Advisory Opinion No. 2002-69

Re: H. Milton Read, Jr.

QUESTION PRESENTED

The petitioner, Chairperson of the Trustees of the South Kingstown School Funds, a municipal appointed position, requests an advisory opinion as to whether he must recuse from voting on investment proposals from Fleet Financial and the Washington Trust Company and/or their subsidiaries, given that he is a retired commercial banker who receives pensions from those companies.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the petitioner, Chairperson of the Trustees of the South Kingstown School Funds, a municipal appointed position, may participate and vote on investment proposals from Fleet Financial and the Washington Trust Company, including their subsidiaries, despite the fact that he receives pensions from those companies. The petitioner has no present business association or employment relationship with said companies that would trigger the prohibitions set forth in R.I. Gen. Laws §§ 36-14-5(a) or 5(d).

The petitioner advises that he is the Chairperson of the Trustees of the South Kingstown School Funds, which is charged with the care and management of funds donated to the Town for school or educational purposes. He represents that the South Kingstown Town Council appoints five individuals to the Trustees to serve a five-year term. He states that the Trustees utilize the services of a professional investment management concern in the employment of its assets, which consist of fixed income, equity and cash deposits.

The Trustees is a corporation created by an Act of the General Assembly at its January Session in 1911. The Corporation is authorized to receive and manage all school and educational funds. It is vested with management of eight endowment funds, which operate on a cash basis with income being received from investments and reinvested income. The Trustees make an annual report to the Town regarding the funds and transfer income arising from the funds to the Town in an orderly fashion. The Trustees meet at least once per year to review all fund performances, and members of the committee should have a strong financial management background to insure proper management of the portfolio. The funds presently are held by Fleet National Bank, and the Trustees are provided an advisory service on recommended changes in the portfolio composition.

The petitioner informs that he is a retired commercial banker who receives pensions from Rhode Island Hospital Trust and The Washington Trust Company. He indicates that the Trustees currently are reviewing past performance, examining their goals and objectives and the suitability of their present diversification and asset allocation. He seeks guidance as to whether the Code requires him to recuse from the Trustees’ consideration of proposals from Fleet Financial and The Washington Trust Company and/or their subsidiaries.

Under the Code of Ethics, a public official 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. See R.I. Gen. Laws § 36-14-5(a). An official has 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 public official's activity, to himself, a family member, business associate or his employer. See R.I. Gen. Laws § 36-14-7(a). Also, a public official may not use his public office or confidential information received through his office to obtain financial gain, other than that provided by law, for himself, a family member, business associate or an employer. See R.I. Gen. Laws § 36-14-5(d). Business associates are defined as individuals or entities joined together to "achieve a common financial objective." R.I. Gen. Laws § 36-14-2(3).

The petitioner is a retired commercial banker who receives a pension from his former employers, Rhode Island Hospital Trust (now Fleet Financial) and The Washington Trust Company. Apart from his status as a pensioner, the petitioner has no present employment relationship or business association with the aforesaid companies that would prohibit his participation and vote in the Trustees’ consideration of investment proposals submitted by them and/or their subsidiaries. See A.O. 98-45 (opining, inter alia, that the State PUC Administrator may participate in matters relating to the telecommunications industry or Bell Atlantic (formerly Nynex), despite the fact that he receives a retirement pension from Nynex). The mere fact that the petitioner receives a pension from these companies is too remote to necessitate his recusal on matters affecting Fleet Financial or The Washington Trust Company. There is no evidence to suggest that any actions that he may take as Chairperson of the Trustees of South Kingstown School Funds could affect his pension interest in these companies.

Code Provisions:

36-14-2(3)

36-14-5(a)

36-14-5(d)

36-14-7(a)

Related Advisory Opinions:

2001-8

98-45

Keywords:

Business Associate

Financial Interest

Pension Benefit