Michael J. Carreiro Complaint NO. 98-6 STATE OF RHODE ISLAND BEFORE THE RHODE ISLAND ETHICS COMMISSION IN RE: MICHAEL J. CARREIRO COMPLAINT NO. 98-6 DECISION AND ORDER Pursuant to the Rhode Island Code of Ethics, R.I. Gen. Laws § 36-14-13 and Regulation 1015, the Rhode Island Ethics Commission (the “Commission”) held adjudicative hearings in open session on the above-captioned matter on March 7, 2000, March 28, 2000, and May 1, 2000. On May 1, 2000, at the conclusion of the proceedings, the Commission immediately began deliberations. A stenographer was present during all open sessions of the adjudicative proceedings. The following Commissioners were present for the taking of all testimony and participated in the deliberations and in this Decision and Order: Melvin Zurier, Chair, James Murray, Thomas Goldberg, Paul Verrecchia, Richard Kirby, James Lynch, Sr. Katherine Tammelleo, Esquire prosecuted the case. James McGair, Esquire represented the Respondent, Michael Carreiro, during the Commission proceedings. Mr. Carreiro was present during all adjudicative proceedings. Amelia E. Edwards, Esquire attended all proceedings as Legal Counsel to the Commission. BACKGROUND AND TRAVEL OF CASE On February 12, 1998, the Commission received a complaint against Michael Carreiro filed by Donald Bollin, a member of the Tiverton Town Council (the “Town Council”). The complaint alleged that Mr. Carreiro and Mr. Mark DeMello violated the Code when, as members of the Town Council, they voted to approve Thomas J. McAndrew, Esquire as Labor Counsel as a town negotiator for the Town of Tiverton (the “Town”) while Mr. McAndrew represented Mr. Carreiro and Mr. DeMello as their private attorney. Mr. Carreiro filed an Answer on July 28, 1998. On August 4, 1998, the Commission made an initial determination that the facts as alleged in the complaint may constitute a violation of the Code of Ethics. The Commission authorized the Executive Director to investigate the allegations further. The investigation concluded on November 9, 1998. The Commission prosecutor filed the Investigative Report on November 9, 1998 at which time Mr. Carreiro was sent notice of a hearing regarding probable cause. The Investigative Report alleged that when Mr. Carreiro voted as a Town Council member to approve Mr. McAndrew as Labor Counsel and as Town negotiator, he did so in violation of the Code of Ethics, to wit, R.I. Gen. Laws § 36-14-5(a), 5(d), and 5(g). In November, 1998, the Commission conducted a probable cause hearing and entered an Order and Finding of Probable Cause which provided: By voting to reappoint Mr. McAndrew as Town Labor Counsel, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent participated in a matter in which he had a substantial conflict of interest in violation of R.I. Gen. Laws § 36-14-5(a). By voting to include Mr. McAndrew as part of the Town negotiating team for labor contracts, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent participated in a matter in which he had a substantial conflict of interest in violation of R.I. Gen. Laws § 36-14-5(a). By voting to reappoint Mr. McAndrew as Town Labor Counsel, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent used his public office to obtain financial gain for a business associate in violation of R.I. Gen. Laws § 36-14-5(d). By voting to include Mr. McAndrew as part of the Town negotiating team for labor contracts, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent used his public office to obtain financial gain for a business associate in violation of R.I. Gen. Laws § 36-14-5(d). By voting to reappoint Mr. McAndrew as Town Labor Counsel, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent accepted a gift based on the understanding that his vote, official action, or judgment would be influenced thereby in violation of R.I. Gen. Laws § 36-14-5(g). By voting to include Mr. McAndrew as part of the Town negotiating team for labor contracts, while receiving private legal representation by Mr. McAndrew in a pending litigation matter, the Respondent would be influenced thereby in violation of R.I. Gen. Laws § 36-14-5(g). These charges were adjudicated before the Commission. The Commission heard two days of testimony. On March 28, 2000, the Commission considered Respondent’s Motion to Dismiss based on the lack of evidence to support the alleged violations of the Code of Ethics. The Commission reserved judgment on the Motion until after the close of the case. On May 1, 2000, immediately after closing arguments, the Commission began its deliberations. The Commission continued its deliberations until May 23, 2000 and, at that time, voted consistent with this Decision and Order. Since the Commission’s vote rendered the Motion to Dismiss moot, the Commission did not rule on the Motion. SUMMARY OF TESTIMONY AND EVIDENCE On March 7, 2000, the prosecutor and James McGair, Esquire, for the Respondent, provided opening statements. Thereafter, on March 7 and March 28, 2000, the prosecution and the defense provided testimony from Colleen Bodziony, Anthony Simeone, Kenneth Tremblay, Esquire, Donald Bollin, Mark DeSisto, Esquire, Raymond Houle, Jr., and Thomas J. McAndrew, Esquire. Colleen Bodziony, manager of the member services for the Rhode Island Interlocal Trust, testified that her company provides insurance coverage to local governments. She testified that her company insured the Town of Tiverton and that on January 13, 1997, she attended a workshop with members of the Town Council and others to explain the errors and omission coverage provided to the Town. She identified a memorandum she had prepared after the workshop (Exhibit 1) and stated that she advised the members about insurance coverage to the members if lawsuits filed. Ms. Bodziony testified that Mr. Carreiro and Mr. DeMello attended the meeting. Anthony Simeone, Branch manager of Gallagher Bassett, testified next. He stated that he was familiar with litigation filed by Charles Mulcahy against the Town of Tiverton, the Town Council members, legal counsel, and others. He stated that in February, 1997, he wrote a reservation of rights letter to the Town Administrator, Raymond Houle, Jr. and the Town Solicitor, Kenneth Tremblay, Esquire. (Exhibit A). The letter advised them that Interlocal would cover the claims against the Town and its Council members with a reservation of rights for the claim for back wages and intentional conduct. Mr. Simeone also testified that in March, 1997, he sent a letter to Mr. Carreiro further clarifying the insurance coverage. (Exhibit B). He stated that he informed Mr. Carreiro in that letter that the individual named defendants would not face any liability and that the individual defendants need not obtain private counsel. Kenneth Tremblay, Esquire, former Town Solicitor for the Town of Tiverton, testified that he served as the solicitor at the time the Mulcahy litigation was filed. He stated that after he received the complaint he sent it to the insurer. He further testified that when he received the reservation of rights letter (Exhibit A) from Gallagher Bassett, he sent letters to the individual named defendants advising them to retain private counsel. (Exhibit 3). He further testified that the Town voted to indemnify the individual named defendants, although he indicated that the Town residents would need to approve the funds before the Town could actually indemnify the individual council members. The prosecution next called Donald Bollin to testify. Mr. Bollin testified that he is member of the Tiverton Town Council and that he served as a council member with Mr. Carreiro and Mr. DeMello. Mr. Bollin stated that he knew that Mr. Carreiro and Mr. DeMello had hired Mr. McAndrew as their attorney in the Mulcahy matter. He further testified that in April of 1997, the Town Council considered and voted on whether to keep Mr. McAndrew as Labor Counsel for the Town. (Exhibit 15). He stated that Mr. Carreiro and Mr. DeMello voted in favor of Mr. McAndrew and that the vote was 4 to 3 in favor of Mr. McAndrew. (Exhibit 15). Mr. Bollin stated that he raised the question of a conflict of interest for Mr. Carreiro and Mr. DeMello to them although he could not recall if he raised the issue before or after the vote. Mr. Bollin further testified that in October, 1997, when the Town Council considered and voted whether to appoint Mr. McAndrew to the negotiating team for the Town, Mr. Carreiro and Mr. DeMello again voted in favor of Mr. McAndrew. (Exhibit 16). Mr. Bollin stated that he again raised the issue of a conflict of interest for Mr. Carreiro and Mr. DeMello. Mr. Bollin also testified that he voted against Mr. McAndrew. Mr. Bollin testified that in April or May, 1997, Mr. McAndrew submitted a bill to the Town of Tiverton for legal expenses. (Exhibit 4). The bill included three charges for services rendered to Mr. Carreiro and Mr. DeMello in the Mulcahy matter. Thereafter Mr. McAndrew submitted an amended bill which deleted all but one reference to services rendered to Mr. Carreiro and Mr. DeMello. (Exhibit 6). The Town Council voted to approve the bill absent the remaining charge relating to the Mulcahy litigation. Mark DeSisto, Esquire next testified for the prosecution. He stated that he has practiced law since 1982. He testified that Interlocal had often assigned cases to him and that in early 1997, it referred the Mulcahy litigation to him. He testified that in March, 1997, he attended two meetings with past and present members of the Town Council and various officials to discuss the Mulcahy matter and the potential exposure of the individual defendants. He reported that Mr. McAndrew attended those meetings as attorney for Mr. Carreiro and Mr. DeMello and that later Mr. McAndrew submitted an entry of appearance on behalf of Mr. Carreiro. He stated that despite Gallagher Bassett’s initial reservation of rights, Gallagher Bassett withdrew the reservation of rights for any intentional conduct. He further testified that on March 7, 1997, he sent a letter to Mr. McAndrew stating that because the insurance carrier had not reserved coverage for intentional conduct, the individual defendants would not face any personal monetary exposure. (Exhibit 14). He advised Mr. McAndrew that “there is no need for separate counsel.” (Exhibit 14). Mr. DeSisto testified that on January 15, 1998, he received a withdrawal of appearance Mr. McAndrew on behalf of Mr. Carreiro and Mr. DeMello. Raymond W. Houle, Jr. testified next. Mr. Houle served as the Town Administrator during the time pertinent to this ethics complaint. Mr. Houle stated that at the meeting with Attorney DeSisto in early March, 1997, Mr. McAndrew acknowledged that he represented Mr. Carreiro and Mr. DeMello. Mr. Houle identified the minutes of the Town Council meetings of April, 1997 and October, 1997 at which Mr. Carreiro and Mr. DeMello voted in favor of Mr. McAndrew as Labor Counsel and as town negotiator respectively. (Exhibits 15 and 16). The Respondent’s counsel called one witness: Thomas J. McAndrew, Esquire. Mr. McAndrew testified that he had represented the town when Mulcahy filed his administrative claim against the Town. He stated that Mr. Carreiro and Mr. DeMello hired him because of his knowledge of and familiarity with the Mulcahy matter. He stated that until early to mid-March, 1997, there was considerable confusion about what the insurer would cover for the individual defendants. He stated that after Gallagher Basset withdrew its prior reservation of rights, he did not take any further action on behalf of Mr. Carreiro and Mr. DeMello in the Mulcahy matter. The latest dated entry for work performed in the Mulcahy matter in the invoice Mr. McAndrew submitted to the Town Council was March 7, 1997. (Exhibit 4). Mr. McAndrew stated that even if he had represented Mr. Carreiro and Mr. DeMello, he believed that the Town’s insurer, not his clients, was responsible for his fees under the case of Employees’ Fire Insurance Co. v. Beals, 103 R.I. 623, 240 A.2d 397 (1968). DISCUSSION Pursuant to R.I. Gen. Laws § 36-14-13, the Commission must determine (1) whether the alleged conduct constituted a violation of the Code of Ethics and (2) whether the violation was “knowing and willful.” See Carmody v. Rhode Island Conflict of Interest Commission, 509 A.2d 453, 461 (R.I. 1986) (the Commission must consider whether Respondent violated the letter of the law and whether the violation was knowing and willful rather than reasonable and in good faith).(1) Based on all the evidence presented, the Commission concludes that Mr. Carreiro did not commit a knowing and willful violation of sections 5(a), 5(d) or 5(g) of the Code of Ethics. With regard to the alleged violations of sections 5(a) and 5(d), the Commission notes that the claims against Mr. Carreiro revolve around whether Mr. Carreiro and Mr. McAndrew were business associates at the time Mr. Carreiro voted in favor of Mr. McAndrew for Labor Counsel and Town negotiator. The Code of Ethics defines “business associate” as “ a person joined together with another person to achieve a common financial objective.” R.I. Gen. Laws § 36-14-2(3). In past advisory opinions, the Commission has found a business association to exist when a public official has maintained an on-going attorney-client relationship with an attorney. See, e.g., A.O. 98-142 and 98-56. However, the Commission has found that when the attorney-client relationship has ended, the business association also ends and no conflict of interest exists. See, e.g., A.O. 96-159, 98-25 and 97-112. In this case, the Commission concludes that at the time Mr. Carreiro used his public office to vote in favor of Mr. McAndrew, the business association between Mr. Carreiro and Mr. McAndrew (to the extent one ever existed)(2) had ceased. Mr. McAndrew specifically testified that after March, 1997, when Gallagher Bassett withdrew its reservation of rights in the Mulcahy matter, he stopped all activity in that matter. Mr. McAndrew’s bill submitted to the Town Council on April 30, 1997, corroborates his testimony. (Exhibit 4). The bill reflects charges for work done on behalf of Mr. Carreiro and Mr. DeMello on February 28, March 3 and March 7, 1997. (Exhibit 4). It does not reflect any charges for work rendered beyond those dates. Although technically, Mr. McAndrew did not withdraw his appearance on behalf of Mr. Carreiro and Mr. DeMello until January 15, 1998, the Commission finds that, for all intents and purposes, any existing business relationship between Mr. McAndrew and Mr. Carreiro ended in March, 1997. Thus, when Mr. Carreiro voted a full month thereafter in favor of Mr. McAndrew and again a full seven months thereafter in favor of Mr. McAndrew, he did not violate sections 5(a) and 5(d) of the Code of Ethics. In addition, the Commission finds that Mr. Carreiro did not act knowingly and willfully in violation of the Code of Ethics even if a business relationship existed between Mr. McAndrew and Mr. Carreiro at the time Mr. Carreiro voted in favor of Mr. McAndrew. In DiPrete v. Morsilli, 635 A.2d at 1163-64, the Rhode Island Supreme Court interpreted the knowing and willful standard under the Code. The Court held: when a violation of the statute is reasonable and made in good faith, it must be shown that the official ‘either knew or showed reckless disregard for the question of whether the conduct was prohibited by [the] statute * * * .’ Consequently an official may escape liability when he or she acts in accordance with reason and good faith. Id. (quoting Carmody, 506 A.2d at 460-61). In this case, several witnesses testified as to the confusion regarding the insurer’s reservation of rights and the individual defendants’ potential liability. Kenneth Tremblay, Esquire testified that as the Town Solicitor he wrote to the individual defendants in the Mulcahy matter, including Mr. Carreiro and Mr. DeMello, to advise them to obtain private legal representation. Further, the Beals case required that the insurer provide private legal counsel for Mr. Carreiro and Mr. DeMello. Since the insurer was obligated under Beals to pay Mr. McAndrew’s fees, Mr. Carreiro and Mr. DeMello could not have expected or anticipated that they could be found to have a business association with Mr. McAndrew as that term is defined under the Code of Ethics. In addition, unlike most of the cases in which the Commission has found a violation of the Code of Ethics, in this case, it did not appear that Mr. Bollin or anyone else raised the question of a conflict of interest until after Mr. Carreiro and Mr. DeMello voted in favor of Mr. McAndrew. For these reasons, the Commission concludes that Mr. Carreiro did not violate sections 5(a) and 5(d) of the Code of Ethics. With regard to the charge that Mr. Carreiro violated section 5(g), the Commission finds no evidence of a quid pro quo between Mr. Carreiro and Mr. McAndrew. The Rhode Island Supreme Court has held that to prove a violation of R.I. Gen. Laws § 36-14-5(g) the prosecution must demonstrate some express or tacit understanding that the public official charged would use his public office in favor of a party in return for some gift, loan or other reward. See DiPrete v. Morsilli, 635 A.2d 1155 (R.I. 1994). In this case, the Commission finds no evidence of a quid pro quo or any tacit understanding that Mr. Carreiro would vote in favor of Mr. McAndrew in return for Mr. McAndrew’s representation in Mulcahy. Therefore, the Commission finds that Mr. Carreiro did not violate section 5(g) of the Code of Ethics. CONCLUSION AND ORDER On the basis of the evidence as presented, the Commission finds insufficient evidence to demonstrate that Mr. Carreiro, while serving as a member of the Tiverton Town Council, committed a knowing and willful violation of sections 5(a), 5(d), or 5(g) of the Code of Ethics. VOTE The vote on the above Decision and Order was unanimous. _____________________________ Melvin Zurier, Chair NOTICE PURSUANT TO R.I. GEN. LAWS, § 36-14-15, ANY ACTION BY THE COMMISSION MADE PURSUANT TO THIS CHAPTER SHALL BE SUBJECT TO APPEAL AND REVIEW PURSUANT TO THE ADMINISTRATIVE PROCEDURES ACT. (1)Although Carmody considered the conflict of interest law prior to its amendment, the Rhode Island Supreme Court found the “analysis in Carmody . . . precedential and persuasive.” DiPrete v. Morsilli, 635 A.2d 1155, 1163 (R.I. 1994). (2) Because the Commission finds that the attorney-client relationship between Mr. Carreiro and Mr. McAndrew had ended before Mr. Carreiro took official action in favor of Mr. McAndrew, it need not address or decide whether under a Beals scenario, in which the insurer is required to pay the costs of the defense, a business association could exist.