A County employee who is a manager in a County Department asks whether the planned purchase of a property from a new home construction company with a lease back to that company, which is regulated by his Department, would violate the Ethics Code. The employee also asks whether an ethical conflict would exist if the property to be purchased and leased is not located in New Castle County. The employee inquires whether any potential ethics violation would be ameliorated if he discloses his business participation with the company to his department head and recuses himself from overall responsibility for, and implementation or administration of, County business concerning the company.

            The employee's purchase and lease back of the property to the new home construction company will not violate the Ethics Code as long as he adheres to the following conditions: he must fully disclose all business relationships with the builder to his superiors; he must disclose the lease arrangements to the Ethics Commission; he must completely recuse himself from direct or indirect involvement in any of his Department's business which concerns the builder for the duration of his business relationship with the builder; he must scrupulously avoid using confidential information acquired by virtue of his County position for personal benefit in his private enterprise. The Commission's response to the employee's Opinion Request involves only the application of the Ethics Code and does not prevent the employee's department from imposing greater restrictions.

 

            A County employee has requested guidance on whether he may purchase a property from a new home construction company (hereinafter "builder") and lease it back to that company. The builder is active in New Castle County and will continue to be so in the future. The builder has made the purchase-lease back opportunity open to all members of the general public. The employee is in a management position with a County department which regulates the builder's construction projects.

 

            The employee does not perform building inspections and does not make decisions about the issuance of building permits. He does not have authority to make decisions that affect the builder in the issuance of building permits or in the recordation process for subdivision submissions. However, according to his New Castle County job class specifications, the employee supervises the staff, makes work assignments, and evaluates the performance of subordinates who have such functions.

            The New Castle County Ethics Code Section 2.03.103 conflict of interest provision prohibits the use of official authority for the personal or private benefit of the official or employee.

 

            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).

 

Section 2.03.104 (A), in the Code of conduct provisions, prohibits conduct which undermines public confidence in the impartiality of an official or governmental body. It states, 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), 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.

 

Sections 2.03.104(B) (C) and (F) of the Code of conduct, relate to prohibitions about and disclosures of financial interests and confidential information:

 

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 Commission a written statement fully disclosing the same. Such disclosure shall be confidential and the Commission shall not release such disclosed information, 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.

 

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 other wiser use such information for personal gain or benefit.[/code] The Code defines "financial interest" in the definition section, Section 2.03.102, as: [code]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.

             The employee wants to acquire an investment in real estate from an entity which is regulated by his department regarding such interests. He subsequently intends to become a creditor of the seller by leasing the real estate back to it. Since this investment opportunity is available to the general public, the employee is not using his authority as a County employee or any confidential information to acquire the property or lease,² so no conflict of interest exists under Section 2.03.103(A).

 

            However, the Ethics Code of conduct also prohibits the creation of an appearance of impropriety or violation of certain other provisions. The Commission believes that the standard used for judging appearance of impropriety for judicial public officials, which has been described in Delaware courts as "conduct [which] 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 [official duties] with integrity, impartiality and competence is impaired." is equally applicable to the conduct of County employees. 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. In this matter, those facts center upon the two separate actions contemplated by the employee.

 

 

            Under the facts related in the opinion request, the employee will not be "directly" involved in decisions to be made about the builder since the employee does not perform inspections, does not render decisions on the issuance of building permits, nor does he have authority to make a decision that affects the home builder in the approval process for recordation of subdivision submissions. Additionally, since he does not have a more than 5% financial interest in the builder's business, the purchase itself does not qualify as a reporting event under Section 2.03.104(C). Therefore, he does not violate the code of conduct prohibitions against acquiring a financial interest in the builder's business by making the purchase as recited in Section 2.03.104(B).

 

            However, according to the employee's job description, he supervises employees who do make such direct decisions concerning the builder. This fact clearly raises a question of impartiality and whether the relationship with the builder creates an appearance of impropriety to the reasonable person. The builder is active in New Castle County and the employee is in a position to exercise his authority over his subordinates for the benefit or detriment of the builder. Thus, the location of the property has no bearing on the ethical inquiry at issue here since the employee is in position to accrue benefit to himself in the property he wishes to purchase, whether it is located within or outside New Castle County. Since the Ethics Code prohibits exercise of official authority when an appearance of partiality has been created, the employee must inform his superiors of the intended purchase and recuse himself from direct or indirect involvement in any of his Department's business with this builder at least until he completes the purchase.

 

 

            An analysis of the employee's lease back arrangement with the builder produces a similar result because the question of partiality again comes to the forefront. Not only do his subordinates have official authority over the builder which gives the employee more perceived power than the ordinary landlord, the employee intends to engage in a private enterprise³ in which his residential real estate could be regulated under the County rental code and leased to an entity which is regulated by his department and his subordinates.

 

            The Code not only requires him to fully disclose the lease activity to the Commission and to scrupulously avoid using confidential information acquired by virtue of his County position in his private enterprise, but it also requires the employee to fully inform his superiors of the business relationship with the builder and recuse himself from direct or indirect involvement in any of his Department's business concerning the builder or his company for the entire duration of the lease. Finally, if he contemplates or intends any continuing business relationship with the builder beyond or apart from the purchase and lease, he must permanently recuse himself from involvement in County matters concerning this builder.