Advisory Opinion No. 2021-25

Rhode Island Ethics Commission

Advisory Opinion No. 2021-25

Approved: April 6, 2021

Re: The Honorable Ryan Pearson

QUESTION PRESENTED:

The Petitioner, a legislator serving as a member of the Rhode Island Senate, a state elected position, requests an advisory opinion regarding whether he may participate in the General Assembly’s discussions and voting relative to proposed legislation that would allow Twin River Casino Hotel to extend its debt leverage ratio limits during the extension of its lottery contract with the State of Rhode Island, given that the Petitioner is privately employed by a commercial lending institution which currently services Twin River Casino Hotel.

RESPONSE:

It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a legislator serving as a member of the Rhode Island Senate, a state elected position, may participate in Senate discussions and voting relative to proposed legislation that would allow Twin River Casino Hotel to extend its debt leverage ratio limits during the extension of its lottery contract with the State of Rhode Island because, notwithstanding that the Petitioner is privately employed by a commercial lending institution which currently services Twin River Casino Hotel, the financial impact of the legislation upon the Petitioner’s employer is both hypothetical and indirect.

The Petitioner was first elected to the Rhode Island Senate in 2013 and has served in that capacity continuously since.  He also serves as a member of the Senate Finance Committee (“Finance Committee”).  In his private capacity, the Petitioner is employed by Citizens Bank (“Citizens”) as a Vice President of Consumer Lending.  He identifies among his responsibilities the origination and management of consumer lending products such as mortgage, student, and auto loans.

The Petitioner states that on January 19, 2021, Bill Number S-0040 (“legislation”) was introduced relative to a joint venture between International Game Technology PLC (“IGT”) and Twin River Casino Hotel (“Twin River”) which proposes an extension of both entities’ lottery contracts with the State of Rhode Island, and also contains a provision that would allow Twin River to extend its debt leverage ratio limits.[1]  He further states that an increase to Twin River’s debt leverage ratio limits would allow Twin River to borrow more money.  The Petitioner represents that the legislation does not guarantee that Citizens will be hired by Twin River to service any of its additional lending needs.  The Petitioner further represents that, upon inquiry to internal colleagues at Citizens who oversee the bank’s relationship with Twin River, he was advised that there is no agreement in place that guarantees that Citizens would be the lender from which Twin River would borrow more money, and also learned that lending to Twin River is not exclusive to Citizens, as Citizens is aware of several other lenders currently servicing Twin River’s commercial lending needs.  He states that there are 420 nationally chartered commercial lending institutions registered with the Federal Reserve, and at least 18 smaller banks operating in the State which could provide commercial lending services to Twin River, adding that the commercial lending industry serves borrowers consistently seeking the most competitive rates and best terms.  It is in the context of these facts that the Petitioner seeks guidance from the Ethics Commission relative to his ability to participate in discussions and voting on the legislation during Finance Committee hearings and during proceedings before the entire Senate.[2] 

A person subject to the Code of Ethics may not participate in any matter in which he has an interest, financial or otherwise, which is in substantial conflict with the proper discharge of his duties in the public interest.  R.I. Gen. Laws § 36-14-5(a).  A substantial conflict of interest exists if a public official has reason to believe or expect that he, or any person within his family, or his business associate, or any business by which he is employed, will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity.  Section 36-14-7(a).  Additionally, a person subject to the Code of Ethics may not use his public office or confidential information received through his public office to obtain financial gain for himself, his family member, his business associate, or any business by which he is employed or which he represents.  Section 36-14-5(d).   

In order to determine whether the above provisions of the Code of Ethics are implicated, the Ethics Commission must ascertain whether, in this particular case, the Petitioner’s employer will be directly financially impacted by the official action that is under consideration.  If a direct financial impact, be it positive or negative, is not reasonably foreseeable, then the Petitioner is not required by these provisions of the Code of Ethics to recuse from participation in discussions and voting on the issue.  See A.O. 2021-17 (opining that a member of the Rhode Island House of Representatives could participate in the General Assembly’s discussions and vote on legislation that would eliminate the cost of obtaining a criminal-records check required for employment with child care providers, notwithstanding that the Petitioner owned and/or managed a number of child care centers in Rhode Island and voluntarily reimbursed the applicants she hired for the cost of obtaining a criminal-records check because, notwithstanding the Petitioner’s choice to voluntarily reimburse applicants for such fees, the direct financial impact of the legislation would be upon the applicants rather than the child care centers at which they sought employment); A.O. 2019-25 (opining that a member of the Cranston City Council could participate in City Council discussions and voting relative to a proposed ordinance that would ban the use of plastic bags by Cranston business establishments, notwithstanding that the petitioner owned and operated a restaurant in Cranston, given the petitioner’s representations that the proposed ordinance’s ban on plastic bags would have no impact on his current operations.  Here, the direct financial impact of the Petitioner’s proposed participation in the discussions and voting on the proposed legislation would be upon Twin River, allowing it to extend its debt leverage ratio limits.  There is the potential for an indirect financial impact upon not only Citizens, but every other commercial lending institution from which Twin River might seek to borrow.

Even if the impact upon the commercial lending institutions from which Twin River might seek to borrow were direct, based upon the foregoing representations, such impact would likely be substantially the same for the more than 438 commercial lending institutions which would then have  the opportunity to compete for potential business from Twin River, thereby justifying the application of the class exception found in section 36-14-7(b) of the Code of Ethics.[3]  See, e.g., A.O. 2018-31 (applying the class exception and opining that a legislator serving in the Rhode Island Senate, who in her private capacity was an attorney, could participate in the legislative process regarding proposed legislation to eliminate the statute of limitations applicable to civil actions alleging sexual abuse, given that the legislation would apply equally to all alleged victims of abuse and their attorneys). 

Accordingly, based upon the Petitioner’s representations, a review of the applicable provisions of the Code of Ethics, and consistent with prior advisory opinions issued, it is the opinion of the Ethics Commission that the Petitioner may participate in Senate discussions and voting relative to the proposed legislation.

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)                           
§ 36-14-7(a)   
§ 36-14-7(b)               

Related Advisory Opinions:  
A.O. 2021-17 
A.O. 2019-25 
A.O. 2018-31 

Keywords:      
Class Exception         
Financial Interest

[1] The Petitioner states that during the 2020 legislative session, similar legislation was proposed and scheduled for hearing before the Finance Committee, of which the Petitioner was a member.  The Petitioner further states that, because he learned in March of 2020 that Twin River was a commercial banking client of Citizens and had requested that bank personnel provide independent expert testimony before the Finance Committee relative to the industry standard on leverage ratios, he did not attend that hearing or participate in discussions or voting in subsequent hearings on the proposed legislation.  The Petitioner represents that Citizens has not been asked to testify before the Finance Committee or the full Senate concerning S-0040 and that there is no expectation that Citizens will do so. 
[2] The Petitioner states that it is currently unknown whether the legislation would be presented to the entire Senate as a stand-alone bill or incorporated into the FY2022 State Budget.
[3] The class exception states that a public official will not have an interest in substantial conflict with his public duties if any benefit or detriment accrues to him or his family member, his employer or his business associate “as a member of a . . . group, or of any significant and definable class of persons within the . . . group, to no greater extent than any other similarly situated member of the . . . group, or the significant and definable class of persons within the . . . group.”  Section 36-14-7(b).  When determining whether any particular circumstance supports and justifies the application of the class exception, the Ethics Commission will consider the totality of the circumstances.  Among the important factors considered are: 1) the description of the class; 2) the size of the class; 3) the function or official action being contemplated by the public official; and 4) the nature and degree of foreseeable impact upon the class and its individual members as a result of the official action.