Advisory Opinion No. 2019-62 Rhode Island Ethics Commission Advisory Opinion No. 2019-62 Approved: October 29, 2019 Re: Richard Epstein QUESTION PRESENTED: The Petitioner, the Vice-Chairman of the Rhode Island Real Estate Commission, a state appointed position, requests an advisory opinion regarding what limitations, if any, the Code of Ethics places upon him, given that he is privately employed by Residential Properties Ltd., a real estate company which is expected to apply to the Real Estate Commission for a license to open and operate a real estate school. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, the Vice-Chairman of the Rhode Island Real Estate Commission, a state appointed position, is prohibited by the Code of Ethics from participating in the Real Estate Commission’s discussions and/or vote relative to Residential Properties Ltd.’s school license application, and in matters involving the establishment of real estate school license caps, since any official action taken by the Petitioner in such matters would have a direct financial impact on his employer. The Petitioner is not prohibited by the Code of Ethics from participating in the review and/or vote on applications for real estate school licenses from other entities, as long as such participation will not have a financial impact upon his employer or his employer’s direct competitors located in close proximity, in which circumstances he will be required to recuse. The Petitioner is the Vice-Chairperson of the Rhode Island Real Estate Commission (“REC”), a nine-member entity within the Department of Business Regulation charged with the review and approval of applications for real estate school licenses, real estate course applications submitted by real estate schools, and school instructor applications. The Petitioner represents that, in his private capacity, he is a real estate agent and a salaried employee with Residential Properties Ltd. (“Residential”) and provides in-house training to other real estate agents. The Petitioner states that Residential is expected to apply for a license to open a real estate school with the initial focus on providing sales representative pre-licensing classes. He further states that the application will be submitted by Residential’s owner, and the Petitioner’s name will neither appear on the application nor would he appear before REC in connection with Residential’s application. The Petitioner represents that he will recuse from any REC discussions and decision-making relative to Residential’s school application. He further represents that there is currently no cap on the number of real estate schools in Rhode Island. Given this set of facts the Petitioner requests guidance from the Ethics Commission regarding what limitations, if any, the Code of Ethics places upon him, given that his employer is expected to apply to REC for permission to open and operate a real estate school. Under 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). A public official will have an interest in substantial conflict with his official duties if he has reason to believe or expect that a “direct monetary gain” or a “direct monetary loss” will accrue, by virtue of the official’s activity, to himself, his family member, his business associate, or any business by which the official is employed or represents. Section 36-14-7(a). The Code further prohibits an official from using his public office or confidential information received though his public office to obtain financial gain, other than that provided by law, for himself or any person within his family, his business associate or any business by which he is employed or represents. Section 36-14-5(d). The Ethics Commission has previously opined that a public official is required to recuse himself from participation and/or vote on any matter in which he or his employer has a business or financial interest or which involves the financial interests of his or his employer’s direct competitor that is in reasonably close proximity to the official or his employer’s business. See, e.g., A.O. 2017-32 (opining that a Newport Planning Board member was required to recuse from participation in matters before the Planning Board involving hotels or other short-term rental properties that were in close proximity to, or direct competition with, the boutique hotel she was helping to develop); A.O. 2004-38 (opining that a member of New Shoreham Town Council, who worked at a restaurant with a liquor license, was requires to recuse on any liquor licensing matters that were likely to result in a direct financial impact upon his employer or on its direct competitors, as such matters were also likely to financially impact the petitioner’s employer); A.O. 2002-23 (opining that a CRMC member who was an owner of Brown & Howard Wharf Marina on Newport Harbor could not participate in CRMC matters pertaining to Waites Wharf, a competitor within 1,500 feet of the petitioner’s property); A.O. 99-9 (opining that a Narragansett Town Councilor who owned a restaurant holding a liquor license could not participate in matters directly affecting his business, and further advising that a direct financial impact was presumed in matters involving establishments within a close proximity to or otherwise in direct competition with his restaurant); A.O. 96-24 (recognizing that an Alternate Member of the Newport Zoning Board of Review who was part owner and operator of a hotel and landlord to a restaurant and dance club, may not participate in matters affecting other hotels or matters affecting restaurants, dance clubs, or bed and breakfasts that were located within 500 feet of the petitioner’s businesses). However, the Commission has also opined that recusal is not required from matters involving similar businesses which are not in close proximity to the public official or his employer’s business, or where the two businesses are otherwise not in competition. See A.O. 2004-13 (opining that a Scituate Town Councilor who leased his property to persons running a family restaurant with a Class BV liquor license could participate in the Town’s issuance of a Class C liquor license for a saloon located three miles from the Councilor’s property); A.O. 2000-62 (opining, inter alia, that Providence Tourism Council Deputy Director, also a minority stockholder in a Providence restaurant, could participate in matters involving the restaurant industry in Providence, or individual members of that industry, provided that such matters did not directly impact his restaurant and/or his personal financial interests). Here, the Petitioner represents that there is no cap on the number of real estate schools in the state and that he will recuse from participating in all REC discussions and decision-making relative to his employer’s school application. In fact, such recusal is appropriate and necessary under the Code of Ethics. However, it is the opinion of the Ethics Commission that the Petitioner is not required to recuse from participating in the review and/or vote on school applications from other entities as long as such participation will not have a financial impact upon his employer or his employer’s direct competitors located in close proximity, in which circumstances he will be required to recuse. The Petitioner is prohibited from participating in any REC matters involving the establishment of real estate school license caps, since any official action taken by the Petitioner in such matters would have a direct financial impact on his employer. See A.O. 2006-9 (opining that a member of the New Shoreham Town Council was prohibited from participating in the Town Council’s review of a Class A alcoholic beverage license, given that his landlord was a holder of one of only two licenses in the Town, and from participating in establishing alcoholic beverage license caps for either Class A or Class B alcoholic beverage licenses, given that his landlord/tenant relationship with a Class A alcoholic beverage license holder and his employment relationship with a Class B alcoholic beverage holder). Notice of recusal shall be filed 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: § 36-14-5(a) § 36-14-5(d) § 36-14-6 § 36-14-7(a) Related Advisory Opinions: A.O. 2017-32 A.O. 2006-9 A.O. 2004-38 A.O. 2004-13 A.O. 2002-23 A.O. 2000-62 A.O. 99-9 A.O. 96-24 Keywords: Employer Competitor Licensing