Advisory Opinion No. 2010-1 Rhode Island Ethics Commission Advisory Opinion No. 2010-1 RE: The Honorable Frank T. Caprio QUESTION PRESENTED The Petitioner, the General Treasurer of the State of Rhode Island, a state elected position, requests an advisory opinion regarding the appropriate process for handling certain claims under the Crime Victims' Compensation Program relating to the Station Nightclub fire. RESPONSE It is the opinion of the Rhode Island Ethics Commission that the Petitioner, the General Treasurer of the State of Rhode Island, a state elected position, will not violate the Code of Ethics by handling certain claims under the Crime Victims' Compensation Program relating to the Station Nightclub fire pursuant to the procedures set forth in Option 2 of his request for an advisory opinion, provided that the Petitioner recuses from any interaction or discussion concerning these matters. The Petitioner is the General Treasurer of the State of Rhode Island ("General Treasurer"). As General Treasurer, the Petitioner is statutorily tasked with administering the Crime Victims' Compensation Program ("CVCP"), which provides monetary compensation to victims of violent crime. See R.I. Gen. Laws §§ 12-25-16 to 31. Pursuant to statutory procedures, a program administrator designated by the General Treasurer investigates applications for compensation and then makes or denies an award. R.I. Gen. Laws § 12-25-18(f). The Petitioner notes that because the CVCP is a fund of last resort, by statute the program will pursue its subrogation rights to recover any payments that it has awarded if the victim or his or her family receives subsequent payments from a third party for the same injuries. See R.I. Gen. Laws § 12-25-23(b). Such subrogation by the CVCP is only required "to the extent that the sum of the payments [received by a victim] . . . are in excess of the total compensable injuries suffered by the victim." Id. The Petitioner states that the initial decision of whether or not to seek subrogation is made by the CVCP's program administrator. If aggrieved by such decision, a victim has the right to seek reconsideration with the General Treasurer or his designee. The Petitioner notes that he generally designates his Chief of Staff/Chief Legal Counsel, Mark A. Dingley, to perform such reconsideration. Thereafter, if the victim remains aggrieved, he or she may appeal the decision to the Superior Court pursuant to the Administrative Procedures Act. See R.I. Gen. Laws § 12-25-18(i); § 42-35-15. The Petitioner states that one hundred sixty-five (165) victims of the Station Nightclub fire tragedy received compensation in varying amounts from the CVCP, and that currently there is before the Federal District Court a proposed global settlement which includes one hundred fifty-nine (159) of the victims who previously received CVCP compensation. In the absence of CVCP's waiver of subrogation based upon a determination by the program administrator that the sum of the CVCP payments and the global settlement proceeds do not fully compensate the victims, (see § 12-25-23(b)), the CVCP will seek to recover its payments from the proceeds of the global settlement. The Petitioner informs that all one hundred fifty-nine 159 victims have requested such waiver. The potential conflict arises from the imminent receipt of legal fees from the proceeds of the global settlement by a law firm which has represented several Station Nightclub fire victims, and which is owned and operated by members of the Petitioner's family. The Petitioner represents that, prior to his election as General Treasurer, he was associated with this law firm, Caprio & Caprio, which is operated by members of his family including his father, Judge Frank Caprio, Sr., his brother, David Caprio, Esq., and his second cousin, Anthony Caprio, Esq. The Petitioner represents that "his affiliations with that firm have completely ceased since his election," that he has never personally been involved in any of the matters relating to the Station Nightclub fire handled by Caprio & Caprio, and that he has no interest, financial or otherwise, in any of the Station Nightclub actions. The Petitioner has inquired of Caprio & Caprio, as well as of the lead plaintiffs' attorneys in the Federal District Court action, Mark Mandell, Esq. and Patrick T. Jones, Esq., as to the impact of CVCP subrogation upon the amount of attorneys' fees received by the victims' attorneys. Based upon these inquiries, the Petitioner relates that the CVCP's decision relative to waiver of subrogation "will not affect the amount of fees received by any of the attorneys under the Global Settlement." Rather, he states that "contingent fees to be received by attorneys will be based on the gross award each victim receives in the Global Settlement without regard to CVCP reimbursement obligations." To date, in order to avoid any appearance of impropriety, the Petitioner states that he has recused himself from any involvement in the determination of CVCP awards to Station Nightclub victims. However, in light of the fact of the impending global settlement and of the CVCP's need to make subrogation decisions pursuant to its statutory procedures, the Petitioner seeks advice from the Ethics Commission as to how best to proceed to avoid any violation of the Code of Ethics and to lessen any appearance of impropriety. The Code of Ethics provides that a public official or employee shall not have any interest, financial or otherwise, direct or indirect, or engage in any employment or transaction 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 exists if the official or employee has reason to believe or expect that he or any family member, among others, 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). Also, a public official or employee may not use his public position to obtain financial gain, other than that provided by law, for himself or any member of his immediate family. See R.I. Gen. Laws § 36-14-5(d). While the above provisions generally describe official decisions that result in some sort of a financial impact, Regulation 36-14-5004 on "Nepotism" more broadly prohibits persons subject to the Code of Ethics from participating in public decision-making if he or she has reason to believe that a family member "is a party to or a participant in such matter." Commission Regulation 5004(b)(1). Enumerated family members, for purposes of Regulation 5004, include "father" and "brother." See Commission Regulation 5004(a)(2). Although "first cousin" is included, second cousin is not. Id. Accordingly, to the extent that the Petitioner's father or brother is representing a Station Nightclub fire victim who seeks a waiver of subrogation from the CVCP, Regulation 5004 requires the Petitioner's recusal. The Ethics Commission has acknowledged that in circumstances in which a public official sits atop a chain of command, a complete and effective recusal can be difficult or impossible to achieve, given that upon the official's recusal the matter must still be carried out by one of the official's subordinates. In such cases, so that the necessary work of a public agency can continue, the Commission has approved alternative chain of command structures. For example, in A.O. 2005-14, the Director of the Rhode Island Department of Health (DOH) sought guidance as to how to comply with the Code of Ethics given that the DOH had regulatory authority over his spouse, a physician, and also considering that his spouse was a key employee of a private company that had preexisting contracts with the DOH. In light of the Director's position at the top of the DOH chain-of-command, it was not feasible to prohibit any of the Director's subordinates (all DOH employees) from participating in matters that involved the Director's spouse. Instead, the Commission approved a plan offered by the Director, whereby he would agree to personally recuse from any participation in such matters and any final decision-making would instead be performed by the Managing Director of Health and Human Services, another cabinet-level Director who was not subordinate to the petitioner. See also A.O. 2005-19 (noting that as all employees of a police department are subordinate to the Chief of Police, and since it is not feasible to require the entire department to recuse on matters impacting the Chief's brother, a lieutenant in the department, the Commission found that a proposed, alternative chain-of-command, in which ultimate decision-making as to the Chief's brother would be performed by the Mayor, was reasonable and sufficient to insulate the Chief from apparent conflicts of interest); A.O. 2000-16 (Director of Rhode Island Housing (RIH) must recuse on decisions impacting his spouse who is the Executive Director of a not-for-profit agency that receives funding from RIH, but it is not feasible or required that all other RIH employees also recuse, as long as final decision-making is made by a member of the RIH Board of Directors). As in the above situations, the instant Petitioner finds himself in the position of wanting to recuse, but also realizing that it is not feasible to require that every employee of the Office of the General Treasurer and CVCP similarly recuse. This is particularly true in relation to the CVCP program administrator, who possesses the particular knowledge, experience and statutory authority to initially determine CVCP claims. Therefore, and consistent with prior opinions of the Ethics Commission on similar matters, the Petitioner has fashioned two alternative recusal options for the Commission's consideration. The Petitioner asks whether either option is sufficient to comply with the Code of Ethics and to avoid any appearance of impropriety. If not, the Petitioner seeks the Commission's assistance in formulating an alternative plan. Under Option 1, the Petitioner will continue to have no involvement whatsoever relating to any of the Station Nightclub fire determinations, including discussions with any of his staff. Pursuant to the normal procedure, the CVCP program administrator will independently determine whether subrogation is required. Requests for reconsideration will be handled as in the normal course by the Petitioner's Chief of Staff/Chief Legal Counsel, Mark A. Dingley, with no involvement by the Petitioner. Pursuant to statute, appeals from the Chief of Staff/Chief Legal Counsel may proceed to the Superior Court under the Administrative Procedures Act. In the alternative, if the above procedure is deemed insufficient or inappropriate, the Petitioner seeks approval of Option 2. As in the first option, the Petitioner will have no involvement or discussions relating to the Station Nightclub fire determinations. Also, as with the first option, the CVCP program administrator will continue to make the initial, independent determination of whether subrogation is required. In Option 2, however, requests for reconsideration will be transferred and handled outside of the Office of the General Treasurer. The Petitioner states that the Department of Administration has agreed to make one of its Hearing Officers available for the purpose of reconsidering subrogation decisions for Station Nightclub fire victims. Such Hearing Officer would base his or her decision upon an independent application of the statutory factors, and would be outside of the Petitioner's chain of command and free of his influence. Appeals from the Hearing Officer's decision would proceed directly to Superior Court. In the Commission's view, both Option 1 and Option 2 represent good-faith efforts to address the conflict of interest issues raised herein. Although both options provide for an initial decision as to subrogation by the CVCP's program director, who is an indirect subordinate of the Petitioner, we believe that it would be an unreasonable hardship to the victims and the State of Rhode Island to require that such an important review and decision be made by a substitute who does not possess the knowledge, experience or statutory authority of the CVCP's program administrator. Furthermore, we are comforted by the Petitioner's recusal and representations that he will have no interaction or discussions with the program administrator concerning these matters. Therefore, as with the previously discussed advisory opinions, we are of the opinion that the implementation of this aspect of either option is reasonable and sufficient to insulate the Petitioner from apparent conflicts of interest. However, unlike the prior, related advisory opinions in which the department heads were able to defer their ultimate decision-making authority to a supervisory board or appointing authority, there is no such supervisory authority over an elected General Officer of the State of Rhode Island. In Option 2, the Petitioner has shown a willingness to avoid the appearance of impropriety by arranging the additional precaution of transferring these matters outside of his jurisdiction, and given the Department of Administration's acceptance of such transfer, we are reluctant to advise the Petitioner to do any less. Accordingly, we approve the procedures offered and outlined by the Petitioner in Option 2 and are of the opinion that in these particular circumstances such process is reasonable and sufficient to insulate the Petitioner from apparent conflicts of interest. We also wish to clarify that although the Petitioner has indicated a preference for recusal and transfer of all one hundred fifty-nine (159) cases in order to avoid any appearance of impropriety, the Code of Ethics requires such recusal and transfer only relative to those matters involving victims who are represented by the Caprio & Caprio law firm, estimated to number approximately thirty (30) to thirty-five (35). We note that the Petitioner has already filed a notice of recusal with the Ethics Commission, pursuant to the requirements of R.I. Gen. Laws § 36-14-6. Code Citations & Other Statutory Provisions: R.I. Gen .Laws § 12-25-18 R.I. Gen. Laws § 36-14-5(a) R.I. Gen. Laws § 36-14-5(d) R.I. Gen. Laws § 36-14-7(a) R.I. Gen. Laws § 42-35-15 Commission Regulation 36-14-5004 Related Advisory Opinions: 2005-19 2005-14 2000-16 Keywords: Family: Public Employment Nepotism