Filing Number: 04-02
Subject: Ethics Code Complaint
Keywords: appearance of impropriety, conflict, contract, County official, Department of Community Services, HUD, impropriety, program, public notice, unwarranted privilege
Decision By: Commissioners: Dennis Clower, Loren Grober, Wendy Jamison, V. Eugene McCoy, John McMahon, Ernest Price
Contact Email: admin@nccethics.org
 
Status: Active

Order:

Issues Presented in the Complaint made pursuant to New Castle County Code Section 2.04.103\
 
          Whether a County official violated New Castle County Code section 2.03.103C1 by contracting with the Department of Community Services without public bidding for Section 8 rental payments which exceeded $500.00 in the aggregate?
 
          Whether a County official's participation in the Department of Community Services Section 8 rental payment program creates an appearance of impropriety in violation of New Castle County Code section 2.03.104A2?
 
 Conclusion
 
         A County official did not violate the New Castle County Code Conflict of Interest provisions in contracting without public bidding with the Department of Community Services for Section 8 rental payments in excess of $500.00 in the aggregate because the County Department was acting only as the agent and administrator of the federal government in executing publicly advertised Section 8 contracts that involved no County funds.
 
          There was no appearance of impropriety in the receipt of Section 8 payments by the County official because the official operated a Section 8 rental business which was unrelated to his County position and duties, and the official or employee was required to enter into a public contract at arm's length through a department in which he is not employed, by which he is not supervised, and to which he does not report.
 
Analysis
 
          The Section 8 Program
 
          The Section 8 Housing Assistance Program is a federally funded (Department of Housing and Urban Development) program administered by the County which is designed to help low and moderate income persons pay for housing in the private market. The Section 8 Housing Assistance Payments Program consists of various subprograms, designed to reflect the different types of housing (new construction, substantial rehabilitation, moderate rehabilitation, existing housing) and delivery mechanisms available. The rental programs share many of the same features: families receive the benefit of a rental subsidy, known as a housing assistance payment, equal to the difference between their share of the rent as calculated by federal standards and the rent charged by the owner. Owners, which may be public or private entities, receive the housing assistance payments directly from HUD or from a housing authority that administers the program for HUD for a fee.
 
          New Castle County and the cities of Wilmington and Newark channel Section 8 rental payments from HUD to the landlord. The New Castle County Department of Community Services is assigned this responsibility for the County and HUD reimburses the County for the service. County participation is limited to confirming that the federal conditions are met, seeing that the contracts and leases ordained by HUD are executed, performing inspections, reporting to HUD on program attributes and expenditures, providing office space, employee salaries, and overhead.
          The County is required by contract to make a public effort to interest landlords in the program by advertising in the media for participation and by holding public meetings twice a year to attract the interest of rental property owners. It publicly encourages potential tenants to seek out landlords willing to rent under Section 8 conditions.
 
          There are two ways in which a landlord becomes involved with the program: the landlord can agree to be placed on a list of property owners who will agree to rent to a tenant who is section 8 qualified or the tenant can find a property himself and convince the owner to participate in the program. In either case, the property must be inspected and qualified according to federal standards. If a property is qualified, the landlord is expected to provide the services agreed to as part of the lease signed with the tenant and the HUD contract. The HUD subsidy is paid directly to the landlord and the tenant pays any balance. The landlord is listed as a vendor in County records for the HUD payments.
 
          Allegations in the complaint
 
          The complaint makes three allegations: that a County official used confidential information for private benefit in obtaining Section 8 rental payments in violation of New Castle County Code section 2.03.103A(1)3; that a County official contracted without public bidding as a landlord in the Section 8 housing assistance program administered by the County Department of Community Services, in violation of Code section 2.03.103C; and that the official's participation in the Section 8 program creates an appearance of impropriety in violation of Code section 2.03.104.
 
          The first question raised by the complainant is whether the Ethics Code provision prohibiting use of office or use of confidential information for private benefit has been contravened. There was no allegation in the complaint that the official or his office has any professional relationship whatsoever with the Department of Community Services or that the official had access to information other than that which was publicly available. An inquiry revealed that not only is there a lack of connection between the office of the official and the Department but also that the Section 8 program is publicly advertised and the Department is required to take active means to solicit the interest of private and public landlords as part of its contract with the federal authorities. Absent any factual support, the Commission has determined that it would not be reasonable to consider this allegation further.4
 
          The second allegation is that the official has violated the Ethics Code provision regarding contracting by a County official or employee. Section 2.03.103C prohibits County officials or employees who have an ownership interest in a business from entering into County contracts valued at more than $500.00 without public notice and competitive bid. The official has previously disclosed that he has received funds under such Section 8 contracts. The final claim is that the official's participation in the Section 8 program creates an appearance of impropriety under Code Section 2.03.104 which prohibits conduct which creates the appearance that official actions are influence by factors other than the merits.
 
          Prior Ethics Commission Opinions
 
          Similar questions were examined in Advisory Opinion 91-04. That Opinion involved a request for advice from a County employee who owned qualified rental properties, some of which were already leased to tenants in a Section 8 program administered by another municipality in the County. All of the employee's properties had been qualified for rental through a process conducted by the municipality and that those inspections and qualification would carry over to any property to be used in the County Section 8 program. The employee was asking whether an ethics code violation would result if he participated in the County Section 8 program, which was administered by the department in which he was employed.
 
          The Commission did not find a conflict of interest in the employee's participation in the program administered by his own department.5 The Commission found that the employee was a member of a subclass of the general public, landlords who are willing and eligible to participate in the Section 8 program, and was therefore exempted from the conflict rule. The Commission also found that there could be no misuse of authority or confidential information by the employee because the qualification of his properties by another entity had already taken place. The Commission emphasized in the Opinion that its decision was also based in part on the fact that the County was acting only as agent and administrator for a federally funded program and that no money was paid from the County fund. The Commission determined that affiliation with the program was contingent upon compliance with federal guidelines and that the contracts were with the federal government, and the County was merely an agent. The Opinion further found that participation in the Section 8 program was accomplished through a public process, even though there was no public notice of the specific employee's participation in the program.
 
          After finding no conflict of interest, the Commission examined the question of appearance of impropriety. The employee's job included the resolution of conflicts between landlords and tenants under the County's Section 8 program. The Commission found that the impartiality of the County Department could come into question if the employee exercised responsibility for mediating a dispute between himself and his tenant. In order to avoid the appearance of impropriety, the Commission recommended that the employee disclose his participation in the Program to his department head and that the employee recuse himself from the overall responsibility, implementation or administration of the program with respect to his property.
 
          Two later Advisory Opinions support the application of the reasoning of Advisory Opinion 91-04 to the complaint now before the Commission. Advisory Opinion 94-05 dealt with the question of whether a County official or employee, like the elected official who is the subject of this complaint, may operate a business which is unrelated to his County position or duties. In finding no conflict, the Commission commented that without some nexus between a County official or employee's business activities and his official position and duties, no appearance of impropriety could arise. Similarly, in Advisory Opinion 00-04, the Commission found that where an employee does not work for a department which originates a publicly noticed contract, or report to or be supervised by the individual choosing or monitoring the contract, there is no conflict of interest or appearance of impropriety.
 
RULING
 
          The Commission finds that the reasoning of the above-noted Advisory Opinions informs and is applicable to the issues before it. The official complained of in the complaint did not violate the Ethics Code conflict of interest provision since there was no evidence he used his County office, or confidential information derived therefrom, for his private benefit. The Commission further finds that the official did not violate the restrictions on contracting with the County without public bid when participating in the Section 8 program because the Section 8 contracts, which the County is paid to administer, are with the real party interest, HUD, and the contracts involve no County funds. Finally, the Commission finds that the official's participation through his unrelated private business with the publicly advertised Section 8 program does not create the appearance that the receipt of rental payments channeled through the Department of Community Services is influenced by factors other than the merits.The complaint is dismissed.BY AND FOR THE ETHICS COMMISSION ON MARCH 24, 2004.Dennis S. Clower, Chairperson
 

Footnotes:

          1 New Castle County Code section 2.03.103 C:
No County official or County employee or his or her spouse or child or any business with which the County official or County employee or his or her spouse or child is associated or who has a legal or equitable ownership of more than five (5) percent (more than one (1) percent in the case of a corporation whose stock is regularly traded on an established securities market) shall enter into any contract with the County (other than an employment contract) unless such contract was made or let after public notice and competitive bidding. Such notice and bidding requirements shall not apply to contracts not involving more than five hundred dollars ($500.00) per year if the terms of such contract reflect arms' length negotiations.
 
          2 New Castle County Code section 2.03.104 A:
No County employee or County official shall engage in conduct which, while not constituting a violation of Section 2.02.102(A)(1), 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 a appearance that the decision or action of the County employee, County official or governmental body are influenced by factors other than the merits.
 
           3 New Castle County Code Section 2.03.103 states in pertinent part:
A. Restrictions on exercise of official authority.
1.     No County employee or County official shall use the authority of his or her office or employment or any confidential information received through his or her holding County office or employment for the personal or private benefit of himself or herself, a member of his or her immediate family or a business with which he or she is associated. . . .
 
          4Section 2.04.102 J:
(The Commission may) [i]nitiate an inquiry, pursuant to section 2.04.103, where a complaint has not been filed but where there is a reasonable belief that a violation of this Division or Division 2.03.200 of this Chapter may exist. . . . Section 2-04.103 A: Upon a complaint signed under penalty of perjury by any person . . . the Ethics Commission shall, through its Ethics Counsel, conduct a preliminary inquiry into any alleged violation of this Division and Division 2.03.100 of this chapter. . . . Section 2.04.103 B:

If the Commission determines after a preliminary nquiry that no reason exists to proceed to an investigation, the Commission shall terminate the inquiry and so notify the complainant and the person who had been the subject of the inquiry. . . .

 
5 The Department of Community Services has subsequently enacted a more strict regulation, according to its chief administrator. While it does not prohibit employees from other County departments or offices from becoming landlords in the County Section 8 program, the department has established a rule that employees of the department may not participate as landlords. Additionally, if a department employee's relative is a participant in the program, job responsibilities are reassigned from that employee in relation to the relative.
          This more strict regulation does not conflict with the Ethics Code. "Each County body, department, agency, office or board is free to and may imposed additional or greater restrictions on its officials and employees' secondary employment activities." Advisory Opinion 93-01, at 6; see also Advisory Opinions 02-02 at 5; 01-03 at 4; and 94-03 at 3.