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Montgomery County Ethics Commission
Text of Advisory Opinions - 2000

Advisory Opinion 2000-1

MONTGOMERY COUNTY ETHICS COMMISSION

ADVISORY OPINION

As a former Montgomery County, Maryland employee, you have written to the Commission regarding your desire to enter into a contract to assist a potential offeror in preparing a proposal in response to a Request for Proposals (RFP) issued by the County on behalf of your former County agency. The Commission is treating the letter as a request for an advisory opinion.

Applicable Law

§19A-13 of the Montgomery County Code restricts the employment of a former county employee under either of two circumstances. First, there is a general one year ban with respect to any employment for any purpose by a county contractor under certain circumstances (the "1 Year Total Ban"). For one year after the effective date of his or her termination form County employment, a former public employee may not enter into any employment understanding or arrangement (express, implied, or tacit) with any person or business that contracts with a County agency if the public employee significant participated in regulating the person or business or had official responsibility concerning a contract with the person or business (except a nondiscretionary contract with a regulated public utility). §19A-13(b).

 

Second, there is a ten year ban on any employment with regard to specified matters (the "10 Year Partial Ban"). A former county employee is prohibited from accepting employment or assisting any party, other than a County agency, in a case, contract, or other specific matter for 10 years after the last date the employee significantly participated in the matter as a public employee. §19A-13(a).

The Commission is authorized, however, to waive either of these prohibitions upon a written request and under certain circumstances. In particular, the Commission may grant a waiver of the prohibitions of subsection §19A-13 if it finds: (1) the waiver is needed to ensure that competent services to the County are timely and available; (2) failing to grant the waiver may reduce the ability of the County to hire or retain highly qualified public employees; or (3) the proposed employment is not likely to create an actual conflict of interest. Furthermore, if the Commission determines that a waiver should be granted, the Commission may impose conditions appropriate to fulfill the purposes of the Ethics Law, and the Commission must disclose to the public any waiver that it grants.

Pertinent Facts

According to your memorandum, a copy of which is attached and incorporated herein, the pertinent facts are as follows:

(1) From 1985 to 1994, your were employed as the Health Program Director for Montgomery County Health Department-outpatient Addiction Services, worked collaboratively to set up the Methadone to Abstinence Program (MTA). The program was operated by your agency, not by a contractor.

(2) In 1994, after you and the program moved to the new Montgomery County Department of Addiction Victim and Mental Health Services (AVMHS), you were promoted to Chief of Court Services. Your memorandum states, "Directing this activity ceased to be a major responsibility November 1994." (Emphasis added.) The Commission, therefore, understands that directing this activity continued to be among your responsibilities, albeit not a major responsibility.

(3) In 1995, after AVMHS and MTA had been incorporated into the new Montgomery County Department of Health and Human Services (DHHS), you were promoted to the position of Manager of Addiction Services Coordination (ASC) of DHHS. Your memorandum is silent as to your continuing responsibility, if any, for MTA.

(4) In August and September 1998, you assisted in developing plans for privatizing "the methadone services (no longer the MTA Program)." According to your memorandum, "Since that time [you] have taken no action or had any discussion regarding this contract. The final RFP went under a cover letter from John Boston and Mildred Holmes-Williams."

(5) You remained the Manger of ASC until you left County Service on January 6, 1999.

(6) On November 30, 1999, you spoke with Mr. Hardy Bennett, the current Manager of Outpatient Addiction Services "regarding similarities between the RFP [you] helped develop and RFP that is currently out." According to your memorandum:

Mr. Bennett stated that there were substantial changes in the scope and compensation sections. I was never credited with preparing even the first draft of the RFP document. Mr. Bennett informed me that several changes were made to the RFP long after I left County Service.

(7) Your memorandum also states:

My assessment is that my participation in this effort . . . will not provide any potential contractor an advantage in the selection process. I am committed to working as a consultant to develop the proposal for the privatization of these services and do not intend to become an employee of Montgomery Recovery Services. The model of treatment is considered [sic] different from those which I previously proposed, managed, or provided.

According to the December 7, 1999, memoranda of Mr. Bennett, you were the author of the early drafts of this RFP, and the time period of your work on this RFP was from September, 1998, through January, 1999.More recently, Mr. Bennett advised the Commission:

When I compare . . . . . Methadone Maintenance RFP Document Draft #4 and the current Methadone Maintenance RFP Document my findings are as follows:

1. The Background/Intent is substantially the same.

2. The Work Statement/Specifications are substantially the same.

3. Contractor Qualifications are substantially the same.

4. Contractor Responsibility is substantially the same.

5. Contractor Qualifications are substantially the same.

6. Performance Measures are not in . . . . . RFP document, but are listed in the latest RFP version.

The remainder of the two documents appear to be boiler plate for the most part.

January 6, 2000 memorandum from Hardy Bennett to Barbara McNally.Finally, in her January 5, 2000, memorandum to the Commission, Ms. Williams said:

 . . . . . indicated in his letter to the commission . . . that he was never credited with preparing the first draft of the RFP document. Contrary, . . . . . did prepare the first "Methadone Maintenance Treatment Services" draft, as indicated on the cover sheet of enclosure 1 ( . . . . . was enlisted as the contact person regarding technical aspects of the document.) Also, . . . . . was instrumental in setting up and implement the county’s Methadone to Abstinence program. Though changes in format and wording may have changed between the attached draft and the November 19, 1999 RFP that left [the Office of P]rocurement, we believe that significant portions of . . . . . work product remain in the RFP.

Conclusion & Advice: Clearly, it would be contrary to fundamental principles articulate in both the Ethics Law and the Procurement Law to permit one who significantly participated in the drafting of a Request for Proposals (RFP) to leave the County’s employ and assist a business that in preparing a proposal in response to that RFP. An RFP is a critical element in the competitive procurement of goods and services by the County. A county employee who significantly participates in drafting and RFP significantly participates in the procurement, and, therefore, after leaving County employment, is prohibited by §19A-13(a) of the Ethics Law from accepting employment with or assisting any party, other than a County agency, in that specific procurement for 10 years after the last date he or she significantly participated in the matter as a public employee.Based on the correspondence in the file, the Commission concludes that you substantially participated in the preparation of the Methadone Maintenance RFP, and, therefore, advises that you may not be employed by or otherwise assists any entity in the preparation of an offer in response to that RFP.

[signed]

Kenneth C. Jackson, Sr.

Chairman

February 1, 2000

Advisory Opinion 2000-2

MONTGOMERY COUNTY ETHICS COMMISSIONADVISORY OPINION

A 15-year employee of a volunteer fire company, whose station is undergoing a major renovation and who is a member of the company’s project management advisory committee, has asked the Commission whether there would be, under the provisions of the Montgomery County Public Ethics Law, "and actual or perceived conflicts of interest" if a small business in which he has an unspecified financial interest subcontracted with the prime contractor to provide fire-sprinkler-related work for the project. The employee stated, among other things, that he is not involved in the day-to-day operations of the company, but occasionally monitors the accounting work of its office manager in an effort to protect his financial interest.APPLICABLE LAWThe Ethics Law applies to "any person employed by a County agency," which includes "each independent fire department or rescue squad that receives funds from the County or uses property owned by the County." §19A-4(a)(4) and (m)(2).This request implicates §§19A-11(a), 19A-14(a), and 19A-15(a) of the Ethics Law. In pertinent part, these provisions are as follows:

1. §19A-11(a). Unless permitted by a waiver, a public employee must not participate in:

(1) any matter that affects, in a manner distinct from its effect on the public generally, any . . .

(B) business in which the public employee has an economic interest . . . ; or . . .

(2) any matter if the public employee knows or reasonably should know that any party to the matter is . . .

(A) any business in which the public employee has an economic interest or is an officer director, trustee, partner, or employee.

2. 19A-12(b). Unless the Commission grants a waiver under subsection 19A-8(b), a public employee must not:

(1) be employed by, or own more than one percent of, any business that:

(B) negotiates or contracts with the County agency with which the public employee is affiliated; or

(2) hold any employment relationship that would impair the impartiality and independence of judgment of the public employee.

3. §19A-14(a). A public employee must not intentionally use the prestige of office for private gain or the gain of another.

4. §19A-15(a). Except when authorized by law, a public employee or former public employee must not disclose confidential information relating to or maintained by a County agency that is not available to the public. A public employee or former public employee must not use confidential information for personal gain or the gain of another.

Analysis & Advice
  • The Ethics Law clearly applies to the employee. §19A-4(a)(4) and (m)(2).
  • The Ethics Commission will not waive any provision of the Ethics Law for the purpose of the proposed subcontract.
  • If the employee’s financial interest in his business equals or exceeds the thresholds set forth in §19A-11(c) and the business enters into a subcontract for part of the work on this project, the project would become a mater that affects the business in a manner distinct from its effect on the public generally. As a result, the employee would no longer be able to participate, as a volunteer fire department employee, in the matter in any manner whatsoever, including, but not limited to, participation as a member of the project management advisory committee.
  • Although §19A-12(b) would prohibit the employee from being employed by, or owning more than one percent of, any business that negotiates or contracts with the County agency with which the public employee is affiliated, that provision does not apply to businesses that subcontract with a County contractor. Furthermore, financial interest in a subcontractor does not constitute "an employment relationship" for the purposes of this section, and therefore, is not, for the purposes of this provision, an employment relationship that would impair the impartiality and independence of judgment of the public employee.
  • The employee must not intentionally use the prestige of office to acquire the subcontract for his business or to assist the business or the prime contractor in the matter.
  • If the subcontract is entered into, the employee must not, except when authorized by law, disclose confidential information relating to or maintained by the Fire and Rescue Service or his volunteer fire company that is not available to the public or use confidential information for personal gain or the gain of his business, the prime contractor, or any other entity.
  • Although they are enforceable by the Ethics Commission only with respect to outside employment and not with regard to other outside financial interests, the employee should be aware of and may want to seek an advisory opinion from the Chief Administrative Officer regarding the "prohibited activities" provisions of the Montgomery County Fire and Rescue Corporation Personnel Regulations.

[signed]Kenneth C. Jackson, Sr., Chair


Advisory Opinion 2000-3

MONTGOMERY COUNTY ETHICS COMMISSIONADVISORY OPINION

A member of a Montgomery County board, who also owns a private consulting firm, has requested Ethics Commission advice regarding certain proposals he is considering presenting on behalf of his firm to Executive and Legislative officials in Montgomery County.

APPLICABLE FACTS
The member states that he owns a consulting firm that is engaged primarily in international trade. Approximately 20% of the firm’s work, however, is devoted to serving a national, not-for-profit organization that provides various services to senior citizens. Among other things, the organization is, under a federal grant program, one of several ethnic representatives in a federal seniors-employment program that places people 55 years of age and older as temporary employees with a federal agency. The member’s consulting firm serves as the Washington representative of the organization for the purposes of this program, and did so when the member was appointed to the regulatory body.Based on his experience, the member believes that Montgomery County may benefit from such a program. He, therefore, is interested in approaching appropriate Montgomery County Executive and legislative officials concerning the program and the desirability of either participating in the federal program through the organization his firm represents or creating its own program funded entirely by County funds. In the latter instance, the member would plan to seek a key role in managing the County program "on a fee basis." He, therefore, has sought the advice of the Commission on whether "this may constitute a conflict [of interest] because of his interest on the County regulatory body.The implementation of the federal program or the private program would not necessarily involve the member’s County regulatory body.

APPLICABLE LAW
This request potentially implicates several provisions of the Montgomery County Public Ethics Law, which is codified as Chapter 19A of the Montgomery County Code: §§19A-11, concerning the participation of public employees in certain matters in which they or related persons or entities have a financial; 19A-12, which imposes certain restrictions on the "outside" or "other" employment of public employees; 19A-14, concerning the use of a public employee’s prestige of office; and 19A-21, which specifies who must register as a lobbyist and comply with the lobbyist disclosure provisions of the law. In pertinent part:§19A-11 provides:

(a) Unless permitted by a waiver, a public employee must not participate in:

(1) any matter that affects, in a manner distinct from its effect on the public generally, any:

* * *

(B) business in which the public employee has an economic interest; or

* * *

(2) any matter if the public employee knows or reasonably should know that any party to the matter is:

(A) any business in which the public employee has an economic interest or is an officer, director, trustee, partner, or employee.

§19A-12 provides:

(a)(1)A public employee must not engage in any other employment unless the employment unless the employment is approved by the Commission. The Commission may impose conditions on its approval of other employment.

§19A-14 provides:

(a) A public employee must not intentionally use the prestige of office for private gain or the gain of another. Performing usual and customary constituent services, without additional compensation, is not the use of prestige prohibited by this subsection.

(b) Unless expressly authorized by the Chief Administrative Officer, a person must not use an official County or agency title or insignia in connection with any private enterprise.

(c) A public employee must not use any County agency facility, property, or work time for personal use or for the use of another person, unless the use is:

(1) generally available to the public; or

(2) authorized by a County law, regulation, or administrative procedure.

§19A-21(a) provides:

Any individual or organization must register as a lobbyist under this Article if, during a year, that individual or organization:

(1) communicates with a public employee to influence legislative action by a County agency, and for that purpose either:

(A) spends more than $500, or

(B) receives compensation, including a pro-rated part of a salary or fee for services, totaling more than $500; or

(2) communicates with a public employee to influence executive or administrative action by a County agency, and for that purpose spends a total of more than $500 for:

(A) meals and beverages;

(B) transportation;

(C) lodging;

(D) provision of any service;

(E) one or more special events; and

(F) one or more gifts.

CONCLUSIONS & ADVICEBased on the facts stated above, the Commission advised the public employee:1. In so far as he would act on behalf of federal grantee to implement a federal program, the Montgomery County Public Ethics Law would not apply to his discussions with appropriate County officials and would not constitute a conflict of interest unless the adoption or implementation of the federal program would require action by the public body on which he sits or any entity or person subject to that public body. If such action were necessary, he would have to recuse himself.2. In so as he would act on behalf of himself or his consulting firm with respect to the adoption and implementation of a new County program that would manage for a fee:

§19A-11 would permit prohibit him, unless permitted by a waiver, from participating as a public employee (i.e., as a member of this public body) in any matter involving that program;

§19A-12 would not prohibit the employee from servicing this new account without the approval of the Ethics Commission if his ownership and employment by his consulting firm was disclosed at the time of his appointment to the board because, under these facts, the new account would not constitute new employment for the purposes of the "other employment" restrictions;

He would be subject to the prohibitions of §19A-14 concerning the use of the prestige of this County office for private gain or the gain of another, the use of an official County or agency title or insignia in connection with any private enterprise, and the use of any County agency facility, property, or work time for personal use or for the use of another person; and

He would have to comply with the legislative and executive lobbying requirements of §19A-21(a) if his activities brought him within any of the thresholds set forth in that provision.

[signed]

Kenneth C. Jackson, Sr. Chair

May 8, 2000

Advisory Opinion 2000-4

MONTGOMERY COUNTY ETHICS COMMISSION ADVISORY OPINION

This opinion is issued in response to a request from the County Council for guidance on the following questions related to the professional background of applicants for appointment to the Board of Investment Trustees:

Would an individual whose profession is to market, to pension funds and other institutional investors, the kind of investment services purchased by the Board face an inherent conflict of interest in serving as a Board member?

If not, what restrictions on the individual’s participation in Board decisions, such as the selection of investment managers and investment consultants, would be necessary to avoid conflicts of interest?

ADVICE
The Commission is of the opinion that one who furnishes or is employed by a firm that furnishes, to pension funds and other institutional investors, the kind of investment services purchased by the Board (an "investment manager") would not face an inherent conflict of interest in serving as a member of the Board of Investment Trustees. The duties of those persons do not, in and of themselves, present an inevitable conflict of interest. Thus, for example, although the Employee Retirement Income Security Act (ERISA), in recognition of the complex interests of investment advisors and investment managers who act as fiduciaries, prohibits fiduciaries from receiving any personal consideration from any party dealing with the plan in connection with a transaction involving assets of the plan or when other actual conflicts arise, ERISA does not disqualify investment managers per se from serving as trustees of private pension plans.Nevertheless, given the many crossover relationships in today’s market among investment managers, financial consultants, and broker/dealers, an investment-manager trustee often may be faced with potentially divided loyalties between his or her obligations as a trustee and some potential benefit or detriment to him or her as a private investment-manager, and the presence of an investment manager on the Board may give rise to divided loyalties and conflicts on the part of fiduciaries with whom the Board contracts or attempts to contract for professional services. Indeed, given the highly competitive nature of this market, the presence on the Board of a trustee who is an investment manager or an employee of an investment manager may have a negative effect on the willingness of competitors to offer proprietary products to the County, since they may be required to make known proprietary information in connection with such offers. Consequently, unless there are no other sufficiently qualified candidates, the Commission recommends that, as a matter of policy, no currently employed investment manager or employee of an investment manager be appointed to the Board.

APPLICABLE LAW
1. The Board of Investment Trustees Law.Montgomery County has established, by law, a trust for the benefit of the members of the retirement system. The trust consists of the money and property of the retirement system, and all earnings, profits, increments, appreciation, and other additions that accrue thereon, and is administered by a nine-member Board of Investment Trustees that has legal title to all cash and other property of the retirement system. Four of the trustees are ex officio members: the Director of Management and Budget, the Director of Finance, the Director of Human Resources, and the Staff Director of the County Council. The other five trustees, all of whom are appointed by the Executive and confirmed by the Council, must include:

(1) an active County employee in a collective bargaining unit who is a vested member of the retirement system, or an individual recommended by certain employee organizations;

(2) an active County employee who is a vested member of the retirement system and the Merit System, and not a member of a collective bargaining unit;

(3) a retired County employee who is a member of the retirement system;

(4) a representative of the Council selected from a list of 3 to 5 individuals recommended by the Council; and

(5) an individual knowledgeable in pensions, investments, or financial matters.

The Board: (1) must invest and reinvest, or cause to be invested or reinvested, the principal and income of the retirement system and keep the same invested without distinction between principal and income; (2) has the exclusive authority to manage the assets of the retirement system; (3) may make or permit an investment manager to make individual investment selections with respect to certain investments and certain personal property, and (4) must select at least three investment managers to make individual investment selections with respect to certain kinds of investments and certain kinds of real property.With certain exceptions, the Board may permit an investment manager to invest the assets of the retirement system fund in any investment the manager considers prudent within policies set by the Board, including but not limited to bonds, debentures, notes, savings accounts, certificates of deposit, variable note arrangements, obligations of the United States Government, commercial paper, money market certificates, bankers’ acceptances or other evidence of indebtedness; mortgages, certificates of mortgage pools and guaranteed mortgage pass-through certificates or other similar investments in mortgages; stocks (regardless of class), or other evidence of ownership, in any corporation, mutual fund, investment company, association, or business trust; combined, common or commingled trust funds; retirement or annuity contracts; guaranteed investment contracts; group annuity contracts; and real and personal property of all kinds, including leaseholds on improved or unimproved real estate, oil, mineral or gas properties, or royalty interests or rights.Subject to certain limitations, the Board may:

(1) purchase or subscribe for any investment, at a premium or discount, and retain the investment;

(2) sell, exchange, convey, transfer, lease for any period, pledge, mortgage, grant options, contract with respect to, or otherwise encumber or dispose, at public or private sale, for cash or credit or both, any part of the retirement system;

(3) sue, defend, compromise, arbitrate, compound and settle any debt, obligation, claim, suit, or legal proceeding involving the retirement system, and reduce the rate of interest on, extent or otherwise modify , foreclose upon default or otherwise enforce any debt, obligation, or claim;

(4) retain uninvested a part of the retirement system fund;

(5) exercise any option on any investment for conversion into another investment, exercise any rights to subscribe for additional investments, and make all necessary payments;

(6) join in, consent to, dissent from, oppose, or deposit in connection "with the reorganization, recapitalization, consolidation, sale, merger, foreclosure, or readjustment of the finances of any corporation or property in which the assets of the retirement system are invested, or the sale, mortgage, pledge or lease of that property or the property of any such corporation upon such terms and conditions that the Board considers prudent; exercise any options, make any agreements or subscriptions, pay any expenses, assessments, or subscriptions, and take any other action in connection with these transactions that the Board considers prudent; and accept and hold any investment that may be issued in or as a result of any such proceeding;

(7) vote, in person or by any proxy , at any election of any corporation in whose stock the assets of the retirement system are invested, and exercise, personally or by any power of attorney, any right appurtenant to any investment held in the retirement system; and give general or specific proxies or powers of attorney with or without power of substitution;

(8) sell, either at public or private sale, option to sell, mortgage, lease for a term of years less than or continuing beyond the possible date of the termination of the trust, partition or exchange any real property for such prices and upon such terms as the Board considers prudent, and execute and deliver deeds of conveyance and all assignments, transfers, and other legal investment for passing the ownership to the purchaser, free and discharged of all liens;

(9) renew or extend any mortgage, upon such terms that the Board considers prudent, and increase or reduce the rate of interest on any mortgage or modify the terms of any mortgage or of any guarantee as the Board considers prudent to protect the retirement system or preserve the value of the investment; waive any default or enforce any default in a manner that the Board considers prudent; exercise and enforce any right of foreclosure, bid on property in foreclosure, take a deed in lieu of foreclosure with or without paying a consideration, and release the obligation on the bond secured by the mortgage; and exercise and enforce in any action, suit or proceeding at law or in equity any rights or remedies in respect to any mortgage or guarantee.

(10) form a corporation or corporations under the laws of any jurisdiction or acquire an interest in or otherwise make use of any corporation already formed to invest in and hold title to any property;

(11) to take any action it considers prudent for the purpose of investing in and holding title to real or personal property or part interests therein;

(12) incur and pay expenses for agents, financial advisors, actuaries, accountants and counsel, if those expenses are incurred solely to perform the Board’s duties under this article;

(13) borrow, raise or lend moneys, for the purposes of the retirement system, in such amounts and upon such terms and conditions as the Board in its discretion considers prudent; for any money borrowed, issue a promissory note and secure tile repayment of this note by pledging or mortgaging all or any part of the retirement system;

(14) hold, buy, transfer, surrender, and exercise all other incidents of ownership of any annuity contract;

(15) buy from any legal reserve life insurance company a single premium, nontransferable annuity contract providing for the payment of the benefits.

(16) do all acts which it considers necessary and exercise any and all powers with respect to the management of the retirement system, and in general, exercise all powers in the management of the assets which an individual could exercise in the management of property owned in the individual’s own right except for making an individual investment selection.

With certain exceptions, the Board must appoint investment managers to manage, acquire, or dispose of assets of the retirement system, subject to Board policies. In any investment manager contract, the Board must identify the assets that are the subject to the contract and give an investment manager the right to invest the assets of the retirement system specified in the contract without prior notice to or approval by the Board. The Board may limit the investment of a specified portion of the retirement system to a certain type of property, e.g., common stocks, bonds, or real estate, and may delegate to the investment manager any of the Board’s powers or discretion and five the investment manager custody and control of certain assets of the retirement system.The Director of Finance is the custodian of the retirement system assets. With the Board’s approval, the director may make written contracts with banks, trust companies, insurance companies or investment companies authorized to do business in any state for the safe custody of investments, banking services, the payment of benefits and expenses and ally other function necessary for the management and safeguarding of the assets of the retirement system. Contracts may authorize a bank, trust company, insurance company, or investment company to invest retirement system assets in money market funds; a short-term investment fund of a bank, trust company, or insurance company; or their substantial equivalent.The Board’s statute sets a standard of care for fiduciaries that applies to the trustees and investment managers, among others:

A fiduciary must discharge the fiduciary’s duties regarding the retirement systems: only in the best interest of the participants and their beneficiaries;

(a) only in the interest of the participants and their beneficiaries;

(b) only to provide benefits to the participants and their beneficiaries, and defray reasonable expenses of administering the retirement systems.

(c) with the care, skill, prudence, and diligence under the circumstances that a prudent person acting in a similar capacity and familiar with the same matters would use to conduct a similar enterprise with similar purposes;

(d) by diversifying the investments of the retirement systems to minimize the risk of

large losses, unless it is clearly not prudent to diversify under the circumstances;

(e) according to a good faith interpretation of the law governing the retirement

systems; and

(f) according to a good faith interpretation of the documents and instruments governing the retirement systems, if they comply with this [Law].

The Board’s law also expressly addresses the subjects of ethics and conflicts of interest. Members are subject to the provisions of the Montgomery County Public Ethics law. Furthermore, with certain exceptions, a trustee must not:

(1) be a party to any transaction engaged in by the Board or an investment manager involving the assets of the retirement system;

(2) use the gains or profits of the system for any purpose except to make investments or payments that are authorized by the Board;

(3) deal with the assets of the retirement system for their own interest or account;

(4) act in any transaction involving the retirement system on behalf of a party whose interests are adverse to the interests of the retirement system or the interests of the members or beneficiaries of the retirement system; or

(5) become an endorser or surety, or in any manner an obligor, for moneys loaned to or borrowed from the Board.

2. The Montgomery County Ethics Law.Not only does the Board’s law expressly subject the Trustees to the provisions of the Ethics law, the Ethics Law expressly treats any person appointed by the County Executive or County Council to a board as a "public employee" for the purposes of that statute. It is clear, therefore, that the prohibitions of the Ethics Law apply to the members of the Board of Trustees.Section 33-61D of the Ethics Law contains a conflict of interest provision that provides, in pertinent part:

(a) Unless permitted by a waiver, a public employee must not participate in:

(1) any matter that affects, in a manner distinct from its effect on the public generally, any:

(A) property in which the public employee holds an economic interest;

(B) business in which the public employee has an economic interest; or

(C) property or business in which a relative has an economic interest, if the public employee knows about the relative’s interest:

(2) any matter if the public employee knows or reasonably should know that any party to the matter is:

(A) any business in which the public employee has an economic interest or is an officer, director, trustee, partner, or employee;

(B) any business in which a relative has an economic interest, if the public employee knows about the interest;

(C) any business with which the public employee is negotiating or has any arrangement about prospective employment;

(D) any business that is negotiating with a relative or has an arrangement with a relative about prospective employment, if the public employee knows about the negotiations or the arrangement;

(E) any business or individual that is a party to an existing contract with the public employee or a relative, if the contract could reasonably result in a conflict between private interests and official duties;

(F) any business that is engaged in a transaction with a County agency if:

(i) another business owns a direct interest in the business;

(ii) the public employee or a relative has a direct interest in the other business; and

(iii) the public employee reasonably should know of both direct interests;

* * *

(H) any creditor or debtor of the public employee or a relative if the creditor or debtor can directly and substantially affect an economic interest of the public employee or relative.

However, if a disqualification leaves less than a quorum capable of acting, or if the disqualified public employee is required by law to act or is the only person authorized to act, the disqualified public employee may participate or act if he or she discloses the nature and circumstances of the conflict.The Ethics Law also expressly prohibits a public employee from intentionally using the prestige of his or her office for private gain or the gain of another, from using an official County or agency title or insignia in connection with any private enterprise (unless authorized by the Chief Administrative Officer), and from disclosing confidential information relating to or maintained by a County agency that is not available to the public, except when authorized by law, or using confidential information for personal gain or the gain of another.These express prohibitions are to be read and applied in light of the express legislative findings and statement of policy on which the Ethics Law is founded:

(a) Our system of representative government depends in part on the people maintaining the highest trust in their officials and employees. The people have a right to public officials and employees who are impartial and use independent judgment.

(b) The confidence and trust of the people erodes when the conduct of County business is subject to improper influence or even the appearance of improper influence.

(c) To guard against improper influence, the Council enacts this public ethics law. This law sets comprehensive standards for the conduct of County business and requires public employees to disclose information about their financial affairs.

(d) The Council intends that this Chapter, except its provisions for criminal sanctions, be liberally construed to accomplish this purpose.

APPLICABLE FACTSThe Commission is advised as follows regarding the applicable facts.The Board of Investment Trustees currently engages twelve investment managers, at a cost of approximately $5.5 million per fiscal year to manage its approximately $2 billion in investments. The Board also retains financial advisors and consultants who manage the hiring of investment managers and report to the Board on the performance of the investment managers.In the investment industry, there are many crossover relationships among investment managers, financial consultants, and broker/dealers. As a result, it is difficult to assure that a trustee who is in the business of selling services to pension funds ("an investment-manager trustee") is exercising impartial and independent judgment in Board matters. For example, the Commission understands that it would not be unusual for a Montgomery County trustee who is an investment-manager to find himself or herself working for another pension fund whose financial advisor or consultant is seeking to do business with Montgomery County and could affect significantly the trustee’s investment-manager relationship with the other pension fund. So too, a Montgomery trustee who is an investment-manager could easily find that a financial advisor to the Montgomery County Board advises one or more other boards on procurements the trustee’s investment-manager firm is interested in obtaining.An investment-manager trustee may have a private interest in voting to support or hire a broker/dealer who gives or could give the investment-manager’s firm free brokerage services for other clients, or may have an interest in having a Montgomery County investment-manager use a broker who is on another board that uses tile investment-manager trustee’ s firm.Finally, top investment-manager firms may resist competing for work for Montgomery County out of fear of providing proprietary information to an investment-manager trustee whose firm is competing or may compete for business at another pension fund.CONCLUSIONThe people of Montgomery County "have a right to public officials and employees who are impartial and use independent judgment." Indeed, "our system of representative government depends in part on maintaining the highest trust in our officials and employees," and "[t] he confidence and trust of the people erodes when the conduct of County business is subject to improper influence or even the appearance of improper influence." For these reasons, the Ethics Law was enacted expressly "[t] o guard against improper influence" and was intended to be "liberally construed" to accomplish that purpose. In addition, under the County pension law a trustee’s fiduciary duty of undivided loyalty to the Plan prohibits him or her from engaging in any transaction in which he or she has other business interests or represents parties who have such interests.Consequently, given the numerous relationships or potential relationships between investment-managers and others in the investment industry, the appointment of a trustee who is a day-to-day investment-manager or an employee of an investment-manager may give rise to many problematic situations in which: (1) the trustee may be faced with potentially divided loyalties between his or her fiduciary obligations and some benefit or detriment to his or her firm; (2) the presence of such a member on the Board may give rise to divided loyalties and conflicts on the part of the fiduciaries with whom the Board contracts or attempts to contract for professional services; and (3) major investment-managers may be dissuaded from offering their services to the Board because its members include a representative of a competitor .Therefore, in order to guard against improper influence by avoiding the significant potential for actual or perceived conflicts or divided loyalties in the highly sensitive administration of the County’s pension fund, the Commission recommends that the Council not nominate for appointment to the Board of Investment Trustees an individual who furnishes or is employed by a firm that furnishes, to pension funds and other institutional investors, the kind of investment services purchased by the Board.

[signed]

Walter Scheiber, Chair

May 16, 2000


Advisory Opinion 2000-5

MONTGOMERY COUNTY ETHICS COMMISSION ADVISORY OPINION

A member (the Requester) of the Montgomery County Commission on Common Ownership Communities (the "COC") has requested, under §19A-7 of the Montgomery County Ethics Law, an advisory opinion on several questions arising out of: (a) his service as a board member and officer of his homeowners association; and (b ) the activities of another COC member who also has a financial interest in the company that manages the requester’s association’s property.Pertinent FactsThe Requester provided the following pertinent facts:

1. He is a member of the COC and chairs one its committees.

2. He also is a Board Member and Secretary of his homeowners association.

3. As an Association Board member, he votes on all of the Association’ s contracts

4. The Association recently hired a new management company ("The Management Co.").

5. Another member of the COC, who also serves on the Committee the requester chairs, has a financial interest in Management and personally services its contract with the Association (the "Management Representative).

6. "[The COC] votes on accepting jurisdiction over cases and then holds administrative hearings regarding disputes between homeowners and their associations."

7. At times, the Management Co. Representative or another of its agents represent parties before the COC or are witnesses in COC proceedings.

Questions PresentedAgainst this background, the Requester asked:1. May he, as a member of the COC, vote on accepting or denying jurisdiction over a case or serve on a hearing panel in which the Management Representative or the Management Company: (a) represents one of the parties; (b) may be a witness; or (c) is employed by or has a contract with one of the parties.2. Does the fact that he, as a member of the board of his homeowner’s association, votes on the Association’s contract with the Management Company "otherwise raises questions concerning voting on COC issues. That is, does it raise a concern that [COC’s] votes can be coerced."Applicable LawThe Common Ownership Commission Law.The COC is a creature of §10B-3 of the Montgomery County Code (M.C.C.). It consists of fifteen voting members and six ex officio non-voting members. The voting members are appointed by the County Executive, subject to confirmation by the County Council and the following requirements:

(1) Six members should be selected from residents of self-managed and professionally managed condominiums, self-managed and professionally managed cooperative housing corporations, and self-managed and professionally managed homeowners’ associations, and may include members or former members of governing boards.

(2) Three members should be selected from persons involved in housing development and real estate sales.

(3) Six members should be selected from persons who are members of professions associated with common ownership communities (such as attorneys who represent associations, developers, housing management or tenants) or investor-owners of units in common ownership communities, including at least one person who is a professional community association manager.

The ex officio members are designees of the County Council, Planning Board, Department of Environmental Protection, Department of Permitting Services, Department of Public Works and Transportation, and Department of Housing and Community Affairs. The COC elects one voting member as its Chair and another as its Vice-Chair. They serve at the pleasure of the COC. Voting members receive no compensation for their services.The COC’s responsibilities include the duty to hear and decide disputes "among an owner, the governing body, and an occupant of a dwelling unit in a common ownership community." For these purposes, "dispute" means any disagreement between 2 or more parties that involves: (1) the authority of a governing body, under any law or association document, to: (i) require any person to take any action, or not to take any action, involving a unit; (ii) require any person to pay a fee, fine, or assessment; (iii) spend association funds; or (iv) alter or add to a common area or element; or (2) the failure of a governing body, when required by law or an association document, to: (i) properly conduct an election; (ii) give adequate notice of a meeting or other action; (iii) properly conduct a meeting; (iv) properly adopt a budget or rules; (v) maintain or audit books and records; or (vi) allow inspection of books and records.In the exercise of this quasi-judicial authority, the COC votes on whether a case is within the COC’s jurisdiction. If there is jurisdiction and the dispute is not essentially identical to another dispute between the same parties, the matter is heard and decided by either a hearing examiner or a hearing panel.The parties, by agreement, may require that the hearing be held and the dispute decided by a hearing examiner designated by the COC Chair, and that decision is a final administrative decision and subject to judicial review.If the parties do not require a hearing and decision by a hearing examiner, the COC Chair must convene a three-member hearing panel, two of whom are voting members of the COC. The third member of the hearing panel is a volunteer arbitrator whom the two COC panel members select from a list of volunteer arbitrators maintained by the COC.If the COC Chair decides that the matter should be heard by a hearing examiner rather than by the COC hearing panel, the COC Chair, with the approval of the Commission, may designate a hearing examiner to hold the hearing and forward a recommended decision and order to the COC hearing panel. If the COC Chair does not designate a hearing examiner, the panel hears and decides the matter. In either of these events, the decision of the hearing panel is the final administrative decision, and is subject to judicial review.A final decision-maker "may order the payment of damages and any other relief that the law and the facts warrant," and award costs, including reasonable attorney fees and the filing fee.The Montgomery County Ethics Law.The Montgomery County Public Ethics Law—Chapter 19 A of the Montgomery County Code—is founded on the following express legislative finding and statement of policy:

(a) Our system of representative government depends in part on the people maintaining the highest trust in their officials and employees. The people have a right to public officials and employees who are impartial and use independent judgment.

(b) The confidence and trust of the people erodes when the conduct of County business is subject to improper influence or even the appearance of improper influence.

(c) To guard against improper influence, the Council enacts this public ethics law. This law sets comprehensive standards for the conduct of County business and requires public employees to disclose information about their financial affairs.

(d) The Council intends that this Chapter, except in the context of imposing criminal sanctions, be liberally construed to accomplish the policy goals of this Chapter.

In furtherance of these findings and policy goals, the conflict of interest provisions of the Ethics Law expressly prohibit certain kinds of activity by public employees. First, unless permitted by a waiver, a public employee must not participate, as a public employee, in any matter that affects, in a manner distinct from its effect on the public generally, any: (a) property in which the public employee holds an economic interest; (b) business in which the public employee has an economic interest; or (c) property or business in which a relative has an economic interest, if the public employee knows about the relative’s interest. However, this prohibition does not apply to a public employee who is appointed to a regulatory or licensing body under a statutory provision that persons subject to the jurisdiction of the body may be represented in appointments to the body.Second, a public employee may not participate, without a waiver, in any matter if the public employee knows or reasonably should know that any party to the matter is: (a) any business in which the public employee has an economic interest or is an officer, director, trustee, partner, or employee; (b) any business in which a relative has an economic interest, if the public employee knows about the interest; (c) any business with which the public employee is negotiating or has any arrangement about prospective employment; (d) any business that is negotiating with a relative or has an arrangement with a relative about prospective employment, if the public employee knows about the negotiations or the arrangement; (e) any business or individual that is a party to an existing contract with the public employee or a relative, if the contract could reasonably result in a conflict between private interests and official duties; (f) any business that is engaged in a transaction with a County agency if another business owns a direct interest in the business; the public employee or a relative has a direct interest in the other business; and the public employee reasonably should know of both direct interests; (g) any business that is subject to regulation by the agency with which the public employee is affiliated if another business owns a direct interest in the business, the public employee or a relative has a direct interest in the other business, and the public employee reasonably should know of both direct interests; or (h) any creditor or debtor of the public employee or a relative if the creditor or debtor can directly and substantially affect an economic interest of the public employee or relative.For these purposes, "public employee" includes any person appointed by the County Executive to a board, commission, committee, task force, or similar body, whether or not the person is compensated for serving on the body, and "business means any for-profit or non-profit enterprise, including a corporation, general or limited partnership, sole proprietorship, joint venture, association, firm, institute, trust, or foundation."ANALYSIS, CONCLUSIONS & ADVICEThe Ethics law applies to the members of the COC, and, among other things, expressly prohibits a member from participating in a matter if he or she is a member of the board of directors of a business that is a party to the matter. Although a homeowner’s association might not be a business for the purposes of other statutes, both the language and the context of the Ethics Law support the conclusion that a homeowners association is a business for the purposes of the conflict of interest provisions of the Ethics Law, especially as applied to County officials exercising quasi-judicial authority. The Ethics Law defines the term "business" to mean, among other things, a non-profit enterprise, including a joint venture or association. Moreover, as noted above, the Ethics Law is founded on the specific goals of ensuring impartiality and avoiding the appearance of improper influence:

Our system of representative government depends in part on the people maintaining the highest trust in their officials and employees. The people have a right to public officials and employees who are impartial and use independent judgment.

The confidence and trust of the people erodes when the conduct of County business is subject to improper influence or even the appearance of improper influence.

The Ethics Law is expressly intended to be liberally construed to accomplish these goals.Nothing is more fundamental in a quasi-judicial proceeding than the requirement that the decision-maker be impartial. Indeed, impartiality is a well-recognized element of the fundamental fairness that is guaranteed by the due process provisions of the constitutions of Maryland and the United States. As a matter of law, therefore, an adjudicator who sits on the board of directors of one of the parties to a dispute is not impartial and, for that reason, the Ethics Law specifically prohibits him or her from participating in the matter.The Ethics Law does not, however, specifically prohibit a county employee from participating as a quasi-judicial decision-maker in a matter in which one of the parties has a contractual relationship with a business on whose board the county employee serves. There can be specific circumstances under which the relationship between a public-employee decision-maker and a business or its agent is so pervasive as to undermine the decision-maker’s impartiality in fact. However, the facts stated in this request do not constitute such circumstances. In particular, the mere fact that a COC member sits on the board of a community association that has a contract with a party, representative of a party or witness in a COC quasi-judicial proceeding rises [ed.: does not rise] to that level. Neither does the fact that another member of the COC participates, as a private individual or employee, as a party, representative of a party, or witness for a party in a [ed.: matter] before the COC.The Ethics Law, therefore, prohibits a member of the COC from participating as a decision-maker in a quasi-judicial proceeding (whether involving only a threshold jurisdictional decision or a decision on the merits) in which one of the parties is a homeowners’ association of which the COC member is a director.The Ethics Law does not, however, prohibit a COC member from participating as a decision-maker in a quasi-judicial proceeding merely because the company that manages the contract with the member’s homeowners’ association or its agent represents one of the parties, may be a witness for one of the parties, or has a contract with one of the parties. Furthermore, if another member of the COC who has a financial interest in a management company may appear before the COC in one of those capacities, that member’s appearance would not, in and of itself, prohibit other COC members—even those who serve on the board of a community association that has a contract with other member’s management company—from participating as decision-maker in the quasi-judicial proceedings. As in all cases, only if the business or personal relationship between such members would make it impossible for the member to participate impartially, would the Ethics Law prohibit participation as a quasi-judicial decision-maker. The facts presented in this request do not compel that result.

 

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