Filing Number: 18-02
Subject: Conflict of Interest
Keywords: appearance of impropriety, bias, board member, business, conflict, County official, County resources, disclosure, elected official, financial interests, impropriety, non delegable, non-profit, official business, presumption of good faith, private advantage or gain, private business, public policy, public purpose, real estate, recusal, State of Delaware
Decision By: Eric J. Monzo; Paula Jenkins-Massie, Sally Jensen; Robert Ralston; Kellie Tetrick and Charles H. Toliver, IV
Contact Email: admin@nccethics.org
 
Status: Active

Question:

A high-level County official has consulted the Ethics Commission with respect to an upcoming situation which potentially presents an Ethics Code dilemma. The County official, by virtue of his position in County government, is required by State law to serve as a member on the board of directors of a tax-exempt, nonprofit corporation, which was created by State legislation. A local municipality has decided to pursue a transfer of jurisdiction over some real property which, if successful, will benefit the municipality and the corporation on which the County official is a board member. It may also benefit the County. The County official, also by virtue of his County position and State law, is required to vote yes or no on the property jurisdiction transfer. If the County official votes yes, the property transfer may become a reality. If he votes no, the property transfer fails. The County official has asked the Ethics Commission for guidance regarding the application of the Ethics Code to his handling of this matter.

Conclusion:

The high-level County official will not be in violation of the prohibitions against conflicts of interest and appearances of conflicts set forth in the Ethics Code when he performs his statutory duty to approve or disapprove a proposed transfer of jurisdiction over real property to a nearby local municipality, even though his decision may make possible some development projects to be undertaken by the corporation, created by State law for the benefit of citizens in northern Delaware, for which the County official is statutorily required to serve on its board of directors, so long as the County official’s decision on the land transfer reflects his priority of duty to County government and he provides full and complete information to the public regarding his decision-making process on the land transfer, in an effort to avoid a misperception on the part of the public that a conflict exists. 

Facts:

The County official (“Requester”) in question contacted the Ethics Commission before taking action on the matter at issue. The Requester is called upon to act in many different capacities because of his County position. Over 20 years ago, before the Requester held his current County position, the State of Delaware created a nonprofit corporation (“Corporation”). The Corporation is a Section 501(c)(3), tax-exempt corporation which is primarily funded by contributions from the State of Delaware, but which also receives funds from county and local governments.[1] Its board of directors has 18 members, the majority of whom are government officials from state, county, and local governments in Delaware, including the County position currently held by the Requester. The State legislation which created the Corporation states that the Corporation’s purpose is “to promote the common good of the citizens of Delaware through planning, development and management of programs and projects intended to foster, encourage and promote recreational, residential, commercial and industrial development and redevelopment” in certain areas of northern Delaware.[2] As such, it makes sense that the State would legislate that a high-level County official must serve on the board of directors of the Corporation because the success of the Corporation inures direct and/or indirect benefits to the County government and the residents of the County, as well as to other Delaware local governments and their residents. While the County may benefit from the success of the Corporation, the Requester nor his family members have any personal investment, or personal financial interest, in the Corporation.

            Recently, a local municipality (“Municipality”) started the process to obtain jurisdiction over some real property from the County. The transfer process for the Municipality to obtain the jurisdiction of the property involves many steps, codified in State and local laws. These steps must be performed in a certain order, and all of them must be successful in order for the Municipality to obtain the desired jurisdiction of the property. The Requester, because of State law and the position he holds in County government, is required to vote yes or no on the property transfer. Certain steps in the process must be affirmatively completed before the Requester is called upon to vote on the matter, and, therefore, the question may not reach him. If each of the steps are completed and the Municipality obtains jurisdiction over the property, the Corporation may be able to use that property as part of several planned development and/or redevelopment projects,[3] as set forth in the Corporation’s enabling statutory language.

            Exercising caution and good judgment, the Requester consulted the Ethics Commission before he was formally asked to make a decision on the matter. The question before the Ethics Commission, therefore, is whether it is in violation of the Ethics Code for the Requestor to vote yes on the Municipality’s property transfer when that vote may have a positive result for the Corporation for which the Requestor also serves as a member of the board of directors?
 

Code or Prior Opinion:

Code and Prior Opinion:

Relevant Ethics Code Provisions and Case Law

            In Section 2.03.102, the following terms which may be relevant to this issue are defined by the Ethics Code, as follows:

Appearance of Impropriety means conduct which is prohibited by Section 2.03.104.A.

Authority of office or employment means the actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular County office or position of County employment.

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.

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 employee means any person who receives compensation as an employee of a County Department or County row office.

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.

Immediate family means, for the purposes of the Statement of Financial Interests reporting only, a spouse, domestic partner, and the adult children of the filer, spouse, or domestic partner. "Immediate family" means a spouse, child whether by blood or operation of law, parent, step-parent, spouse's parent or child, or sibling of the whole or half blood of a County official or employee.

Non-ministerial action means an action in which the person exercises his or her own judgment as to the desirability of the action taken.

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.

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.

Regulation includes, but is not limited to, obtaining permits, registering residential rental property, or trade licensing, but does not include the payment of property taxes, sewer service charges, individual library use charges, park fees, animal licensing fees or other similar fees.

The New Castle County Ethics Code recognizes that public office is a public trust, and a violation of that trust by a County official or employee for personal gain or profit may cause serious harm as such a violation will undermine the confidence of the public in its government.[4]  For this reason, the Code requires, among other things, public disclosure of financial interests of certain County officials, employees, and candidates for office, so that the public may be assured that their financial interests do not conflict with the public trust.[5] The Code further recognizes that because the public confidence in County government is best secured by assuring the impartiality and honesty of their County officials and employees, the Ethics Code sets forth minimum standards for ethical conduct and that the Code should be liberally construed to promote complete public financial disclosure, and official and employee conduct, which is deserving of the public’s trust.[6]

It is important that the Code also recognizes that County officials are citizens which bring to their office their knowledge and concerns for issues facing the ordinary citizen.[7] The Code is not intended to cause County officials to disengage from their contacts in their communities. However, the Ethics Code prohibits the disclosure of confidential information gained as a result of a County official or employee during their official duties.[8] For these reasons, the Commission strives to provide guidance to County officials and employees regarding the application of the Ethics Code to their actions taken as County officials or employees in a manner which best promotes compliance with the Ethics Code.[9]  

The New Castle County Ethics Code prohibits conduct on the part of County officials or employees which 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.[10]  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.[11]  Economic benefits thereby derived with a de minimus impact may be exempted. [12]

            When a County official has a conflict between a non-delegable statutory duty and a personal interest, the Ethics Code, in Section 2.03.103.A.2, outlines the procedure which must be taken by the County official to avoid or resolve the conflict by consulting the Ethics Commission and creating a public record of the conflict.[13]       

            Additionally, the Code recites prohibitions on County officials concerning their involvement with outside interests which interact with the County government. Section 2.03.103.B.2 prohibits the official from representing or assisting any private enterprise with respect to any matter before the County. This restriction extends to non-profit organizations as well as private businesses or private concerns.[14]

                        Prior Commission Opinions       

            In Final Order 08-03, the Commission dismissed a complaint that an official improperly communicated with selected members of his constituency. The Commission held that "if an official or his or her family do not have any interest in the substance of proposed legislation to a greater degree than the general public or a subclass consisting of an industry, occupation or other group which includes them, no evidence of bad faith, corruption, or improper personal interest arises just because the official consulted with selected constituents about legislation or took a position on that matter. If an official could be considered to have such a private interest different from the general public or a subclass of an occupation or industry, but the matter is part of his non-delegable duties and he believes his participation in the matter is in the public interest, he may act provided he follows the public notice provisions of Section 2.03.103(A)(2)."    

            The Commission, in Final Order 03-02, found no violation of the Ethics Code when a Councilperson voted for an ordinance which was favored by his former employer and former associates. The substance of the legislation was the subject of significant local partisan debate in the County's general constituency and there was no evidence of private benefit to the Councilperson from enactment.           

            In Advisory Opinion 11-04, the Commission was asked whether elected officials may vote on a matter in which they had prior significant involvement as part of their official duties. The Commission concluded that the officials may vote on the matter because their involvement in the state process was part of their official duties and they do not have a personal interest in the matter greater than that of the general public in their representative districts.  

            In Advisory Opinion 09-03, an official asked whether meeting with parties opposed to a land use issue for the purpose of exploring compromise would violate the County Code of Ethics. The Commission found no violation and stated:

In this case, neither the elected official nor his family have a personal interest in the ordinance different from a subgroup of other residents of his district and he is not prohibited from performing his legislative duties. The Commission agrees that it is well within the sphere of those duties to confer with members of the public in order to assist, where possible, with forming a consensus for the public good. Since there is no evidence of improper motive in the elected official's conduct, the Commission will provide the official with “the presumption of fair dealing and honesty as well the time-honored privilege due an elected representative of the people to conduct interactions with his constituents and others as he chooses without intrusion from the Commission.” Advisory Opinion 08-03. This presumption is afforded whether the elected official meets with opponents or proponents of legislation -- individually, separately or together as the official sees fit.      

            The Commission, in Advisory Opinion 06-06, stated that it presumes that "County officials and employees act with integrity and good faith unless circumstances show otherwise." In that Opinion the Commission stated that "unless undisclosed facts demonstrate that there are other circumstances ...creating the reasonable perception that the official's conduct would be influenced by factors other than the merits of the measure at issue, a vote will not create and appearance of impropriety."

             And in Advisory Opinion 99-03, the Commission found that in the absence of a pecuniary interest, it could be within the duties of a Council member "to express the views [on a rezoning] he or she believes to be in the best interest of his or her councilmanic district."


Analysis:

The question presented here is novel for the Commission, but the Ethics Code and the body of decisions issued by the Commission are instructive, some of which are referenced above. Not surprisingly, the theme which runs through the Advisory Opinions issued by the Commission on similar questions to the one presented here is that every County official or employee, when presented with a situation where a real or perceived conflict of interest may be present, it is best for that County official or employee to contact the Ethics Commission before any action is taken[15] for advice so that a violation of the Ethics Code, and the resulting loss of confidence of the public for this government, does not occur. The Commission commends the Requester for placing this question in front of the Commission for review before official action has been taken.    

            Here, the Requester finds himself in a potentially complicated situation, not of his making, but which may be perceived by the public as a matter involving a conflict of interest under the Ethics Code. In his position as a County official, the Requester is required to perform many and varied duties, some of which are specifically prescribed by statute and others which are discretionary in nature. In this situation, the Requester is required by statute to serve as a member of the board of directors of the nonprofit Corporation, which was created by State law for the public good of the citizens of northern Delaware and whose sources of the overwhelming majority of its funding include governments in Delaware, primarily the State government. The most likely reasoning used by the State legislators when they decided that the Requester and other government officials must serve on the board of directors of the Corporation includes the fact that the interests of the Corporation and the interests of the County and those other governments are intertwined and not likely to conflict. Indeed, it is difficult for the Commission to conjure a circumstance where the interests of the County and the interests of the Corporation diverge. In the unlikely circumstance where their respective interests do not merge, the Requester, as a member of the board of the Corporation, has the opportunity to voice his dissent at board of director meetings.

            The Requester is also required by statute to officially approve or disapprove of the transfer of jurisdiction of the land from the County to the Municipality. The State Code which places this duty upon the Requester does not contemplate, on its face, the delegation of this duty by the Requester to someone else in County government.[16] The controlling State statute does, however, set forth a list of hurdles which must be met by the Municipality, in specified order, all of which must be completed in that order, or the transfer may not legally take place. As of this writing, certain of those steps which must take place before the Requester is formally asked to provide his approval or disapproval have not yet been undertaken and/or completed.

            If the statutory requirements are met and the transfer of the jurisdiction of the land takes place, which would have to include an approval by the Requester, that transfer will benefit the Corporation by potentially facilitating one or more development and/or redevelopment projects being handled by the Corporation. The success of these projects will also benefit the Municipality, which is ostensibly why the Municipality is trying to obtain the jurisdiction of the land from the County. Because of the nature of the Corporation, however, the success of the projects will also, at least in theory, benefit the County. The extent of that benefit is uncertain, as is the success of the Corporation’s projects.

            It is important to note that, contrasted with many prior Commission opinions involving complicated decision-making scenarios with real or potential conflicts of interest, this is not a situation where the Requester has a competing or conflicting personal or family interest. As such, there is no issue of personal gain or profit from the Requester’s actions here. The only ascertainable potential conflicts, in this instance, lie in the possibility that it may turn out that the interests of the County will conflict with: (1) the reasons why the Municipality wants to obtain jurisdiction of the County land; and/or (2) whether the Corporation’s development projects involving the land in question are successful. In the Commission’s view, the answers to those questions are speculative at this juncture and only hindsight may provide factual clarity.

            The Requester’s first duty must be to the citizens of New Castle County and County government.  This Commission believes that the Requester’s decision on whether to approve or disapprove the transfer of County jurisdiction of the land to the Municipality is the paramount question for the Requester. This statutory duty of the Requester is likely non-delegable. As such, the Requester must make that decision without regard for the interests of the Corporation, notwithstanding his membership on its board of directors. If the Requester decides that it is in the best interests of the County citizens and County government for him to approve the transfer of jurisdiction over the land, there should be no reasonable perception of conflict or partiality on the part of the public with respect to the Requester’s County duties and his board service to the Corporation, especially if the Requester provides full and complete information to the public regarding his decision-making on the transfer of the jurisdiction of the land.[17] 


Finding:

Maintaining the interests of the County government as his highest priority and providing all public information to the County citizens about the decision, the Requester will not violate the Ethics Code in performing his statutory duties when making a decision on the proposed transfer of jurisdiction over real property to a nearby local municipality even though the Requester is also a statutory member of the board of directors of a nonprofit corporation which was created for the public good of the citizens of northern Delaware, where such corporation may benefit from the Requester’s decision on the transfer of the jurisdiction of the land.

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 CASTLE COUNTY ETHICS COMMISSION

ON THIS 9TH DAY OF MAY 2018

                         

                       Eric J. Monzo, Esquire, Chairperson

                       New Castle County Ethics Commission

Decision:  Unanimous

Footnotes:

[1] Due to its public funding status, the Delaware State Auditor performs regular audits of the finances of the corporation.

[2] See 146th General Assembly, House Bill No. 410, Section 39.

[3] It has been reported that even if the jurisdiction of the real property in question is transferred from the County to the municipality, a rezoning may be necessary before the corporation will move forward on its plans for development of that property.

[4] New Castle County Code, Section 2.03.101.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.

[5] Id.

[6] Id. See also New Castle County Code, Section 2.03.101.D, which states:

This Division is intended to establish a minimum standard for ethical conduct and financial disclosure. Elected officials may superimpose conduct rules for officials and employees which are more strict, but not less strict, than these minimum standards. The Ethics Commission has jurisdiction to decide whether superimposed rules fall below the minimum standards expressed in this Division.

[7] New Castle County Code, 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.

[8] New Castle County Code, Section 2.03.104.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.

[9] Id.

[10] 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 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. 

[11] New Castle County Code, Section 2.03.103.A.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).

[12] Id.

[13] New Castle County Code, Section 2.03.103.A.2:

In any case where a person has a legal and/or statutory responsibility with respect to action or nonaction 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.

[14] New Castle County Code, Section 2.03.103.B.2, and 3:  

2. No County official may represent or otherwise assist any private enterprise with respect to any matter before the County. This prohibition is to be considered personal to the County official and is not, for purposes of the New Castle County Ethics Code only, deemed to impact other members of a firm, business, or other employer by which the County official is employed. 

3. This subsection shall not preclude any County employee or County official from appearing before the County or otherwise assisting any private enterprise with respect to any matter in the exercise of his or her official duties. 

[15] An Advisory Opinion from the Ethics Commission may act as a complete defense in any subsequent enforcement proceeding only if the opinion is requested at least twenty-one (21) working days prior to the alleged violation, and the County official or employee requesting the opinion provided the Commission with truthful and comprehensive factual information. See New Castle County Code, Section 2.04.102.I.

[16] In a different section of State law, however, a provision is made for the Requester’s most immediate subordinate to stand in his stead if the Requester is disabled or temporarily unavailable.

[17] The Commission has not been informed of any impending decision which must be made by the Requester as a member of the board of directors of the Corporation in regard to this matter, and, therefore, does not offer any comment on that aspect of this matter at this juncture.