Advisory Opinion No. 96-59

Re: W. Bart Lloyd

A. QUESTION PRESENTED

The Assistant Director of the Rhode Island Housing and Mortgage Finance Corporation (RIHMFC) requests an advisory opinion on behalf of a former employee of the Rhode Island Housing and Mortgage Finance Corporation (RIHMFC) who served as the Operations Supervisor in the Department of Homeownership Opportunity. The petitioner asks whether the former employee may work for a private company/institution within a year of leaving state service as either a mortgage originator or a mortgage underwriter if the private entity requests RIHMFC to purchase mortgages/loans.

B. SUMMARY

It is the opinion of the Rhode Island Ethics Commission that the Code of Ethics, R.I. Gen. Laws § 36-14-5(e), will not prohibit a former employee of Rhode Island Housing and Mortage Finance Corporation (RIHMFC) from working in the private sector as either a mortgage originator or a mortgage underwriter within a year of leaving state service. In reaching this opinion, the Commission recognizes that the former employee, who may be responsible for submitting loans to RIHMFC for purchase and otherwise communicating with officials from RIHMFC if employed as a mortgage underwriter, is not "representing" the interests of his private employer before RIHMFC, as the term is defined in R.I. Gen. Laws § 36-1-2(10), since the former employee's involvement would be ministerial in nature and RIHMFC's officials would use little or no discretion to review submitted loan applications. Also, the former employee, if employed as a mortgage originator, would not be representing the interests of his new employer before RIHMFC since this position would not require him to contact or communicate with officials from RIHMFC regarding an application for purchase.

C. DISCUSSION

1. Facts

The Rhode Island Housing and Mortgage Finance Corporation (RIHMFC) purchases qualified mortgages involving low and moderate income borrowers held by private institutions. Before RIHMFC's involvement, a private company ordinarily a) originates the loan by taking an application and compiling the necessary information from a prospective borrower; and b) underwrites the loan if the application meets certain criteria. The private institution may then decide, if the borrower and transaction qualify, to submit the loan and mortgage to RIHMFC for purchase.

Upon receipt of an application for purchase, loan underwriters from RIHMFC review the loan to ensure that the loan and borrower are qualified. The Petitioner advises that, when reviewing an application, RIHMFC's underwriter may contact the underwriter from the private institution to gather more information relating to the loan. If RIHMFC's underwriter determines that the loan meets certain specified criteria based on the submitted information, he or she will approve the purchase. (The Petitioner advises that, in certain case, there may be "gray" areas which may require some discretion on behalf of RIHMFC's underwriter. For example, to qualify for purchase, a borrower may need three years of credit history. When reviewing an application, if a borrower only has two years of credit history, RIHMFC's underwriter may request an underwriter from a private institution to obtain information from the borrower concerning the limited credit history. If RIHMFC's underwriter is satisfied with the borrower's response, he or she may approve the purchase.) When considering the application, RIHMFC's underwriter may require the private entity submitting the application to present additional information relating to a borrower.

Recently, an Operations Supervisor for RIHMFC in the Department of Homeownership Opportunity informed officials from RIHMFC of his intentions to terminate his employment. The employee also has informed RIHMFC that after leaving state service he may seek employment in the private sector as a mortgage originator or a mortgage underwriter. The Petitioner advises that, in either position, the former employee may be involved with loans which could be submitted to RIHMFC for purchase. More specifically, the Petitioner advises that, a) as a mortgage originator, although the private employer may submit the resulting mortgage/loan to RIHMFC for purchase, the former employee would have no involvement with this application. However, if the former employee is employed as an underwriter, he would be responsible for submitting the loan to RIHMFC for purchase and corresponding with RIHMFC's officials regarding the application for purchase.

2. Analysis

The Code of Ethics, R.I. Gen. Laws § 36-14-5(e)(4), prohibits a former employee of a state agency from representing another person or entity before that agency for a period of one year after the employee has left state service. Under the definition set forth in R.I. Gen. Laws § 36-14-2(10), a former employee will "represent" another person or entity before his or her former employer if "he or she is authorized to act, and does in fact act, as the other person's attorney-at-law or his or her attorney-in-fact in the presentation of evidence or arguments before that agency for the purpose of influencing the judgment of the agency in favor of that other person." (Under R.I. Gen. Laws § 36-14-2(6), the definition of "person" includes both an individual or business entity.)

In a past advisory opinion, we have recognized that a former employee of a state or municipal agency will not risk a violation of R.I. Gen. Laws § 36-14-5(e)(4) if he represents the interests of his private employer before said agency if the representation a) would require the former employee to engage only in ministerial acts, duties, or functions; and b) the agency does not hold an adversarial hearing or exercise discretion to reach a decision as to the matter involving the former employee's representation. See A.O. 94-13 (concluding that former Deputy Legal Counsel and Acting Chief of Staff for the Office of the Secretary of State who voluntarily terminated his employment with the Office may not represent himself or any other person before the Office until one year after his official date of resignation for any matter other than a representation which would "requir[e] only ministerial acts, duties, or functions involving neither adversarial hearings nor the authority of the [agency] to exercise discretion or render decisions").

Here, we must decide whether, by serving as either a mortgage originator or a mortgage underwriter, the former employee would be impermissibly representing the interests of his private employer before RIHMFC in violation of R.I. Gen. Laws § 36-14-5(e)(4). First, as to the issue of whether the former employee may serve as a mortgage originator, we conclude that such employment will not violate R.I. Gen. Laws § 36-14-5(e)(4) since the former employee will have no involvement with his private employer's application to RIHMFC. Accordingly, he will not in any way "represent" the interests of his new employer before RIHMFC.

As to whether the former employee may serve as a mortgage underwriter, we also conclude that this individual may serve in such a position without violating the prohibitions set forth in R.I. Gen. Laws § 36-14-5(e)(4). In reaching this conclusion, we have relied on the Petitioner's representation that a) the former employee, as a mortgage underwriter, would only be required to submit information relating to borrowers to RIHMFC's underwriters and, if necessary, to respond to RIHMFC's requests for more information; and b) RIHMFC' underwriters, who have little discretion, decide whether to approve a purchase based on whether the information supplied satisfies certain specified criteria. Given the circumstances as presented, we believe that the former employee, as a mortgage underwriter, would not act as an "attorney-in-fact" in the presentation of evidence or arguments since he has no real opportunity to influence the decision of RIHMFC. Accordingly, the former employee's position as a mortgage underwriter would not provide him an unfair advantage which would trigger the one-year prohibition set forth in R.I. Gen. Laws § 36-14-5(e)(4). C.f. A.O. 95-58 (refusing to apply the one year prohibition set forth in R.I. Gen. Laws § 36-14-5(e)(4) to the former Legal Counsel for the Department of Environmental Management who was terminated from his position after serving the six-month probationary period where it was clear that the petitioner would not yield the type of influence which would give him an unfair advantage).

Code Citations:

36-14-2(6)

36-14-2(10)

36-14-5(e)

36-14-5(e)(4)

Related Advisory Opinions:

95-58

94-13

Keywords:

post-employment

revolving door