Advisory Opinion No. 99-84

Re: James R. Thorsen

QUESTION PRESENTED

The petitioner, a prospective member of the State Investment Commission, a state appointed position, requests an advisory opinion as to potential conflicts under the Code of Ethics given his employment with the State Street Global Advisors, a division of State Street Bank which does substantial investment business with the State of Rhode Island.

RESPONSE

The Code of Ethics does not prohibit the petitioner from accepting an appointment to the State Investment Commission given his employment with State Global Advisors. However, the petitioner is required to recuse on certain matters that come before him on the State Investment Commission that affect his employer.

Under the Code of Ethics, a public official or employee may not use his position, other than as provided by law, to benefit himself, and may not participate in any matter in which he has an interest in substantial conflict with his public duties. A substantial conflict of interest exists if, for example, an official has reason to believe or expect that he or an employer will derive a direct monetary gain or loss by reason of his official activity. See R.I. Gen. Laws §§ 36-14-5(a), 36-14-7(a). Additionally, R.I. Gen. Laws § 36-14-5(d) provides that a public official cannot use his or her office for pecuniary gain, other than provided by law, for him(her)self, family, employer, business associate, or a business that he/she represents.

In this matter, the petitioner represents that he formerly held the position of Deputy General Treasurer for Finance for the State of Rhode Island. He is now employed as a principal at State Street Global Advisors in Boston, which is a division of State Street Bank. State Street Bank does a substantial investment business with the State of Rhode Island. No inherent conflict of interest exists between the petitioner’s private employment and his prospective public appointment, therefore he may accept an appointment to the State Investment Commission by the Governor. The petitioner provides three particular areas where the interests of his employer may intersect with those of the State Investment Commission.

First, the petitioner notes that the State Street Bank provides securities for a portion of the State of Rhode Island's short-term case investment needs. This involves daily auctions conducted by the State Treasury Staff. The State Investment Commission sets the standards for vendor qualification, but is not involved in the auction process. In this scenario, the petitioner is required to recuse on the setting of standards for vendors given that his employer is a potential vendor and by participating could place his employer at a competitive advantage as to other potential vendors.

Second, the petitioner states that State Street Bank serves as custodian of pension fund assets for the Rhode Island Employee's Retirement System. While the Treasury staff handles the day-to-day relationship, State Street Bank's contract ends in June and the Investment Commission will be involved in either extending the contract or awarding a new contract. Again, the petitioner is required to recuse from any participation or votes on either an extension of contract or new contract if State Street Bank is a potential vendor given that it would receive a direct financial benefit from having the state contract.

Finally, the petitioner advises that the State Street Global Advisors has an agreement with the State for investment management services for a portion of the Rhode Island Employees' Retirement System's pension funds assets. The petitioner has no involvement with or direct responsibility for this account in his private employment. The Code of Ethics requires that the petitioner recuse from participating in matters as a State Investment Commissioner in matters concerning State Street Global Advisors in its management of the pension funds given that it also could impact his employer.

In short the Code of Ethics requires that the petitioner recuse from participating in any matter that could impact himself or his employer financially, including matters where the Investment Commission is setting standards for vendors or interviewing or awarding contracts if his employer is a potential vendor.

Code Citations:

36-14-5(a)
36-14-5(d)
36-14-7(a)

Related Advisory Opinions:

96-33
96-99
97-19
97-24
97-34
97-93
98-131

Keywords:

Private Employment