Advisory Opinion No. 2002-14

Application of §1-85 To Legislation Regarding The Milford Academy

Senator Win Smith has asked the State Ethics Commission for an advisory opinion applying The Code Of Ethics For Public Officials’ conflict of interests provisions to the following fact pattern.

As an attorney in private practice, Senator Smith has previously done legal work for the Milford Academy, Inc. (the Academy). Approximately one and one half years ago, Senator Smith ceased this legal representation (and also resigned as the Academy’s General Counsel and Trustee) over issues including the Academy’s nonpayment of his firms legal bills, which total slightly more than $17,000. In essence, over time the Academy’s financial condition has deteriorated; resulting in unpaid bills to approximately fifty creditors.

Approximately one year ago the Academy secured a mortgage loan on its ten acres of property in downtown Milford. The proceeds of the loan were intended to provide the Academy with working capital and the ability to pay off certain of its creditors (although not the Senator’s law firm). The loan was for six months only, and was essentially intended to provide the Academy with time to develop long-term alternatives to address its financial problems. However, these alternatives have not materialized; and, as a result, the holder of the loan commenced foreclosure action approximately three months ago.

According to Senator Smith, the City of Milford (the City) was greatly concerned about the potential future use of the Academy parcel; and, therefore, at about the time of the foreclosure began confidential negotiations with the Academy. These negotiations resulted in an agreement whereby the City would purchase the Academy property for approximately two and one half million dollars, and then lease the land back to the Academy. In essence, the Agreement (the negotiation of which was not known to Senator Smith at the time) would both preserve a long-standing Milford institution and preclude the development of its property in a manner possibly adverse to the interests of the City.

The purchase of the Academy property was to be financed by the City’s issuance of bonds. However, subsequent to the Agreement, the City’s Bond Counsel (Robinson & Cole) and the City Attorney determined this specific bonding power was not authorized under either the City’s Charter or the municipal provisions of Connecticut’s General Statutes.

As a result of this determination, the City, which Senator Smith represents in the General Assembly, contacted him to seek his assistance in obtaining legislation to empower Milford to issue the bonds in question. While the Senator is one of four legislators who represent Milford, he notes that his committee assignments (he sits on the Finance Committee, the Bonding Subcommittee of the Finance Committee and the Bond Commission) make him the obvious choice to pursue the legislation in question.

Finally, Senator Smith notes two additional facts of significant import to the Commission’s analysis of his request for advice. First, one of the conditions the City has placed on the Agreement is that the Academy fully pay all of its outstanding creditors. Therefore, if the required legislation is obtained and the transaction is consummated, Senator Smith’s firm will receive $17,000. Second, recently discussions have arisen within the City’s administration regarding the issue of whether Milford should assume the role of a lease-back landlord. The Senator notes these discussions to emphasize the fact that the legislation being sought is permissive in nature and would not require the City to issue bonds or purchase the Academy property.

Based on the foregoing facts, Senator Smith wishes to know whether, consistent with the requirements of The Code Of Ethics For Public Officials, he can pursue the legislative enactment requested by the City of Milford.

The relevant section of the Code is Conn. Gen. Stat. §1-85. In pertinent part, that provision states: "A public official, including an elected state official,…has an interest which is in substantial conflict with the proper discharge of his duties…if he has reason to believe or expect that he…or a business with which he is associated will derive a direct monetary gain…by reason of his official activity. A public official, including an elected state official,…does not have an interest which is in substantial conflict with the proper discharge of his duties…if any benefit or detriment accrues to him…or a business with which he…is associated as a member of a profession, occupation or group to no greater extent than any other member of such profession, occupation or group. A public official…who has a substantial conflict may not take official action on the mater."

In applying §1-85 to Senator Smith’s question, two fundamental issues must be decided. First, do the creditors of the Milford Academy constitute a "group" as that term is used in the statute. And second, is the potential benefit to Senator Smith’s firm "direct" as that term is used in the statute.

In analyzing the meaning of the word "group" in the context of §1-85, the Commission is guided by the rule of statutory construction "ejusdem generis". In essence, this rule requires that in the construction of statutes the general terms of the law apply only to the same types of classes as those specifically enumerated. Here the listed classes are "profession, occupation or group." Therefore, in interpreting "group", the Commission must seek a definition consistent with the words "profession" and "occupation". Thus, for example, the Commission’s Regulations implementing §1-85 equate "profession, occupation or group" with "profession, business or industry." See, Regulations of Conn. State Agencies §1-81-28(b).

Applying this analysis to the facts presented, the approximately fifty creditors of the Milford Academy are an insufficient class to constitute a "group" as that term is utilized in §1-85. See, e.g., State Ethics Commission Docket No. 89-2: wherein the Commission held that the stockholders of one entity, Northeast Bancorp, did not constitute a group under §1-85. See, also, State Ethics Commission Advisory Opinion Nos. 92-8, 53 CLJ 40, p. 3D (3/31/92) and 92-16, 54 CLJ 6, p. 8C (8/11/92): wherein the Commission ruled that property owners proximate to a proposed Hartford convention center did not constitute a "group" for purposes of §1-85.

Turning to the second issue, "direct", in pertinent part, is defined as "without intervening…conditions." The American Heritage Dictionary, Second College Edition, at p. 400. It can be argued, based on this definition, that the potential payment to Senator Smith’s law firm is insufficiently immediate to qualify as "direct", since an intervening condition, the purchase of the Academy property by the City, must first occur. In reality, however, the Agreement between the City and the Academy predates the request that Senator Smith now obtain the necessary municipal bonding authority to implement the deal. Given this fact, there is, at this time, no meaningful intervening condition, i.e., additional, substantive prerequisite, which must take place for the payment to the Senator’s law firm to occur.

As a consequence, it can be said that Senator Smith has reason to "believe or expect" that his firm will receive a direct benefit following passage of the legislation at issue. See, Regulations of Connecticut State Agencies §1-81-28(c): "a public official…has reason to believe or expect the derivation of a direct monetary gain…when there is a written contract, agreement or other specific information available to the individual which would clearly indicate to a reasonable person that such a direct benefit…would accrue." Under these circumstances, despite the obviously laudable aims of those concerned, the Senator must refrain from official action on the matter and leave the task of obtaining the bonding authority legislation to another Milford legislator. If, however, this specific legislation becomes part of a larger bonding or budget bill, the Senator is free to take action on this secondary legislation, provided he does not speak on the specific issue which created the conflict. See, Regulations of Connecticut State Agencies §1-81-28(g).

By order of the Commission,

Rosemary Giuliano
Chairperson