Advisory Opinion No. 2001-57

Re: Thomas Lazieh

QUESTION PRESENTED

The petitioner, a Central Falls City Councilor, a municipal elected official, requests an advisory opinion as to whether he may 1) receive a Storefront Improvement Loan administered by the Central Falls Planning Department; 2) submit a bid for the purchase of municipal property; 3) serve on the Board of License Commissioners; and 4) participate in the Council and/or Board’s consideration of matters involving his tenants.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the petitioner, a Central Falls City Councilor, a municipal elected official, may receive a Storefront Improvement Loan administered by the Central Falls Planning Department, provided that he 1) receives funds allocated by the Council prior to his election; and 2) recuses from participating and voting on salaries and/or personnel matters involving the members of the Planning Department who process and approve the individual loan applications. Further, he may bid upon the sale of municipal property, provided that 1) he did not participate in the Council’s decision to sell the property and/or establish bid specifications; 2) the availability of said property is publicly noticed; 3) he did not obtain any confidential information relating to said property through his public position; 4) he does not appear before the Council; and 5) he recuses from the Council’s consideration of all matters relating to the disposition of said property. Finally, the Code of Ethics does not preclude his service on the Board of License Commissioners. However, as both a Councilor and Board member, he must recuse himself from participation and/or vote on any matters that would have a financial impact upon his tenants, who are his business associates under the Code of Ethics.

In August of 1999, the petitioner filed an application for a Storefront Improvement Loan for his commercial property, located at 551-555 Dexter Street, with the Central Falls Planning Department. The Planning Department administers the Storefront Improvement Loan program as part of the City’s Community Development Block Grant (CDBG) program. Although the Council votes to participate in the CDBG program each year, the Planning Department establishes eligibility criteria and approves all loan applications. Prior to his election to office in November of 1999, the Council voted to participate in the CDBG program. The petitioner advises that an excess of funds is available due to a lack of applicants and funding remains available from 1999. Further, the City recently demolished municipal property that abuts his commercial property on Dexter Street and publicly noticed it for sale. The petitioner has submitted an offer to purchase in response to the notice. He represents that, upon resolution by the Council, the Mayor would execute the property’s transfer to the successful bidder. He indicates that the successful bidder would not have to appear before the Council to effectuate the purchase and transfer.

Finally, the petitioner is the Chair of the Central Falls Board of License Commissioners, which is comprised of all five Council members and the Mayor. He advises that he has leased two rental units of his Dexter Street commercial property to a liquor store and a restaurant. Previously, his family had operated a liquor store at that location, but in December 1998 he sold all interests and transferred the Class A license to another individual. A multi-year property lease currently exists between the licensee and the petitioner. He indicates that he has recused himself from participation in matters involving this licensee and has not received campaign contributions from this or any other licensee. The petitioner informs that there are a total of four Class A licensees and approximately thirty Class B licensees within the municipality.

Under the Code of Ethics, a public official may not have any interest, financial or otherwise, direct or indirect, which is in substantial conflict with the proper discharge of his duties in the public interest. See R.I. Gen. Laws § 36-14-5(a). A substantial conflict of interest occurs if he has reason to believe or expect that he or any family member or business associate, or any business by which he is employed or represents will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. See R.I. Gen. Laws § 36-14-7(a). He also is prohibited from using his public position or confidential information received through his position to obtain financial gain, other than that provided by law, for himself, a family member, business associate, or any business by which he is employed or represents. See R.I. Gen. Laws § 36-14-5(d). Further, the Code provides that while serving and for a period of one year after he has officially terminated his position with any state or municipal agency, he shall not appear before the state or municipal agency on which he had served. R.I. Gen. Laws §§ 36-14-5(e)(1) and 5(e)(4). The legislative intent of this revolving door provision presumably is to minimize any influence the former public official may have with respect to his former agency/employer.

Further, no person subject to the Code or any business associate of said person may enter into a contract with a 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(f) of the Code requires an official to recuse himself from voting or otherwise participating in the consideration and/or disposition of a matter involving a business associate. See R.I. Gen. Laws § 36-14-5(f). Under R.I. Gen. Laws § 36-14-2(3), a “business associate” is defined as any individual or entity joined with a public official “to achieve a common financial objective.” Finally, a public official or employee may not accept any reward or promise of future employment in return for or based on any understanding or expectation that his vote, official action or judgment would be influenced thereby. See R.I. Gen. Laws § 36-14-5(g).

In an analogous context, the Commission previously concluded that a West Warwick Town Councilor could participate in a CDBG Business Assistance Loan program administered by the Town, provided that any loan funds awarded to him would not be allocated from the 1999 grant funds upon which he had voted. See e.g., A.O. 2000-28. There, the Council established the eligibility criteria prior to the Councilor’s election to office. Similarly, the Commission concludes that the petitioner may participate in a Storefront Improvement Loan program administered by the Central Falls Planning Department, provided that any loan funds awarded to him would not be allocated from the CDBG funds upon which he voted as a Councilor. Here, due to a lack of applicants, funds remain available from 1999 that were allocated prior to his election to office. Further, the petitioner has no involvement with the Planning Department’s development of eligibility criteria nor does the Council participate in the review or selection of loan applications. Absent some other prohibited involvement or interest, the Code does not prohibit his receipt of a Storefront Improvement Loan merely because he is a Councilor. In the event that he receives a loan award, he must recuse himself from participation and/or vote on salaries and/or other personnel issues involving the members of the Planning Department who process and approve the individual loans. Determining said salaries or participating in other personnel matters would constitute a substantial conflict of interest and would likely impair the petitioner’s independence of judgment.

The Code of Ethics also does not bar the petitioner from seeking to purchase municipal property which abuts his commercial property. As a general rule, municipal employees and officials may bid on property offered for sale provided that the municipality adheres to the open and public bidding process required by R.I. Gen. Laws § 36-14-5(h). The Commission consistently has concluded that public officials and employees may not bid on contracts where they have participated in the bid development process. Under the Code, participation in the bid specification process places the public official or employee in a privileged and/or advantageous position with respect to other bidders. See A.O. 98-65 (finding that Town employees who provided substantive input into a decision to put property to tax sale, or as to requirements of the bids, may not bid on the property). Therefore, the petitioner may not have participated in the Council’s decision to sell the property and must recuse from participation and/or vote on all matters relating to its subsequent disposition. He is prohibited from using confidential information received through his public position to obtain a personal financial benefit, such as gaining an unfair bidding advantage over other potential purchasers. See R.I. Gen. Laws § 36-14-5(d).

Although the Commission has concluded that individuals subject to the Code may not appear before their own agency or board prior to the expiration of one year from their date of separation, that prohibition does not extend to the performance of ministerial acts. See A.O. 99-108 ; A.O. 97-46. Here, the petitioner represents that his appearance before the Council would not be required to effectuate the property transfer, if he is the successful bidder. Therefore, consistent with its earlier opinions, the Commission finds that the petitioner may bid on the purchase of municipal property, provided that he may not have any personal involvement with a matter before the Council that goes beyond ministerial activities for a period of one year following his date of separation. See R.I. Gen. Laws § 36-14-5(e).

Finally, the Commission concludes that the petitioner may participate in liquor licensing matters as a member of the Board of License Commissioners, as long as those matters do not directly impact his personal financial interests or those of his tenants, who are his business associates under the Code of Ethics. In previous advisory opinions, the Commission has held that the Code does not prohibit members of town and city councils with interests in restaurants/liquor establishments from serving on the town or city council and, generally, from considering matters relating to the zoning or licensing of restaurants and bars. However, an official would be required to recuse from participation when an issue came before the council involving a competing business that was in reasonably close proximity to the official’s own, or that otherwise directly impacted the business in which the official had an economic interest. See e.g., A.O. 99-9 (advising a member of the Narragansett Town Council who owns a restaurant holding a liquor license that he should not participate in matters that directly affect his business and further advising that a direct impact is presumed for any establishment within a close proximity to or otherwise in direct competition with his restaurants); A.O 96-70 (requiring a member of the Newport City Council and the Board of License Commissioners who owns a restaurant holding a liquor license to recuse himself from zoning or licensing matters that concern competitors); A.O. 96-24 (recognizing that an Alternate Member of the Newport Zoning Board of Review who is 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 restaurant, dance clubs, or bed and breakfasts that are located within 500 feet of the petitioner’s businesses); A.O. 94-24 (concluding that the Central Falls Mayor, as a member of the Board of Licenses Commission and as a part-owner of a family business holding a liquor license, should not participate in decisions involving his family’s competitors). See also A.O. 98-151.

As a general rule, an individual’s business interests, or those of his business associates’ would not be impacted directly if his business were not in close proximity to the subject business. If, however, another establishment is a direct competitor of an establishment in which the petitioner has an interest, a direct impact would be presumed. Pursuant to Sections 5(a) and (d) of the Code, the petitioner also may not take any official action as a Board member that could financially impact his business associates. Section 5(f) of the Code requires the petitioner to recuse himself from voting or otherwise participating in the Council and/or Board’s consideration of matters involving his business associates. Accordingly, he must recuse from participation and/or vote in both Council and Board matters involving his tenants, given their business association under the Code of Ethics. See A.O. 98-16; A.O. 99-7.

The Commission finds that the Code does not bar the petitioner from participating and voting in the Board’s consideration of matters that do not involve Class A licenses. This opinion is without prejudice as to the petitioner’s right to seek further guidance from the Commission, specifically relating to his participation in Class A licensing matters. Notices of recusal on any of these matters should be filed with both the Central Falls City Council and the Ethics Commission pursuant to R.I. Gen. Laws § 36-14-6.

Code Citations:

36-14-2(3)

36-14-5(a)

36-14-5(d)

36-14-5(e)

36-14-5(f)

36-14-5(h)

36-14-6

36-14-7(a)

Related Advisory Opinions:

2001-48

2001-16

2000-88

2000-62

2000-28

99-122

99-105

99-83

99-46

99-35

99-9

99-7

98-151

98-124

98-123

98-95

98-86

98-65

98-50

98-46

98-22

97-66

97-51

97-50

97-48

96-70

96-24

95-105

95-90

95-29

95-24

94-24

92-19

91-41

91-18

93-57

89-103

83-44

83-39

Related Case Law:

Celona v. Rhode Island Ethics Commission, 544 A.2d 582, 586 (R.I. 1988)

Keywords:

Business associate

Business interest

Family: business interest

Financial interest

Grants

Government loans