Filing Number: 15-06
Subject: Non-Profit
Keywords: appearance of impropriety, board member, communication, compensation, County resources, Department of Special Services, financial interests, impropriety, non-profit, private advantage or gain, private business, solicitation
Decision By: Johanna Bishop, Eric Monzo, Beatrice Patton Dixon, Paula Jenkins-Massie, Sally Jensen, James Keeley, Christopher Simon
Contact Email: admin@nccethics.org
 
Status: Active

Question:

          Whether the New Castle County Delaware Employees Federal Credit Union1 (“Credit Union”) may use the New Castle County government email system to send email blasts to County employees to disseminate information about its services and to increase membership in the Credit Union?

Conclusion:

          No. The Credit Union is a private enterprise. County officials and employees who are members of the Credit Union receive dividends based on the profits made by the Credit Union. Participation by County officials and employees in direct efforts to benefit the financial holdings of the Credit Union through the use of County resources would violate the Ethics Code.

Facts:

          The requestor is a County employee who is a member, and board member, of the Credit Union. During a recent Credit Union board meeting, a strategic planning session was held at which the board discussed that it “needs to reach out not only to its existing member base but to potential members.”2 The requestor was asked whether the Credit Union could send a “Hot News”3 through the County email system “occasionally to remind employees that [the Credit Union] is here for them and membership is available to them and their immediate families.” The requestor discussed the Credit Union’s request with a member of the Administration, who advised the requestor to seek an opinion from the Ethics Commission.
 

Code or Prior Opinion:

Relevant Ethics Code Provisions and Case Law
 
           In Section 2.03.102, the following relevant terms are defined by the Ethics Code, as follows:
 
Business with which he or she is associated means any business in which the person is a director, officer, owner or employee; or a business in which a member of the person’s immediate family is a director, officer, owner or has a financial interest.
 
Compensation means any money, thing of value or any other economic benefit of any kind or nature whatsoever conferred on or received by any person in return for services rendered or to be rendered by oneself or another.
 
De minimis means an economic consequence which has a cost or value less than fifty dollars ($50.00).
 
Financial interest means any interest representing more than five (5) percent of a corporation, partnership, sole proprietorship, firm, enterprise, franchise, organization, holding company, joint stock company, receivership, trust, or any legal entity organized for profit.
 
Person means a business, governmental body, individual, corporation, union, association, firm, partnership, committee, trust, joint venture, club or other organization or group of persons.
 
Private enterprise means any activity conducted by any person, whether conducted for profit or not for profit and includes the ownership of real or personal property. Private enterprise does not include any activity of the federal, State or local government or of any department, authority or instrumentality of the federal, State or local government.
 
Real property means buildings and other structures attached permanently and directly to the land, as well as the land itself.
 
          The New Castle County Ethics Code prohibits conduct on the part of County officials or employees which either creates the appearance of impropriety even where no direct conflict of interest is present. Specifically, conduct which creates an appearance of impropriety is prohibited by Section 2.03.104(A) of the New Castle County Code.4 To determine if an appearance of impropriety exists, the Delaware courts have stated that “[t]he test is… if the conduct would create in reasonable minds, with knowledge of all relevant facts, a perception that an official’s ability to carry out [his or] her duties with integrity, impartiality and competence is impaired.” Hanson v. Delaware State Public Integrity Com’n, 2012WL3860732, at *16 (Del.Super. 2012), aff’d, 69 A.3d 370 (Del.Supr. 2013); and “[t]he test for appearance of impropriety is whether the conduct would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that the [official’s] ability to carry out [the official’s] responsibilities with integrity, impartiality and competence is impaired.” In re Williams, 701 A.2d 825, 832 (Del.Super. 1997). The courts have advised the Commission to look at the totality of the facts presented, and this Commission has historically applied this standard when reviewing the conduct of County officials and employees.
 
           It is a violation of the New Castle County Ethics Code if a County official or employee uses his or her office or employment for his or her personal or private benefit, the benefit of a member of his or her immediate family, or a business with which he or she is associated.5 Economic benefits thereby derived with a de minimus impact may be exempted.6 It is also considered to be a violation of the Ethics Code when a County official or employee assists a private enterprise “with respect to any matter before the County.”7
 
Prior Commission Opinions
 
           In Advisory Opinion 15-02, the Commission was asked whether the County would violate the Ethics Code if it became a corporate sponsor of a non-profit entity in order to provide employees with a reduced rate for the services offered by the non-profit organization. In finding that the proposed action would violate Section 2.03.104(A), the Commission wrote:
 
The Commission takes notice that a number of profit making and non-profit businesses offer similar services to the public in New Castle County. There is no evidence in the request that offers from these other businesses have been compared to that offered by the non-profit in question, such as in a process similar to the RFP’s used for County vendors or other form of public survey. … County sponsoring or partnering not only lends the County’s imprimatur to this business but likely adds to its bottom line, to the detriment of its competitors. Unlike in the RFP process, the Commission and the public have no way of determining whether the County’s use of its resources urge its employees to pay for services from the non-profit is beneficial to the employee or the County taxpayer.
 
          In Advisory Opinion 12-02, an official in a County agency wanted to sponsor a meeting for clients of the agency to inform them about agency functions. At the meeting, a vendor was going to make a presentation of services that are related to the agency so that clients could enter into individual contracts for services performed by that vendor. Competing vendors were not invited to make similar presentations. The Commission found that an improper appearance of favoritism would exist if one vendor was selected by the official to make a presentation over similarly situated, competitor vendors. The Commission found:
 
The Ethics Code does not prohibit the requestor from sponsoring a meeting and invite relevant vendors as presenters. However, the requestor may not exclude similarly situated vendors from presenting if that exclusion provides a significant business opportunity to the presenting vendor which is detrimental to the similarly situated competitors. Additionally, the conduct of selecting one among competitors would imply favoritism on the part of the requestor and create the perception in the mind of the reasonable attendee and members of the public that he was not only not impartial but was advancing the private gain of the selected vendor.
 
          In Advisory Opinion 09-04, a County official wanted to provide access to his staff to a for-profit business that had no connection to the County, as a free service to his staff during the lunch hour. The Commission found that the official would violate Section 2.03.104(D) of the Ethics Code by providing access to his employees for the benefit of the private business. The Commission wrote:
 
Since the official has no financial interest in the for-profit business and will not receive any form of remuneration for providing the access, a direct conflict does not arise. However, the proposed conduct of the official …raises a question [of] the appearance of using a public office for the representation of, or for the private gain of, a for-profit business. The fact that the service to the County employees is free is not relevant to resolving this issue. In affording access to the employees, the official is personally endorsing the for-profit business in a manner different from other such businesses which are not provided such access. Although the business is not aiming its services at County government, as appears to be contemplated in the Code’s representation restrictions, the official would be acting in an official capacity when making this endorsement and therefore using his office for the future gain of the private entity as prohibited by Section 2.03.104(D).
 
          In Advisory Opinion 05-11, a County official asked the Commission whether the Ethics Code would be violated if he donated services unrelated to his County duties to the public at a County sponsored event under a long-standing contract with a local S-corporation business in which he had a significant financial interest. The Commission found no violation of the Ethics Code in the fact pattern presented in that matter, however, it stated:
 
In this case, there is no likelihood of public confusion between the official’s public duties and his private business….The business of the Corporation and the duties of the County official are not similar and do not overlap in any way. The Corporation is not regulated by, does not contract with, or advocate before the County. It would be obvious to the reasonable person that the advertising vehicle is not County sponsored, owned, or affiliated …with the County.
 
Other Relevant Code Provisions
 
           Section 26.03.1103 of the New Castle County Code, in the chapter that covers “employee relations,” the Code states:
 
The Chief Human Resources Officer shall cooperate with appointing authorities, employees, department general managers and others to promote measures directed toward more sanitary, safe and healthful working conditions; toward affording better facilities for recreation; toward greater security and economic advantage as by means of group insurance and credit union facilities; toward any other means of bettering the conditions and improving the morale of County employees; and toward maintaining good employee-management relations within the County.
 

Analysis:

          The question presented is one of first impression for the Commission. The Commission supports the employee relations goals embodied in Section 26.03.1103 of the New Castle County Code. It is the understanding of the Commission that the Office of Human Resources provides new County employees, as part of the packet of materials that they receive during orientation, a brochure provided by the Credit Union which outlines their services. Additionally, the Commission takes note that the County’s computer system information board, the Portal, has a link to the Credit Union’s website. And, the Commission notes that according to County land records, the address at which the Credit Union is located is land owned by New Castle County. The Commission also notes that the Credit Union is not the only credit union in the geographic region of New Castle County to which New Castle County employees may belong. It appears, therefore, that the County has made efforts to meet the employee relations requirement of Section 26.03.1103 with respect to credit union facilities. Good employee relations may not, however, be achieved at the expense of compliance with the Ethics Code.
 
          While the Credit Union is a not-for-profit company, its services and benefits to its members are enhanced as its profits above its operating costs increase. The Credit Union’s profits are distributed among its members in some form, including direct financial dividends. While it is clear that every County official or employee who is a member of the Credit Union receives some level of financial benefit from such membership, it is impossible for the Commission to know the extent of benefit. Each member of the Credit Union has an ownership interest in the Credit Union, and if the member takes meaningful advantage of most or all of the Credit Union services for a number of years, the financial benefit resulting from such action could reach a significant monetary value. But the Commission will not speculate as to monetary amounts involved, and it is not necessary to do so. By virtue of the way in which the Credit Union functions, it is certain that the members of the Credit Union will benefit financially from the growth of the Credit Union. That would be a positive result and the Commission has no reason to believe that the Credit Union, the County, or the requestor has any improper motive. But the ability of County official and employee Credit Union members, and part-owners, to profit from the growth of the Credit Union may not occur at the behest of a County official or employee Credit Union member and part-owner, through the use of County resources, as that would violate Sections 2.03.103(A)(1), 2.03.103(B)(2, and 2.03.104(A)of the Ethics Code.
 
          Even if the decision as to whether the Credit Union could use the Hot Mail service as requested was made by a County official or employee who is not a Credit Union member, a violation of the Ethics Code would occur. Unlike the facts presented in Advisory Opinion 05-11, the likelihood of confusion on the part of the County employees (or an informed public) is quite real. The Credit Union uses the term “New Castle County” in its name, it is physically located on County property, and there is a link to its website on the County Portal. The possibility already exists for employees or members of the public to be confused about whether the Credit Union is an arm of the County government, and whether public funds are involved in the functioning of the Credit Union, which is a private enterprise. The Commission believes that every effort should be made by the County to inform the public of the independent status of the Credit Union as a private enterprise that is not publicly funded. It does not appear to the Commission that the act of making a credit union available to its employees is a funded benefit, but it also does not appear that other similarly situated credit union or banking competitors have been afforded the opportunity to offer similar services to County officials and employees, through the transparent, competitive bid process , or otherwise.

Finding:

          The conduct proposed by the requestor would either directly violate sections of the Ethics Code, because the requestor would benefit financially from the use by a private enterprise of County resources, or it would violate the Ethics Code because it would create confusion and an improper appearance in the mind of the reasonable public. The Credit Union may not use Hot News to advertise its services to County officials, employees and organizations.
 
           In rendering this advisory opinion, this Commission has applied the New Castle County Ethics Code, which establishes the minimum level of ethical conduct required of County officials and employees.
 
BY AND FOR THE NEW CASTE COUNTY ETHICS COMMISSION ON THIS 10TH DAY OF JUNE, 2015.
 
                                                _____________________________________
                                                Johanna P. Bishop, Chairperson
                                                New Castle County Ethics Commission
 
Decision: Unanimous
 
 

Footnotes:

1The New Castle County Delaware Employees Federal Credit Union is a federally-chartered, not-for-profit cooperative banking organization. It is not an arm of the County government. The Credit Union’s membership base includes employees and pensioners of the County, any library within New Castle County, the New Castle County Conservation District (a statutory subdivision of the State of Delaware), and the Credit Union itself. Immediate family members and household members of members may become members also. The income earned above its cost of operations is returned to its members in the form of account dividends and services offered at better rates than those offered by for-profit banking institutions. The Credit Union’s accounts are referred to as share accounts because the member becomes a part-owner in the Credit Union, with voting rights. Banking services offered by the Credit Union include collateral loans, second mortgage loans, signature loans, share savings accounts (including IRA’s), share deposit certificates, share checking accounts, debit cards, and online banking.
 
2Quotation is from an email to the requestor from Credit Union, dated April 30, 2015, a copy of which was provided to the Commission by the requestor.
 
3A “Hot News” email is the name of the email blast used by the County to reach every person with an email address that includes “@nccde.org.” This includes County officials, employees, and entities affiliated with County government in an official capacity. Hot News emails are sent by many different people in County government, but the authority and control over the County computer and email system ultimately rests with the Administration.
 
4New Castle County Code Section 2.03.104(A) states: “No County employee or County official shall engage in conduct which, while not constituting a violation of Subsection 2.03.103(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 an appearance that the decisions or actions of the County employee, County official or governmental body are influenced by factors other than the merits.”
 
5New Castle County Code Section 2.03.103(A)(1).
 
6Id.
 
7New Castle County Code Section 2.03.103(B)(2).