Advisory Opinion No. 99-50

Re: David C. Holt

QUESTION PRESENTED

The petitioner, on behalf of the Finance Director for the Town of New Shoreham, requests an advisory opinion as to whether the Finance Director, a municipal employee position, may participate in the decision to invest the Town’s money, which must be collateralized, in the Fairfield County Savings Bank (the “Savings Bank”) given that the Finance Director serves on the Board of Directors of the Savings Bank.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the Finance Director, a municipal employee position, may not participate in or influence in any manner the Town of New Shoreham’s consideration or decision to invest or to continue to invest the Town’s money with the Fairfield County Savings Bank given that the Finance Director serves on the Board of Directors of the Savings Bank. The Town’s investment of its funds with the Savings Bank clearly constitutes a direct financial gain to the Savings Bank, and, as discussed below, the Finance Director’s relationship with the Savings Bank is a business association under the law. As such, pursuant to R.I. Gen. Laws §§ 36-14-5(a), 36-14-5(f), and 36-14-7(a), the Finance Director may not take any official action which could financially impact the Savings Bank.

Under the Code of Ethics, persons subject to the Code may not participate in any matters when it is likely that a “direct monetary gain” or a “direct monetary loss” will accrue to, inter alia, a business associate by virtue of such any official action. R.I. Gen. Laws §§ 36-14-5(a) and 36-14-7(a). In addition, a person subject to the Code may not participate in the consideration and/or disposition of a matter involving a business associate. R.I. Gen. Laws § 36-14-5(f). “Business associate” is defined as any individual or entity joined with a public official or employee “to achieve a common financial objective.” R.I. Gen. Laws § 36-14-2(3).

In numerous prior advisory opinions, the Commission has determined that persons subject to the Code are “business associates” of the entities on which they serve as members of the Board of Directors. See A.O. 98-108 (concluding that state legislator could not submit a legislative grant for the Alms for Animals, a non-profit agency, given that she served on its Board of Directors); A.O. 98-76 (opining that member of Narragansett Town Council was prohibited from participating in matters concerning the Chamber of Commerce, including a vote to appropriate funds to the Chamber, given that she served on the Chamber’s Board of Directors); A.O. 96-75 (advising three members of the General Assembly who also serve as members of the Board of Directors of local hospitals to recuse themselves from any hospital issues given their business association with local hospitals); A.O. 95-59 (advising a member of the Smithfield School Committee to recuse from a vote concerning a community organization if the official’s association with the organization allowed him to affect the financial objectives of the organization).

In this case, the Finance Director has a business association with the Savings Bank since she serves on the Savings Bank’s Board of Directors. Her relations with the Savings Bank triggers the prohibitions of R.I. Gen. Laws §§ 36-14-5(a) and 5(f). To comply with the Code, the Finance Director may not act in any manner which could result in financial gain to the Savings Bank.

Code Citations:

36-14-2(3)
36-14-5(a)
36-14-5(f)
36-14-7(a)

Related Advisory Opinions:

98-108
98-76
98-44
98-16
98-10
97-51
96-75
96-54
95-59

Keywords:

Business Associates
Memberships