Advisory Opinion No. 2004-14
Application of the Revolving
Door Provisions of the Code of Ethics for Public Officials to
the Secretary of the Office of Policy and Management
In answer
to the first question, as a public official, Secretary Ryan may not use his
state office or position for financial gain.
Conn. Gen. Stat. §1-84(c). In the context of the question asked, this
means that, while he is actively pursuing a particular job opportunity, he
should have nothing to do with his potential outside employer’s state business.[1] Under Conn. Gen. Stat. §1-86(a), he would be required to
notify the Governor of the potential conflict of interest, and she must then
refer the particular matter to someone at his level or above him. Conn. Gen. Stat. §1-86(a). The State Ethics Commission will make every effort
to help ensure compliance with §1-86(a) should the need arise. Turning to Secretary
Ryan’s second and third questions, the mere fact that a prospective employer
may have, at some time during the course of his tenure as Secretary of OPM,
benefited from an administration program or policy does not prohibit him from
seeking employment with that business. Of course, no public official may solicit or accept anything of value,
including a promise of future employment, based on any understanding that his
vote, official action or judgment would be or had been influenced thereby. Conn. Gen. Stat. §§1-84(f),
1-84(g). Also, Secretary
Ryan has also asked a series of questions regarding the application of the
revolving door law to a specific set of facts.
These facts are presented by Secretary Ryan as follows: As Secretary of OPM, Mr. Ryan has generally
played a role in the procurement and contract negotiation of state employee and
retirement health care, and for the HUSKY A and B
managed care programs. In the case of
the former programs, Secretary Ryan indicates that in some years, he negotiated
directly with the HMOs, while in other years, he has
simply given direction to other OPM staff, who have then participated in the
negotiations between the providers and the Comptroller’s Office. Ultimately, the Comptroller’s Office is the
signatory for the State on the contracts.
In some years, as Secretary of OPM, he has been required to declare
deficiencies in the account, in order to supply the appropriate funding as
negotiated. Secretary
Ryan states that, with regard to the HUSKY contracts, he has regularly
participated in the negotiations with a Deputy Commissioner from the Department
of Social Services (“DSS”). These
negotiations generally occur as a joint session with all the participating
HMOs, although, infrequently, there may be different
increases for different HMOs. Secretary
Ryan participated in these negotiations for contracts that were ultimately
signed in December of 2003, retroactive to October of 2003, and continuing to Secretary Ryan
also indicates that the state’s discretion in the area of rate increases is
somewhat limited by a theoretical rate-increase cap that is set from year to
year by the federal Centers for Medicare and Medicaid Services (“CMMS”) and the
Office of Management and Budget (“OMB”).
Secretary Ryan states that CMMS must approve the rate increases from
year to year, and that the cap established for increases in recent years has
been in the 4 percent range. HMOs
generally seek increases in the high single digit range, and the state
generally has had to default to the CMMS/OMB ceiling. Given this
factual background, Secretary Ryan has asked a series of questions. The first is whether his involvement in the
2003 contract process has precluded him from accepting employment in the HMO
industry and, if so, for what period of time?
If (1)
Secretary Ryan participated substantially in the negotiations of
the contract that was signed on December 30, 2003; (2) the changes to
the contract were more than routine modifications (see below); and if
he left state service before December 30, 2004, then he would have
to wait one year before he took a job with one of the HMOs that was a party to
the contract. See explanation of Conn.
Gen. Stat. §1-84b(f), above.
If, however, his participation was not substantial, or the changes were
simply routine modifications such as are described below in connection with the
subsequent 4-month 2004 contract, then he would not be subject to the one-year
ban of §1-84b(f). Secondly,
Secretary Ryan has asked whether his involvement in the 2004 contract precludes
him from taking a job with one of the parties under Conn. Gen. Stat.
§1-84b(f). According to Secretary Ryan,
in its most recent session, the General Assembly approved legislation that
allows the state to negotiate with the HMOs the “carve-out” of certain benefits
that have previously been part of the total HMO coverage. In particular, the State was authorized to
negotiate for the removal of dental, mental health and/or pharmacy benefits
from the HMO contract. The carving out
of any one of these coverages would necessarily
reduce the monthly amount received by the HMO per member. Over the
past several months, Secretary Ryan states, he has met with two or three of the
HMOs in question. The two sides did not
engage in negotiation: instead, these sessions were an opportunity for the HMOs
to outline their position with regard to the potential carve-outs. According to Mr. Ryan, the representatives
from the State listened to the HMOs, and indicated that these positions would
be considered when negotiations began.
Thereafter, Secretary Ryan told DSS Deputy Commissioner Michael Starkowski that he, Mr. Ryan, in order to comply with the
ethics laws, would not participate in the negotiations for the new
contract. Some time later, Deputy
Commissioner Starkowski informed Secretary Ryan that
DSS had sent a letter to the HMOs offering a four-month extension of the
existing contract, with a 4% inflationary rate increase. This was the rate that had been allowed in
the previous contract, although the HMOs had requested a 7% increase. Mr. Ryan indicates that he took no part in
the decision to send the letters or to offer the 4% number. The current budget had allotted 2%, but Mr.
Ryan states that that number is traditionally considered a base line only. Mr. Ryan did participate in internal discussions regarding the federal
guidelines for rate-setting, which were in line with the 4% number. Mr. Ryan indicates that, in recent years, the
State has relied heavily on the federal guidelines for rate setting. The contractual terms of the contract
remained the same except for the additional inflationary increase and the term
of the contract, which is four months.
This contract was signed by DSS and the HMOs. The carve-out issue was not addressed. In the
context of another section of the Code of Ethics, the State Ethics Commission has
held that “the routine modification of a contract, making changes which are not
seriously inconsistent with the original contract, does not appear to be
‘entering into a contract’ as that term is used” in the open and public process
contracting requirement of Conn. Gen. Stat. §1-84(i). See, for example, State Ethics Commission Advisory
Opinion No. 81-2, “Contracts Between the State and a
Business With Which a Public Official is Associated,” 42 It is
anticipated by Secretary Ryan that DSS Deputy Commissioner Starkowski
will now negotiate with the HMOs regarding the carve-outs, and that DSS will
keep certain officials of OPM informed of their progress although OPM will not
participate in the negotiations themselves. Once
DSS and the HMOs have reached a proposed agreement, it will be necessary for
Secretary Ryan, as part of his statutory responsibilities, in the case of both
the 4 % increase and also in the case of any carve-out overruns, to certify
that there are sufficient funds to cover any additional cost to the state.
Secretary Ryan has asked whether this
action on his part constitutes “substantial participation” in the negotiation
or award of the HMO contract under Conn. Gen. Stat. §1-84b(f). Because
Secretary Ryan is not participating in the negotiation of the contract itself,
his action in approving or disapproving the deficiency amount does not appear to
be substantial participation in the contract negotiations themselves. A second section of the Code of Ethics also
contains “substantial participation” language, however. Under Conn. Gen. Stat. §1-84b(a), a former
state employee or public official may never represent anyone other than the
state regarding a particular matter in which he participated personally and
substantially while in state service, and in which the state has a substantial
interest. Commission regulations define
substantial participation in a particular matter under §1-84b(a)
as “participation that was direct, extensive and substantive, not peripheral,
clerical or ministerial.” Regulations of
Agencies, §1-81-32. Certainly, Secretary Ryan’s action in
approving a cost overrun has a direct, extensive and substantive effect on the
process. Therefore, should he take a
position with one of the HMOs after leaving state service, he may not represent
that HMO with regard to any contract that was funded as a result of his official
action. Because this ban has no time
limit, the Commission has construed its application narrowly. Thus, in this instance, the ban would not
extend to a subsequent contract neither negotiated nor funded by Secretary
Ryan. Finally,
Secretary Ryan has asked how the revolving door provisions of the Code of
Ethics affect his ability to seek or accept employment with an in-state or
out-of-state holding, parent or sister company of the one of the HMOs described
in this opinion. This issue
has been addressed by prior Commission opinions. For example, in Advisory Opinion No. 88-5, 49
Conn. Law J. No.43, p. 46B (4/26/88), the Commission held that it would be a
violation of Conn. Gen. Stat. §1-84b(d) [the previous statutory cite for the
current §1-84b(f)] for a state employee to work for either a parent or sister
organization to a partnership that had contracted with the state, where the
signatory to the state contract was the president of the parent organization
and the general partner in two subsidiary partnerships. It was this individual who had offered
employment to the state employee. In its
decision, the State Ethics Commission stated:
“To hold otherwise would vitiate subsection 1-84b(d),
for it would allow avoidance of the subsection through the routine creation of
alternative business organizations.” Certainly
there is absolutely no reason to believe in the matter now before the
Commission that the HMO parent or holding company was created to somehow
circumvent the one-year prohibition of
§1-84b(f). Nevertheless, the language of
§1-84b(f), and the policy concerns raised in Advisory Opinion No. 88-5, do
suggest that the relevant issue is whether or not the private party to a state
contract has sufficient control over, or input in, the hiring decisions of its
parent, sister, or related holding company, such that the private party could facilitate a job offer
being made to a state employee or public official in appreciation for the work
performed by the state servant during the negotiation of the contract. Therefore, if, in Secretary Ryan’s case, the
HMO that is a party to the 2003 state contract does not have any authority to
facilitate his hiring by a parent, holding or sister company, then he need not
refrain from accepting employment with that company before If,
however, Secretary Ryan accepts employment with an outside company and Finally, of
course, the remaining revolving door provisions will apply to Secretary Ryan
after he leaves state service. See Conn.
Gen. Stat. §§1-84a, 1-84b(b). By
order of the Commission, Hugh Macgill, [1] In
previous informal staff opinions, active pursuit of a job opportunity has been
defined as the point at which the state employee or official is scheduled for
an interview with the prospective employer.
In contrast, a state employee who sends in a resume in response to an
advertisement, but has not yet heard back from the employer, would not need to
comply with the notification and recusal requirements of §1-86(a).if he participated substantially
in, or supervised, the negotiation or award of a state contract valued at
$50,000 or more, and the contract was signed within one year before Secretary
Ryan leaves state service, he may not accept employment with a party to the
contract other than the state for one year after his departure. Conn. Gen. Stat. §1-84b(f). This restriction applies regardless of
whether he or another agency head was the ultimate signatory on the contract.then remains for a period of time
in the position of Secretary of OPM, he must not take any action in his
official capacity that would benefit his future employer. See Conn. Gen. Stat. §§1-84(b) and/or
1-84(c). If, during the remainder of his
tenure as Secretary, such an issue does arise, then pursuant to §1-86(a), he
must notify his immediate supervisor, the Governor, who must then assign the
matter to someone at the Secretary’s level or handle it herself. See Regulations of Connecticut State Agencies
§1-81-29. Should an issue arise in which
the Governor is precluded from participation, then, again under §1-86(a), the
Secretary must notify the State Ethics Commission and “take such
steps as the Commission shall prescribe or advise." For example, if a statute mandates that a particular action
may only be taken by an official of OPM, and Mr. Ryan cannot act, then the action
would have to be taken by an OPM deputy secretary. Under these unique
circumstances, i.e., that the matter must be referred to someone subordinate to
Mr. Ryan, the deputy commissioner should notify the State Ethics Commission in writing
of his or her actions.
Chairperson