official of the official’s or employee’s agency. Regulation 1.4.4(C). However, that prohibition does not apply when the financial transaction is in the normal course of a regular commercial business or occupation, or when the subordinate offers or initiates the financial transaction. See Regulation 1.4.4(A)(1) & (2). It is the opinion of the Ethics Commission that the Code of Ethics does not bar J. Mack Studios from continuing to sell apparel and promotional products directly to private individuals and entities, such as students, parents, and parent/teacher organizations, where such transactions are paid for by the individuals or groups directly and do not involve the expenditure of the Public Schools’ funds. Such private individuals and groups are not part of the Public Schools nor are they part of municipal government. While student groups and school booster organizations may be more closely associated with the Public Schools, provided that the individual placing the order does not use the Public Schools’ funds to pay, such transactions would not run afoul of the Code of Ethics. With respect to orders that may be placed by individual coaches or staff members, these employees and contractors of the Public Schools are the Petitioner’s subordinates in her capacity as a School Committee member. However, since such transactions would be both initiated by the subordinates and undertaken in the normal course of J. Mack Studios’ regular commercial business, they would not be prohibited by Regulation 1.4.4. Therefore, the Commission concludes that the Petitioner’s business may continue to engage in such transactions, provided that all such orders are paid for by the individuals directly and without the use of the Public Schools’ funds. Next, the Petitioner inquires whether her company may continue to provide custom apparel and promotional products to students, student groups, coaches, and staff of the Public Schools related to student activities which are paid from the Westerly High School Student Activity Account (“Student Activity Account” or “Account”). She represents that, as a School Committee member, she has no authority regarding the funding of the Student Activity Account or the purchasing decisions made with monies from this Account, which she states are not public funds. She also states that the Account is maintained with funds generated and or received by the high school for specific student purposes related to student activities. Purchasing decisions are made by the students, student groups, coaches, and staff involved in the student activity. The Petitioner explains that students or staff may place an order with her company, such as an order for t-shirts for a student activity or club that raised money for same through fundraising. J. Mack Studios provides the individual placing the order with an invoice, which the individual provides to whomever manages the Account at the high school. Thereafter, the company receives a check drawn from the Account. Based upon the Petitioner’s express representations regarding the nature of the Student Activity Account, the Commission concludes that J. Mack Studios may continue to provide custom apparel and promotional products to students, student groups, coaches, and staff of the Public Schools related to student activities which are paid from the Account. The Petitioner has stated that such funds are not public monies and that, as a School Committee member, she does not exercise decision-making authority with respect to funding the Account or the expenditures made therefrom. As set forth above, Regulation 1.4.4 would not prohibit the Petitioner’s business from engaging in such transactions with coaches or staff members, the Petitioner’s subordinates, because such transactions would be both initiated by the subordinates and undertaken in the normal course of J. Mack Studios’ regular commercial business. Finally, the Petitioner seeks guidance as to whether her company may continue to provide custom apparel and promotional products to departments within the Public Schools and or the Town. She represents that her company does not solicit such business but responds to routine, unprompted requests for its products and services. She states that such items do not meet or exceed the threshold that would make it necessary for the orders to go out to bid, which she indicates is $5,000. Commission Regulation 520-RICR-00-00-1.5.4 Municipal Official Revolving Door (36-14-5014) (“Regulation 1.5.4”) provides that no municipal elected official or municipal school committee member, while holding office and for a period of one (1) year thereafter, shall seek or accept employment with any municipal agency in the municipality in which said official serves, other than employment which was held at the time of the official’s election or appointment to office. The term “employment” expressly includes service as an independent contractor to the municipality or municipal agency, whether as an individual or a principal of an entity performing such service. See Regulation 1.5.4(A)(1). No person subject to the Code of Ethics, nor any business entity in which said person has a 10% or greater equity interest or $5,000 or greater cash value interest, may enter into a contract with any state or municipal agency unless “the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” R.I. Gen. Laws § 36-14-5(h). Section 5(h) further provides that “contracts for professional services which have been customarily awarded without competitive bidding shall not be subject to competitive bidding if awarded through a process of public notice and disclosure of financial details.” Id. The professional services exception of section 5(h) typically relates to contracts for legal, medical, architectural or accounting services. See A.O. 2000-35. Under the Code of Ethics, a public official may not participate in any matter in which she has an 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 her duties in the public interest. Section 36-14-5(a). A substantial conflict of interest exists if she 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). Additionally, the Code of Ethics prohibits a public official from using her public office or confidential information received through her public office to obtain financial gain for herself, a family member, a business associate, or any business by which she is employed or which she represents. Section 36-14-5(d). As an initial matter, the Ethics Commission finds that the municipal official revolving door prohibition set forth in Regulation 1.5.4 does not bar J. Mack Studios from accepting and fulfilling orders for custom apparel and products placed by the Public Schools and the Town, or any of their departments. The Petitioner is not seeking or accepting employment with the Town. Rather, J. Mack Studios is a vendor fulfilling custom orders for goods placed by customers in the ordinary course of its business. The fact that the Town or a municipal agency thereof may place an order with the Petitioner’s company does not transform the Petitioner into an independent contractor performing services for a municipal entity. Contra, A.O. 2018-42 (concluding, inter alia, that Regulation 1.5.4 would bar a fence company owned by a North Smithfield Town Council member from contracting with the town or any town agency if the petitioner had been elected to office, rather than having been appointed to fill a vacancy); A.O. 2008-23 (finding that Regulation 36-14-5014[2] prohibited a Johnston School Committee member, who owned and operated an autobody repair and auto sales business, from both providing repair services to municipal vehicles and accepting appointment to the town towing list). The Commission consistently has advised municipal officials and employees seeking to contract with or provide services to a municipality that they could only do so if the municipality used an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. See A.O. 2018-42 (concluding that a North Smithfield Town Council member who owned a fence company may provide estimates and submit bids to perform work for the Town or its departments, provided that the contracts for such work are awarded through an open and public process); A.O. 2008-14 (finding that the Chairperson of the Coventry Planning Commission may respond to an RFQ to perform municipal engineering services for the Town, provided that he did not participate in the bid specification process and that any contract awarded is pursuant to an open and public bidding process); A.O. 1997-72 (opining that the Charlestown Harbormaster, who also owned and operated a private business that sold and serviced diving equipment, could sell equipment to the Town only if it adhered to an open and public bidding process for such purchases); A.O. 1997-35 (concluding that a Bristol Town Council member’s spouse, who owned and operated a florist shop, could not accept business from the School Department unless the School Department adhered to an open and public bidding process to select vendors for floral services). In Advisory Opinion 2001-22, the Commission addressed the ability of a Coventry Town Council member, who owned a company that sold screen-printed and embroidered shirts and hats, to engage in business with the Town of Coventry. There, the petitioner’s company had been awarded the bid to print t-shirts for the Parks and Recreation Department’s summer program for several years prior to his election to office. The Commission opined that the petitioner’s company could submit a bid to provide t-shirts for the summer program, where the petitioner had no involvement with the Parks and Recreation Department’s development of bid specifications, provided that all contracts were awarded through an open and public bidding process pursuant to § 5(h). The Commission further required the petitioner to recuse from the Council’s review of the bid award recommendation, as well as the final selection and contract award. Similarly, in accordance with § 5(h) and prior advisory opinions, the Ethics Commission finds that the Petitioner’s company may engage in business with the Public Schools and the Town, or any of their departments, only if such transactions occur pursuant to an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. Given the nature of the Petitioner’s business, fulfilling individual orders for custom-made goods, each order placed by a public entity would constitute a contract subject to the requirements of § 5(h). Additionally, the prohibitions affecting the Petitioner may extend beyond the open and public bidding requirement. The Commission has previously found that public officials who participate in the bid development process for a public entity place themselves, their family members and their business associates in a privileged position with respect to other bidders and, thus, contravene the “open and public process” required under § 5(h). Therefore, if the Petitioner’s company seeks to do business with the Public Schools, the Petitioner must recuse from participation if the School Committee is involved with the development of bid specifications and the selection and awarding of bids, as well as from any discussions and voting relative to payment of invoices. See § 5(a) & (d). Notice of recusal must be filed with the Ethics Commission in accordance with § 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: § 36-14-5(a) § 36-14-5(d) § 36-14-5(h) § 36-14-6 § 36-14-7(a) Commission Regulation 520-00-00-1.4.4 Commission Regulation 520-00-00-1.5.4 Related Advisory Opinions: 2018-42 2008-71 2008-23 2008-14 2003-5 2002-20 2001-22 2000-35 1997-72 1997-35 Keywords: Contracts Private Employment Transactions with Subordinates Vendor [1] See https://www.jmackstudios.com/ (Last accessed April 16, 2019). [2] In May 2018, the Ethics Commission codified the Code of Ethics into the Rhode Island Code of Regulations (“RICR”), a uniform state code containing the rules and regulations of the various Rhode Island agencies. In order to do so, the Ethics Commission reformatted and renumbered the Code of Ethics. As a result, Commission Regulation 36-14-5014 now corresponds to Regulation 1.5.4.