Filing Number: 07-08
Subject: Gifts
Keywords: appearance of impropriety, communication, contract, Executive Office, gifts, impropriety, solicitation, vendor, waiver
Decision By: Commissioners: John McMahon, Kathryn Denhardt, Thomas Collins,Miguel Gonzalez, V. Eugene McCoy, Mark Murowany
Contact Email: admin@nccethics.org
 
Status: Active

Question:

            An official requests a determination about whether a two year waiver of charges by a communication company for sole use of one of its cable access television channels by the County in exchange for the right to solicit and retain all funds from entities wishing to advertise on that channel is a "gift" under the Ethics Code and whether acceptance of such a "gift" would create an appearance of impropriety.

Conclusion:

            The exchange between the County and the company does not involve a "gift" as defined in the Ethics Code but this request involves an unprecedented type of exchange between a vendor and the County. At this early contract proposal stage, the Commission finds that the actual and suggested restrictions for advertising on the public access cable television channel mitigate against a finding of an appearance of impropriety. However, since the channel is not yet in operation, the Commission cannot actually predict the manner in which public perception will be impacted and warns that it may revise its finding once the channel is broadcsasing and the restrictions enforced.

Facts:

             The County Administration has entered into negotiations with a profit-making business to establish a cable television channel solely dedicated to information from the County such as meeting schedules and locations, traffic reports, school closings, emergency broadcasts and other such public service programs. In exchange for a two-year waiver of the start up costs and the normal monthly fees for the use of the channel, the County would give the company the exclusive right to solicit businesses and individuals for advertising on the channel. Entities solicited would be informed in writing that any advertisement on the channel would not entitle the business or individual to preferential treatment from the County and such entities would not be identified as "sponsors" of any program.1 The content of advertising would conform to guidelines established for Public Broadcasting Stations, County employees and officials would not be involved in solicitation for ads or contacting entities regarding their advertisements, and all advertising revenue would be paid to and retained by the company.2 The company values the waiver of the start up and monthly operating costs of the channel in the tens of thousands of dollars.

Code or Prior Opinion:

Code provisions
 
            New Castle County Code Section 2.03.101 defines the purpose of the Ethics Commission as providing guidance to public officials and public employees regarding the minimum standards of ethical conduct and financial disclosure established by the Ethics Code. It functions only to assure the public that "the financial interest of the holders of or nominees to or candidates for public office do not conflict with the public trust" and to promote public confidence in government by assisting those officials and employees to comply with their responsibilities under the Code. The jurisdiction of the Commission extends only to those individuals and the Code speaks only to their conduct.
 
            The Ethics Code defines the word gift at Section 2.03.102:
 
[A]nything that is received without consideration of equal or greater value. The term "gift" shall not include a political contribution otherwise reported as required by law or a commercially reasonable loan made in the ordinary course of business. A gift to a member of an official or employee's family, or a gift which is not personally accepted by an official or employee but is controlled by or directed by that person to another recipient, is considered to be a gift to the official or employee. Any gift of more than de minimis value accepted by a County official or employee, or by his or her spouse or dependant child because of the official or employee's holding public office or employment, must be promptly entered in a public gift log as a recordable gift by the employee or official. A gift is considered accepted upon receipt or control or direction unless it is promptly returned in its entirety.
 
            The Ethics Code's conduct rules in Code Section 2.03.104 recite prohibitions affecting the conduct of individual officials and employees when direct financial conflict is not at issue. Subsection (A) prohibits exercise of official authority which creates an appearance that the decisions or actions of a County official or employee or his or her department are influenced by factors other than the merits of the matter for decision. This prohibition exists because such conduct violates the public trust by undermining public confidence in the impartiality of the governmental body with which the employee or official is associated.3
 
            New Castle County Code Section 2.03.104(I)(2) permits a representative or agent of County government to accept a gift made to the people of New Castle County so long as that non-cash gift does not create an appearance of impropriety and the gift is recorded in a public gift log.4
 
             New Castle County Code Sec. 2.03.104 (J)(1) prohibits solicitation from entities which do business with or are regulated by New Castle County with the exception of solicitation which is conducted pursuant to written County policy that identifies the public benefit for the approved cause.5
 
Administrative policy
 
            In addition to the Code, New Castle County administrative personnel policy 5.04 speaks to solicitation. It states that an employee may not solicit or accept any gift "from a vendor or supplier or offered to promote a product or service." However, it also states that the definition of gift does not include "items of a de minimus value such as . . .t-shirts, mugs, hats . . .and other unsolicited advertising or promotional items." It is not clear whether this latter exclusion applies to items from vendors. The policy also recognizes
 
that there may be rare circumstances where it is permissible for an employee to accept a gift or benefit. In such circumstances: a) approval must be obtained from the department general manager or row officer, and the Exception to Personnel Policy 5.04 Form shall be filed within 48 hours to fully disclose the specific exception; . . . c) questions regarding whether the gift is an exception to this policy shall be decided by the department general manager or row officer. If the department general manager or row officer is unable to make this decision, the New Castle County Ethics Commission shall be contacted for an advisory opinion."
 
            Unless Administrative rules or policy fail to comport with the minimum ethical standards established in the County Code of Ethics, interpretation of those rules and policy must be made by the Executive branch itself as such interpretation is not within the jurisdiction of the Ethics Commission. The Commission is not aware of any Executive branch interpretation of the administrative prohibition about accepting gifts from vendors and suppliers and the policy will have no bearing on its analysis of this request.
 
Prior Commission Decisions
 
            Past Commission interpretation of the Code of Ethics has permitted solicitation activities by County employees under restricted circumstances but the Commission precedent, except for one Opinion, predates the law enacted in 2006 found at Code Sections 2.03.104 (H), (I), and (J). Those older opinions relate to situations in which the official or employee is seeking donations on behalf of a private charitable enterprise. In most of those opinions the Commission analyzed questions of the appropriate boundaries between the County status of the employee or official and the targeted entity. See, e.g., Advisory Opinions 96-07 and 93-02. Also of note here is Advisory Opinion 01-08, in which the Commission required an employee to avoid personally soliciting funds from entities for which he directly performed County services. It required him to minimize any appearance that a party being solicited would receive favorable treatment from the County or feel compelled to donate because of the employee's County status by prohibiting the employee from signing any direct written solicitation made to persons regulated by his department and requiring him to avoid mention of his County department in oral or written solicitations.
 
            In Advisory Opinion 95-02, the Commission addressed the question of whether a County agency could co-sponsor an educational seminar with one of the private users of the agency. The Commission found while the agency could participate in the seminar, co-sponsorship would violate the Code by creating an appearance of impropriety. "The agency's cosponsoring of a seminar with one of the several private entities which must conduct business with the agency creates the appearance of a cozy relationship between the Sponsor and the agency, thereby enhancing Sponsor's public image. This appearance would engender in the public a perception that the agency favors Sponsor over its competitors or officially sanctions Sponsor's activities."
 
            In the only relevant Opinion issued pursuant to the 2006 solicitation rules, Advisory Opinion 06-09 addressed the concern that solicitation by the County would create an appearance that a donation would result in a special benefit to or preference for a donor. The Commission determined that new Code Section 2.03.104(J) permitted a broad solicitation which included entities which do business with or are regulated by New Castle County when a number of restrictive conditions were fulfilled, including a written County policy describing the solicitation's benefit for the public and requiring prior Commission review.

Analysis:

"Gift"
 
            The exchange between the County and the company does not fit the definition of a "gift". The for-profit company has experience in assisting other municipalities in operating cable access channels. It has not approached the County in the posture of a charitable donor but has proposed a business proposition which benefits both parties, where the company takes the risk of underperformance of advertising revenue and the County the risk of damage to its integrity and reputation by association with the advertisers. Rather than a gift, the interaction between the County and the company is better termed a commercial contract for goods and services. Under that contract the County gets the financial benefit of the waiver by giving the company authority to use the County name and reputation to assist in selling advertising and collecting revenues. The unavoidable conclusion is that the company, a for-profit business, expects the advertising revenue to be equal to or potentially greater than the cost of the waiver. Thus, there is a quantified financial benefit on both sides of the contract in the amount of the fee the advertisers pay to the company. There is no gift involved.
 
Appearance of Impropriety
 
            The Commission has no authority to judge whether a dedicated cable channel is in the public interest and accepts the Administration's conclusion that such a communication vehicle is worthwhile. Additionally, the Commission does not have jurisdiction to approve or reject vendor relationships entered into at the direction of the County Executive unless they violate the conflict or appearance rules of the Ethics Code. There is no suggestion in this request that any County official or employee involved in this matter has the type of personal relationships prohibited by the Code's conflict rules.
 
            The Commission agrees that in many ways the relationship between the County and the company is similar to other vendor relationships but it finds that the currency on the County's side of this transaction, information it produces and its good name, sets that relationship apart. Although the absence of a finding that a "gift" exists moots a response to the specific contingent question in this request for advice, whether the acceptance of the terms of the waiver create an appearance of impropriety, the Commission believes that that question still hangs in the air regarding this proposed exchange because of the association between the County and the advertisers. The administration appears to be aware of this difference and has suggested restrictions in the proposed contract to protect the County's good name, such as using PBS standards in the nature of advertising, written notice to potential advertisers that they have no expectation of improper deference in County services, and requiring that all solicitation and financial activities are performed only by employees of the company.
 
            The Commission standard for judging an appearance of impropriety is whether the conduct in question, i.e., the acceptance of the financial waiver in exchange for the use of its information and good name, "would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that [an] official's ability to carry out [official duties] with integrity, impartiality and competence is impaired." In re Williams, 701 A.2d 825, 832 (Del. Super. 1997). In determining the relevant circumstances, the courts advise the Commission to look at the totality of facts.
 
            Here, that totality includes the Executive's decision that the addition of a cable channel as a means communication with the citizens of the County furthers the public interest. That short term public good must be balanced against the risk of enhancing the image of an advertiser at the expense of the public confidence in the integrity and reputation of the County and its administration, as discussed previously in Advisory Opinion 95-02. In this context, the Administration's efforts to protect the County's good name, through the prohibitions against political party advertising, revenue solicitation by any County employee, and a written notice to potential advertisers against expectation of deferential services, help to reduce the perception that the reputation of the County is diminished by this endeavor.
 
            A question arises about whether a limitation on the amount of revenue, either in dollar value or by percentage, from any one advertiser or categories of advertisers, should be included in the contract. For example, the effect of accepting significant advertising revenue from businesses regulated by the County in the area of land use, or from their attorneys, might cause a reasonable person to believe that the County would be less stringent about enforcement of regulations in regard to those businesses. Additionally, the prohibition on accepting advertising from political parties could be broadened to include limitations on advertising by incumbents and candidates for County office in order to avoid the appearance of misuse of County office or status for personal gain.
 
            The addition of such limitations in the contract would further reduce the appearance of improper association and increase public perception and confidence that the County government conducts its business in a fair and impartial manner. In advance of actual operation of the public access channel, the Commission believes imposition of these and the other stated restrictions will avert a perception of impropriety. However, since the channel is not yet in operation, the Commission cannot actually predict the manner in which public perception will be impacted and warns that it may revise its finding once the channel is broadcasting and the restrictions enforced.

Finding:

            Although the exchange between the County and the company does not involve a "gift" as defined in the Ethics Code, this Opinion request involves an unprecedented type of exchange between a vendor and the County. The Commission believes that the County has made and will continue to make significant efforts to balance the competing forces at work -- increased information for the citizens versus perception of partiality and favoritism for advertisers. At this early contract proposal stage, the Commission finds that the actual and suggested restrictions for advertising on the public access cable television channel mitigate against a finding of an appearance of impropriety.
 
            In issuing this Advisory Opinion, the Ethics Commission is applying the New Castle County Code of Ethics, which establishes the minimum level of ethical conduct required of County officials and employees. The Commission cautions, however, that each County department, board, or other unit of County government is free to, and may impose as part of its own policy, additional or greater restrictions on its officials and employees than those set forth in this Opinion.
 
            BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 13th DAY OF JUNE 2007.
 
_________________________
John McMahon, Chairperson
 
Decision: Unanimous

Footnotes:

1For the purposes of this Opinion, the Commission assumes that this written disclaimer would also be noticed in some way in the video broadcasts of the channel.

2For example, requests for advertising space would not be accepted from Liqupr stores, bars, manufacturers of alcohol, tobacco, or firearms, adult bookstores, political parties, or gambling entities. However, the 15 second long advertisements would allow individuals or business to promote their product, service or company without reference to price, calls to action, or third party reviews.

3New Castle County Code Sec. 2.03.104. Code of conduct, in pertinent part:
. . .
A.     No County employee or County official shall engage in conduct which, while not constituting a violation of Section 2.03.103(A)(1) [conflict of interest], undermines the public confidence in the impartiality of a governmental body with which the County employee or County official is or has been associated by creating an appearance that the decision or action of the County employee, County official or governmental body are influenced by factors other than the merits.
. . . 

4Section 2.03.104(I) states in pertinent part:
2. Gifts made to the people of New Castle County may be accepted by a representative or agent of County Government as long as the gift does not create an appearance of impropriety. Such a gift shall not become the property of or be attributed to the representative or agent. The gift shall remain in locations controlled by New Castle County. Any such gift shall be promptly recorded in a public gift log.
            Section 2.03.104(H)(2) prohibits acceptance of gifts of cash other than a political contribution otherwise reported as required by law. 

5New Castle County Code Section 2.03.104(J) states:
J.     Solicitation.
1.     Solicitation from entities which do business with or are regulated by New Castle County are prohibited unless such solicitation is pursuant to New Castle County written policy decision and for the benefit of the public.