Filing Number: 17-01
Subject: Appearance of Impropriety
Keywords: appearance of impropriety, appointed official, board member, compensation, conflict, County official, County policy, Executive Office, impropriety, private advantage or gain, private business, public policy, recusal
Decision By: Eric J. Monzo, Vice Chairperson; Paula Jenkins-Massie; Sally Jensen; and Robert Ralston
Contact Email: admin@nccethics.org
 
Status: Active

Question:

Whether a County official may serve as a member of the board of directors of a bank which bank does not do business with the New Castle County government and for which she is paid a flat fee for monthly meeting attendance?

Conclusion:

Yes, the requester may continue her service on the board of directors of a bank which does not do business with the New Castle County government and for which she is paid a flat fee for monthly meeting attendance, so long as the conflict of interest procedures in the Ethics Code are observed at all times, including that she formally recuses herself while serving on the board of directors from participation in all matters which come before the County that involve that bank and all matters which come before the bank that involve County government. To the extent that it comes to the attention of the requester that customers of the bank are doing business with the bank in order to perform actions which require County government approvals or involvement, she must take reasonable steps to inform herself of these potential conflicts in her service on the board of directors for the bank, and vice versa, in order to avoid possible unintentional cross-over of bank and County matters.

Facts:

The requester is a recently-hired County official and employee. Since 2000, the requestor has served as a member of the board of directors of a bank. She is paid a flat fee for attendance at monthly meetings but is not otherwise compensated for her service on the board. The bank at issue is headquartered in Wilmington, Delaware, is a Delaware State Chartered Bank and an FDIC insured, Equal Housing Lender. It is also subject to the regulation by the Delaware Banking Commissioner. The bank operates one branch in New Castle County and one branch in Sussex County. The bank has been providing banking services since 1996 and holds itself out as a leader in providing secured and unsecured Visa and MasterCard Credit Cards to people with little or no credit history.  The bank has advertised that its goal is to “continually develop, expand, and retain sound consumer and commercial relationships by delivering attractive and competitive financial products and services, at an exceptional level of quality that exceeds consumer's needs and expectations.” Additionally, the bank advertises a commitment to the Delaware community by participating in promotions which benefit the Delaware Financial Literacy Program, Junior Achievement, United Way, the Ministry of Caring, Interfaith Community Housing of Delaware, and the Opportunity Center Incorporated. Further, the bank participates in the Community Reinvestment Act which subjects the bank to heightened scrutiny by the FDIC with respect to whether it provides continuing and affirmative obligations to help meet the credit needs of the local communities in which the bank is chartered.
The bank does not do business with the New Castle County government. It is not involved in any litigation with New Castle County. And it does not have any pending applications in the Land Use Department or any other County department.

Code or Prior Opinion:

Relevant provisions in the definition section of the Ethics Code, Section 2.03.102, include the following:
Appearance of impropriety means conduct which is prohibited by Section 2.03.104A.
Business means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit.
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.
Conflict or conflict of interest means conduct which is prohibited by Section 2.03.103.
County means New Castle County and including any County Department.
County official means any person elected or appointed to any County office, board, commission or the New Castle County Council Audit Committee provided, however, that for purposes of Sections 2.03.103(B)(2), 2.03.103(C), and 2.03.104(C). "County official" does not include any member of a board or commission which operates solely in an advisory capacity, and whose members are not compensated, other than reimbursement for expenses.
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.
Governmental body means any department, authority, commission, committee, council, board, bureau, division, service, office, official, administration, legislative body, or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any department performing a governmental function.
Governmental body with which a County official or County employee is or has been associated means the governmental body within County government by which the County official or employee is or has been employed or by which the County official or employee is or has been appointed or elected and subdivisions and offices within that governmental body.
Income means any money, thing of value or other pecuniary benefit received or to be received in return for, or as reimbursement for, services rendered or to be rendered. The term does not include gifts; governmentally mandated payments or benefits; retirement, pension or annuity payments funded totally by contributions of the County official or employee; or miscellaneous, incidental income of minor dependent children.
Person means a business, governmental body, individual, corporation, union, association, firm, partnership, committee, trust, joint venture, club or other organization or group of persons.
Recusal means, including but not limited to, withdrawing from sponsorship, deliberation, vote, research, preparation, discussion, negotiation, contract formation, policy making, planning, decision making, and/or implementation of a matter. It also includes a prohibition on conducting, in an official capacity, any private or public discussion of a measure raising a conflict or improper appearance. As soon as a potential conflict or improper appearance arises or is recognized, an official or employee must end direct or indirect participation, advice, input, direction, recommendation, or discussion, as well as refraining from vote, if the person is a not an elected official. Elected officials may choose to avoid recusal and may vote if they follow the alternate process described in Subsection 2.03.103.A.2.
Regulated by New Castle County means that an entity operating in New Castle County as a business or nonprofit organization requires approval from or regulation by New Castle County in order to lawfully conduct one or more business activities.
 
Code of Conduct Provisions
 
Certain portions of the New Castle County Ethics Code are relevant to this opinion, including the following:
 
Section 2.03.101. - Purpose of Division.
 
A.  It is hereby declared that public office is a public trust and that any effort to realize personal financial gains through public office other than compensation provided by law is a violation of that trust. It is further declared that the people have a right to be assured that the financial interests of holders of or nominees to or candidates for public office do not conflict with the public trust. Because public confidence in government can best be sustained by assuring the people of the impartiality and honesty of public officials, this Division shall be liberally construed to promote complete financial disclosure as specified in this Division. Furthermore, it is recognized that clear guidelines are needed in order to guide public officials and employees in their actions. Thus, this Division intends to define as clearly as possible those areas which represent conflict with the public trust.
 
B.  It is recognized that many public officials are citizen-officials who bring to their public offices the knowledge and concerns of ordinary citizens and taxpayers. They should not be discouraged from maintaining their contacts with their community through their occupations and professions. Thus, in order to foster maximum compliance with its terms, this Division shall be administered in a manner that emphasizes guidance to public officials and public employees regarding the ethical standards established by this Division.
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Section 2.03.103. - Prohibitions relating to conflicts of interest.
 
A. Restrictions on exercise of official authority.
 
1.  No County employee or official knowingly or willfully 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. This prohibition does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the County official or employee, a member of his or her immediate family or a business with which he or she or a member of his or her immediate family is associated. There will be a rebuttable presumption of a knowing or willful violation of this section if the action benefits the County official or employee, his or her spouse, or his or her dependent children (whether by blood or by law).
 
2.  In any case where a person has a legal and/or statutory responsibility with respect to action or non-action on any matter where the person has a personal or private interest and there is no provision for the delegation of such responsibility to another person, the person may exercise responsibility with respect to such matter, provided that promptly after becoming aware of such conflict of interest, the person files a written statement with the Commission fully disclosing the personal or private interest and explaining why it is not possible to delegate responsibility for the matter to another person. If the matter is one in which the legal and/or statutory responsibility requires the person to vote upon the issue, the written statement filed with the Commission shall be read into the public record prior to the time the person's vote is cast. Any person choosing to abstain from voting on an issue where or she has a conflict shall state the reasons for his or her conflict on the record; an abstaining voter need not file the written statement with the Commission required when acting on, rather than abstaining from, an issue involving a conflict.
 
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Section 2.03.104. - Code of conduct.
 
A.  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.
 
B.  No County employee or County official shall acquire a financial interest in any private enterprise which such employee or official has reason to believe may be directly involved in a decision to be made by such official or employee in an official capacity on behalf of the County.
 
C.  Any County employee or County official who has a financial interest in any private enterprise which is subject to the regulatory jurisdiction of, or does business with, any County Department shall file with the County Human Resources Office a written statement fully disclosing the same. Such disclosure shall be confidential and the County Human Resources Office shall not release such disclosed information other than to the Commission and to the Department head of an employee, except as may be necessary for the enforcement of this Division. The filing of such disclosure statement shall be a condition of commencing and continuing employment or appointed status with the County.
 
D.  No County employee or County official shall use such public office to secure unwarranted privileges, private advancement or gain.
 
E.  No County employee or County official shall engage in any activity beyond the scope of such public position which might reasonably be expected to require or induce such County employee or County official to disclose confidential information acquired by such employee or official by reason of such public position.
 
F.  No County employee or County official shall, beyond the scope of such public position, disclose confidential information gained by reason of such public position nor shall such employee or official otherwise use such information for personal gain or benefit.
 
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Case Law and Commission Precedent
 
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. 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.
 
In Advisory Opinion 15-09, a County employee asked the Ethics Commission whether she could join the board of a nonprofit organization if she revealed the potential areas of improper appearance to both the nonprofit and the appropriate County authority and recused herself from any activities which may cause the appearance of conflict, including policy making, promotion, or other activities concerning the nonprofit’s relationship with the County. The Commission decided in the affirmative, but reminded the employee that, in order to assure compliance with the Ethics Code, recusal required more than abstaining on matters put to a vote. The Ethics Code definition of recusal also means that the employee may not engage in any County discussion or circumstance that involves the nonprofit board, and the employee may not engage in any nonprofit board discussion or circumstance that involves the County. In addition, the employee must make it clear in her participation and activities with the nonprofit organization that she is not acting or speaking on behalf of New Castle County, and she may not appear before New Castle County officials or employees on behalf of the nonprofit organization.
 
In Advisory Opinion 15-03, the Commission was asked whether an appointed official could serve as a member of a nonprofit board which has occasionally received federal funds that are administered by the official’s department. In concluding that the official may join the board of the nonprofit, the Commission required the official to reveal potential areas of improper appearance to both the nonprofit and the appropriate County authority and to recuse him or herself from any activities which may cause the appearance of conflict, including policy making, promotion, or other activities concerning the nonprofit’s relationship with the County.
 
In Advisory Opinion 10-06, a County employee requested guidance as to whether he or she may serve on a board of directors for a nonprofit organization which provided services for citizens at a County park administered by his or her department. Due to the fact that the function of the board of the nonprofit was to oversee activity that was conducted under extensive and continuous regulation by the employee’s County department, the Commission concluded that the employee may not assume a seat on the board without violating the New Castle County Code provision against representation of a private entity before his or her department. Further, the Commission reasoned that assumption by the employee of a leadership role in the nonprofit organization extensively regulated by his or her department would create an appearance of partiality in decisions made by that department concerning the nonprofit organization.
 
In Advisory Opinion 09-05, a County official on a nonprofit board wanted to participate in the formation or execution of a contract between the nonprofit and a company that was acting as an agent for the County. The Commission ruled that the official must recuse him or herself from all of the board’s discussion, negotiations, votes, or contract formation with the County or its agents. 
 
In Advisory Opinion 05-24, an elected official asked whether he could become a member of a nonprofit board which receives federal community development funds administered by the County and a small County grant. Quite similarly to the conclusion in Advisory Opinion 15-03, mentioned above, this Commission held that the elected official may join the board of the nonprofit if he or she reveals the potential areas of conflict to both the private entity and the appropriate County authority and requests that both the entity and the County permit him to recuse him or herself from the activities which cause the appearance of conflict, including policy making, promotion, or other activities concerning the nonprofit’s relationship with the County.

Analysis:

The New Castle County Ethics Code recognizes that County official and employees are members of communities and have concerns and activities beyond their lives as County employees, as discussed in Section 2.03.101.B:
It is recognized that many public officials are citizen-officials who bring to their public offices the knowledge and concerns of ordinary citizens and taxpayers. They should not be discouraged from maintaining their contacts with their community through their occupations and professions. Thus, in order to foster maximum compliance with its terms, this Division shall be administered in a manner that emphasizes guidance to public officials and public employees regarding the ethical standards established by this Division.
Nevertheless, every County official and employee must consider the ethical rules stated in the Code of Conduct to determine whether his or her “outside” activities create an actual conflict and/or an appearance of conflict with his or her County duties.
In Section 2.03.103.A of the Code, government conduct on the part of County employees or officials for personal or private financial benefit is prohibited. Further, Section 2.03.104.A.1 prohibits the creation of an impression in the reasonable mind of a member of the public that an official or employee’s official action is affected by personal interests which impairs his or her competence, integrity and honesty, or that the department in which he serves will look as though it is showing partiality in a given matter.
Prior Commission decisions are especially instructive on the issues raised by this request for an advisory opinion. The requestor is a County official with management responsibilities which extend throughout County government. The purposes advertised by the bank at issue here are positive banking activities, but the potential for actual conflict or the appearance of a conflict exists. That is the issue which must be carefully observed by the requestor in order to prevent any real conflict of public impression of a conflict.  To avoid any violation of the Ethics Code, the requestor must follow the dictates and restrictions outlined in Advisory Opinions 15-09, 15-03, 10-06, 09-05, and 05-24 (referenced above and available on the Ethics Commission website), a well as Ethics Code Section 2.03.103.B, which requires her to recuse from any issues regarding the bank which come before the County and to recuse from any issues regarding the County which come before the employee as a member of the board of the bank.

Finding:

The requestor may continue her service on the board of directors of the bank if the employee reveals the potential areas of improper appearance to both the bank and the appropriate County authority and recuses from any activities which may cause the appearance of conflict, including policy making, promotion, or other activities concerning the bank’s potential relationship with the County. The requestor employee is reminded, in order to assure compliance with the Ethics Code, that recusal requires more than abstaining on matters put to a vote. The Ethics Code definition of recusal also means that the employee may not engage in any County discussion or circumstance that involves the bank, and the employee may not engage in any bank discussion or circumstance that involves the County. In addition, the employee must make it clear in her participation and activities with the bank that she is not acting or speaking on behalf of New Castle County, and she may not appear before New Castle County officials or employees on behalf of the bank.
 
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION
ON THIS 8TH DAY OF MARCH, 2017.
 
_______________________________
Eric J. Monzo, Esquire, Chaiperson
New Castle County Ethics Commission
  
 Decision: Unanimous