Advisory Opinion No. 2001-67

Re: William L. Bernstein, Legal Counsel to the Pascoag Utility District

QUESTION PRESENTED

The petitioner, Legal Counsel to the Pascoag Utility District, a regional entity, requests an advisory opinion as to whether an individual may seek elective office as a member of the District Board of Commissioners, a regional elected position, given that he sold real estate to the District in August 2001.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the Code of Ethics does not prohibit an individual who sold property to the Pascoag Utility District from seeking elective office as a member of the District Board of Commissioners, a regional elected position. However, in the event that the candidate is successful in his bid for office, he must recuse from the Board’s consideration of any claims arising from his real estate transaction with the District.

The petitioner advises that the Rhode Island legislature created the Pascoag Utility District to provide electric power and water to residents of the Town of Burrillville. The District is governed by a seven-member Board of Commissioners who are elected by the residents and rate-payers of the District. He represents that in August 2001, a Board candidate sold a $435,000.00 property to the District, which now houses the District’s administrative offices. Although there have been no discoveries of major property defects, he informs that it is too soon to determine if there are any latent defects and there exists the potential for the District to raise claims against the candidate.

The Code of Ethics provides, inter alia, that a public official may not participate in matters where he has a substantial conflict of interest, use his office for pecuniary gain, or accept employment that would impair his independence of judgment as to his official duties. See R.I. Gen. Laws § 36-14-5(a), 5(b), 5(d), 7(a). A substantial conflict of interest exists if the public official has reason to believe or expect that he, or a 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 §§ 36-14-5(a), 7(a). Section 5(f) of the Code requires a business associate to notify the agency of the nature of his or her business relationship with the public official and requires the public official to recuse himself from voting or participating in consideration and disposition of the matter at issue. An individual is a "business associate" of a public official if the official and that individual are "joined together" to "achieve a common financial objective." See R.I. Gen. Laws § 36-14-2(3).

In past advisory opinions, the Commission has required public officials to recuse from consideration of a matter if the official had an ongoing or anticipated business relationship with an individual or entity appearing before his or her public body. See e.g., A.O. 94-60 (concluding that a member of the North Kingstown Planning Commission could not participate in a subdivision proposal submitted by an engineer where the member planned to engage in business projects within the immediate future with that engineer). See also A.O. 96-100. However, the Commission has permitted public officials to participate in matters involving a former associate if it is clear that the business relationship has terminated and that the parties do not anticipate any future business dealings. See A.O. 99-78 (advising a Narragansett Planning Board member that he may participate in the Board’s consideration of matters involving a personal acquaintance and/or a professional who previously represented him, provided a) no business relationship currently exists between the parties and b) it is not reasonably foreseeable that the parties will engage in a future business relationship); A.O. 96-30 (concluding that a City Councilor could participate in a matter involving an individual he represented more than five years ago as an attorney given that there was neither an ongoing relationship with the individual nor any specific plans to represent the party in the future). See also A.O. 96-68; A.O. 96-62.

Here, the real estate transaction at issue has been completed and no ongoing business association exists between the Board candidate and the District. However, there remains the possibility that the District may raise a claim of latent defects pursuant to the completed transaction. In an analogous context, the Commission previously ruled that a Burrillville Planning Board member must recuse from the Board’s consideration of matters involving a developer with whom he had a one-year home warranty given that, although the developer had been paid in full, certain warranty items had not been performed. See e.g., A.O. 2000-87. There, the Commission found that the existence of a warranty between a home-owner and a developer who has been paid in full does not, in and of itself, trigger a business association under the Code. It opined that, unless and until the developer completed the submitted repair items, performance of the warranty is subject to dispute and it is reasonably foreseeable that litigation might arise.

The Commission concludes that the Code of Ethics does not prohibit the candidacy of an individual who sold property to the District in August 2001. However, in the event that he is successful in his bid for office, he must recuse himself from the Board’s consideration of any matters or claims arising from his real estate transaction with the District. See R.I. Gen. Laws § 36-14-5(a),(b),(d), and (f). Notice of recusal should be filed with both the Pascoag Utility District and the Ethics Commission in accordance with R.I. Gen. Laws § 36-14-(6).

Code Citations:

36-14-2(3)

36-14-5(a)

36-14-5(b)

36-14-5(d)

36-14-5(f)

36-14-6

36-14-7(a)

Related Advisory Opinions:

2000-87

2000-34

99-141

99-78

98-141

98-117

96-100

96-68

96-62

96-30

94-60

Keywords:

Business associate

Candidate

Recusal