Advisory Opinion No. 98-131

Re: The Honorable Henry C. Rose

QUESTION PRESENTED

The Petitioner, a legislator serving as a State Representative, a state elected position, requests an advisory opinion as to whether he may accept an appointment to the Board of Bank Incorporation, which sits as an appellate board for decisions of the Department of Business Regulation (DBR) on banking industry expansion matters, given that he is a Director of the Alliance Finance Corporation (Alliance Finance), a family owned loan and investment company that is regulated by the DBR.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the Code of Ethics does not prohibit the Petitioner from serving on the Board of Bank Incorporation (Board) notwithstanding his relationship with Alliance Finance, a family owned loan and investment company regulated by the Department of Business Regulation (DBR). Our conclusion relies on the representations of the Petitioner and a Deputy Director of the DBR regarding the Board's limited responsibilities and involvement in matters affecting the Petitioner's business. The Board, by statute, has a very limited role to consider appeals of the DBR's decisions regarding expansions of the banking industry. The Board is not involved in the general oversight or regulation of the banking industry. Therefore, given this limited role his membership on the Board would not create an inherent conflict of interest with his private business interests. Also, although the Petitioner may serve on the Board of Bank Incorporation, he should recuse from participation in any matter involving Alliance Finance or any other banking institution that is reasonably likely to be a direct competitor of Alliance Finance. R.I. Gen. Laws § 36-14-6. Finally, we advise the Petitioner that R.I. Gen. Laws § 36-14-5(e), prohibits him from appearing before the Board of Bank Incorporation on behalf of Alliance Finance while he serves on the Board and for a period of one year after he leaves that position.

Under the Code of Ethics, the Petitioner 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), 36-14-7(a). Under R.I. Gen. Laws § 36-14-5(b), the Petitioner may not accept outside employment that would impair his independence of judgment. Also, pursuant to R.I. Gen. Laws § 36-14-5(d), the Petitioner 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 or any business which he represents. Finally, under the provisions of R.I. Gen. Laws § 36-14-5(e), the Petitioner may not represent himself or any other person before any state agency of which he is a member.

The Petitioner is a member of the House of Representatives. In his private life the Petitioner serves on the Board of Directors of Alliance Finance, a family-owned loan and investment company. Recently, the Speaker of the House of Representatives, pursuant to R.I. Gen. Laws § 19-1-2, appointed the Petitioner to serve on the Board of Bank Incorporation, a five member board comprised of the Director of the DBR, the General Treasurer, the Attorney General, a member of the House of Representatives, and a member of the Senate. By statute, the Board is responsible for considering appeals from decisions of the DBR regarding major banking matters that "affect the citizens and tax base of the state," such as whether a Bank or investment institution may expand operations or open new facilities within the state. See R.I. Gen. Laws § 19-1-2. Any party aggrieved by a decision of the Board may appeal to the Superior Court pursuant to the procedures set forth in the Administrative Procedures Act, R.I. Gen. Laws § 42-35-1 et seq.

After considering the Petitioner's request and past advisory opinions, it our opinion that the Petitioner may accept the appointment and serve on the Board of Bank Incorporation. The Board, by statute, has a very limited role to consider appeals of the DBR's decisions regarding expansions of the banking industry. The Board is not involved in the general oversight or regulation of the banking industry. Also, although the Petitioner's business, Alliance Finance, is regulated by the DBR, it has never appeared before the Board and is not likely to do so in the future since the company has no plans to expand its operations. Therefore, the Petitioner's membership on this Board would not create an inherent conflict with his private interests. Cf A.O. 98-111 (concluding that the Code of Ethics does not prohibit members of the Rhode Island Real Estate Commission from teaching continuing education classes for real estate agents provided that they recuse themselves from matters concerning the regulation of continuing education classes given the Commission's limited role in the continuing education program); A.O. 97-108 (advising the State Building Commissioner that he could teach a course on the 1 & 2 Family Dwelling Code where the course was not part of the continuing education program under the jurisdiction of the Building Code Standards Committee); and A.O. 96-64 (concluding that the Code of Ethics does not prohibit the Petitioner, a municipal electrical inspector and a member of the Board of Examiners of Telecommunication System Contractors and Installers, from simultaneously teaching continuing education classes for electricians where his Board neither regulates not administers the mandatory education classes for electricians and journeymen); Compare with A.O. 96-47 (advising a member of the Board of Examiners of Electricians that he could not teach continuing education classes mandated for electricians and journeymen since his Board was responsible for establishing and maintaining the continuing education program); A.O. 92-49 (concluding that members of the Building Code Standards Committee, who are statutorily charged with the task of developing and supervising a continuing education program, could not teach courses in this program since such simultaneous activity (regulating the program and teaching in the program) created an interest conflict of interest).

Also, although the Petitioner may serve on the Board of Bank Incorporation, he should recuse from participation in any matter involving Alliance Finance or any other banking institution that is reasonably likely to be a direct competitor of Alliance Finance. See 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). The Petitioner is advised that, in the event that a matter comes before the Board that affects a competitor, it may be appropriate for him to request an additional advisory opinion from this Commission.

Finally, we advise the Petitioner that pursuant to R.I. Gen. Laws § 36-14-5(e), he is prohibited from appearing before the Board of Bank Incorporation on behalf of Alliance Finance while he serves on the Board and for a period of one year after he leaves that position.

Code Citations:

36-14-5(a)

36-14-5(b)

36-14-5(d)

36-14-5(e)

36-14-6

36-14-7

Related Advisory Opinions:

98-111

97-108

97-31

96-70

96-64

96-47

96-24

92-49

Keywords:

Business interest

Competitors

Private employment