Declaratory Ruling 2011-A

February 24, 2011

Question Presented:      May a legislator accept outside employment as an owner of a political and nonprofit consulting firm?

Brief Answer:      Yes.  Given that the legislator does not hold a committee chairmanship or leadership position, and that he developed an expertise in political consulting and fundraising before being elected to the General Assembly, there is nothing in the more than thirty years of precedent that would prohibit the legislator from accepting the position in question.  However, he must abide by the strict guidelines detailed below, which are intended as a broad, but not exclusive, outline of the types of issues that may arise under the Ethics Code.

At its December 2010 regular meeting, the Citizen’s Ethics Advisory Board (“Board”) granted the petition for a declaratory ruling submitted by Michael Farina (“Petitioner”).  The Board issues this declaratory ruling on the date shown below in accordance with § 1-92-39b of the Regulations of Connecticut State Agencies.  The ruling interprets only the Codes of Ethics[1] and the regulations of the Office of State Ethics, and is based solely on the facts provided by the Petitioner.  If those facts change in any material way, a new petition should be submitted, for this ruling does not foreclose the possibility of a different result.     

Facts

           

            The facts provided by the Petitioner are set forth below and are considered part of this ruling:

I request a ruling on the condition under which I may employ a state legislator in a political and non-profit consulting firm that I wish to create in the future without creating an ethical violation for said legislator.

The legislator whom I wish to hire does not hold a leadership position or committee chairmanship and will not receive any financial benefit or gain in his employment at my potential firm due to his elected position.  In his role of employment, it is anticipated that this legislator will provide potential clients of the firm with political consulting services, event management services, strategic advice, fundraising assistance, messaging and communications help, and other services that will benefit the clients.  Potential clients with whom the legislator may be working with could include candidates for municipal office, candidates for state office, federal candidate committees, local town committees, state central committees, and various non-profits. . . .

This legislator will not be involved in the direct solicitation of lobbyists registered with the state of Connecticut.  Said legislator will not use his official position for personal financial gain, and his independent judgment on issues facing the state of Connecticut will not be compromised by his employment.  Furthermore, this legislator is not in a position of power to direct the flow of legislative business at the Connecticut General Assembly and does not have the power to directly affect the interests of lobbyists.

In addition, this legislator has made a career for himself as a political consultant and fundraiser for local, state, and federal candidates prior to his election to the Connecticut General Assembly.  This experience predates the legislator’s elected position. . . .[2]

In a subsequent correspondence with the Office of State Ethics, the Petitioner explained, in response to an inquiry as to whether the firm intends to lobby at the state level in Connecticut, that “[t]here will be no lobbying by the firm at all . . . .”[3]

Analysis

1.         Accepting outside employment as an owner of the political and nonprofit consulting firm

Individuals generally subject to the Code of Ethics for Public Officials[4] (“Ethics Code”) are described as either “state employees” or “public officials,” the latter term including, among others, “any member or member-elect of the General Assembly . . . .”[5]  Because the legislator in question is a member of the General Assembly, he is a “public official” and therefore subject to the Ethics Code, including its conflict-of-interest provisions, General Statutes §§ 1-84 through 1-86, which “are premised on one basic concept: public office is a public trust and must not be used for the private financial benefit of oneself, one’s family, or one’s business.”[6]   

Although the conflict-of-interest provisions do not furnish specific guidance for the situation before us, they do contain general rules pertaining to outside employment.  Under those rules, a public official may use his expertise, even if gained in state service, for outside financial benefit.[7]  However, under subsections (b) and (c) of § 1-84, a public official may not, among other things, accept outside employment that will impair his independence of judgment as to his official duties, nor may he use his public office for private financial gain.[8]  The former State Ethics Commission (“former Commission”) “consistently . . . applied these provisions to prohibit full-time state officials and employees from accepting outside employment (i.e., any form of endeavor for profit) which directly involves individuals or entities subject to the official’s or employee’s authority.”[9]

Not so for members of Connecticut’s General Assembly, for “[w]ith equal consistency . . . the [former] Commission . . . held that such a rigorous standard is inapplicable to Connecticut’s part-time legislators.”[10]  The former Commission “consistently differentiated between full-time public servants and Connecticut’s part-time legislators”[11] (as does the Ethics Code itself [12]).  Indeed, it explained, time and again, that “[i]t is exceedingly difficult to apply the [Ethics] Code’s use of office and acceptance of outside employment provisions . . . to the members of Connecticut’s part-time General Assembly.”[13]  “The great majority of legislators,” it noted, “must, of economic necessity, pursue outside employment while in public service,” and “[u]nder the circumstances, potential conflicts of interests are inevitable.”[14] 

Recognizing that it could not “prevent every [such] conflict of interests . . . without virtually eliminating outside employment for legislators,”[15] the former Commission essentially created a presumption in favor of legislators’ outside employment.  As noted by the former Commission’s executive director/general counsel in an informal staff letter: “the Ethics Commission has, in general, sought to allow Connecticut’s part-time legislators a maximum degree of latitude in their private business dealings, including matters involving the State.”[16]  Hence, in the overwhelming majority of advisory opinions addressing legislators’ outside employment, the conclusion is not that a legislator is violating the Ethics Code by simply holding particular outside employment; rather, it is that the legislator is required to refrain from certain functions of either the outside employment or the legislative position.  By way of examples:

·        Advisory Opinion No. 2001-28: A legislator who serves on the Legislative Regulations Review Committee, and on its subcommittee that reviews the regulations of a particular state agency, may consult for clients and vendors of that state agency, provided that she neither represents clients before state agencies listed in General Statutes § 1-84 (d), nor becomes a lobbyist, as prohibited by General Statutes § 1-86 (c).

·        Advisory Opinion No. 97-10: A legislator may be a member of a law firm that engages in lobbying, provided that he does not violate the ban in § 1-86 (c) on becoming a lobbyist, that there is a complete separation between the legislator’s compensation and the firm’s lobbying work, and that the firm excludes the legislator’s name from any firm letterhead used for lobbying and in furtherance of lobbying.

·        Advisory Opinion No. 92-4: A legislator who serves as the House ranking member of the Banks Committee may become an owner and/or officer of a bank doing business in Connecticut, provided that he refrains from representing it before state agencies listed in § 1-84 (d), and that he refrains from taking official action that will result in a direct monetary loss or gain to himself or an associated business.  

·        Advisory Opinion No. 85-6: A legislator who is a journeyman artisan may accept employment on a project substantially funded by the state and with an employer who retains lobbyists, provided that the employer or the project are not a “burning issue before the General Assembly,” and that the legislator’s services are actually needed and are therefore not a prohibited gift from a lobbyist.

Despite its presumption in favor of legislators’ outside employment, on rare occasions, the former Commission barred legislators’ “outside economic endeavors . . . when [the] conflicts, both real and apparent, [were] so significant as to require prohibiting the conduct in question.”[17]  Of its approximately twenty-nine rulings (advisory opinions and declaratory rulings) addressing legislators’ outside employment, in only five of them did the former Commission deem the conflict significant enough so as to require prohibiting the conduct in question.    

The first of those “significant” conflicts was addressed in Advisory Opinion No. 81-13, in which a legislator was prohibited from being paid to write articles or act as a radio/television commentator concerning the activities of the General Assembly.  One reason for the prohibition (among others) was that “[t]here could be the appearance, at least, of a substantial conflict of interest if he were to be paid for writing a story about some activity in the General Assembly which he helped to generate.”[18] 

The other four “significant” conflicts involved committee chairpersons (and in one instance ranking committee members), who, given their “enormous power,” were prohibited “from accepting employment in an industry or engaging in an activity over which their committee ha[d] jurisdiction”[19]:

·        Advisory Opinion No. 87-13: Chairpersons of the Environment Committee, Chairpersons of the Appropriations Committee, and Chairpersons and Ranking Members of the Finance, Revenue and Bonding Committee may not participate in the state’s Farmland Preservation Program, which is administered by the Department of Agriculture, because of their authority over the Department or Program.

·        Advisory Opinion No. 88-9: Chairperson of the Labor and Public Employees Committee, which has full cognizance over all matters relating to workers’ compensation, may not represent state employees before the Workers’ Compensation Commission (“WCC”).

·        Advisory Opinion No. 89-7: Chairperson of the Labor and Public Employees Committee, which has full cognizance over all matters relating to workers’ compensation, may not represent individuals in a workers’ compensation case, either before the WCC or through meetings with their adjusters.

·        Advisory Opinion No. 89-28: Chairperson of the Banks Committee may not accept employment as an agent for investors seeking to purchase a bank, if the bank in question is subject to his Committee’s authority or interested in legislation pending before the Committee.

The one exception to that general rule regarding committee chairpersons is found in Advisory Opinion No. 99-29.  There, a Judiciary Committee chairperson asked whether he could be hired as the Director of Professional Development by the Connecticut Bar Association (“CBA”), a client registrant that lobbies on “matters related to the practice of law.”[20]  Though recognizing that, under its precedent (i.e., the “significant” conflicts listed above), the chairperson’s “acceptance of employment with the CBA would appear problematic,” the former Commission accepted the chairperson’s means of resolving the problem: he would “not only . . . recuse himself from matters affecting his substantial financial interests, as required by law, but also to voluntarily recuse himself from matters affecting the significant interests of his employer.”[21]

Back to the “significant” conflicts, this Board added one to the list discussed above in Advisory Opinion No. 2007-8, the Board’s only ruling to date pertaining to a legislator’s outside employment.  It involved another legislator who occupied a specific position of authority, the House Speaker, and it centered on his paid fundraising work on behalf of a nonprofit entity.  Although not outright prohibiting the Speaker’s fundraising work, the Board limited it.  Focusing on the Speaker’s “significant power and authority,” the Board stated that, because he “essentially directs the flow of legislative business in the House, he has the power to affect the interests of lobbyists.”[22]  Thus, the Board concluded that it would be an inappropriate use of office for the Speaker to be paid by the nonprofit entity to solicit funds or sponsorships from lobbyists. 

            Turning from the formal rulings to the informal staff letters, in the past thirty-two years, roughly forty-seven of them addressed legislators’ outside employment.  Of those, a single one deemed the conflict significant enough so as to require prohibiting the conduct in question, and it involved a committee chairperson seeking employment in an industry over which his committee had jurisdiction.[23]  On the other hand, in letters issued under the former Commission, one legislator was allowed to accept employment as a paid fundraiser for a non-profit entity[24]; another was allowed to accept a paid administrative and/or leadership role in a nonprofit entity, whose main purpose was to organize to influence state policy[25]; another was allowed to conduct business with lobbyists in his capacity as a personal financial adviser[26]; and at least two others were allowed to work as consultants for nonprofit entities, including entities that received funding from various state sources.[27]

            And in one enforcement action, Ethics Commission Docket No. 84-1, the former Commission implicitly approved the outside employment of a legislator as an owner of a political advertising company.[28]  In that case, the legislator had mailed letters to candidates for the Republican and Democratic Town Committees in Hartford in order to drum up business for his company.  The problem: the letters not only were produced on the legislator’s “official stationary, bearing the indicia of his public office,” but also were “mailed in official envelopes bearing the State seal and identifying [him] as a State Representative and assistant majority leader.”[29]  Thus, the legislator was fined for using “the official indicia of his public office” for the financial gain of his company—but not for engaging in outside employment as an owner of a political advertising company.[30] 

            In the case before us, we have a legislator who does not hold a leadership position or committee chairmanship, and who, prior to being elected to the General Assembly, built a career and an expertise in political consulting and fundraising.  Based on the precedent discussed above—and its almost exclusive focus on positions of specific authority within the General Assembly—we cannot but conclude that this legislator may accept outside employment as an owner of the political and nonprofit consulting firm without violating subsections (b) and (c) of § 1-84.[31]  To hold otherwise would be not only to break significantly with more than thirty years of precedent, but also (in the words of the former Commission) to “single out one area of expertise . . . .”[32]

2.         Prohibited activities

            However, the legislator must abide by the following strict guidelines, which are intended as a broad outline, as opposed to an exclusive list, of the types of issues that may arise under the Ethics Code.

A.        Using his state office

            Under § 1-84 (c), the legislator may not use his public office, or any confidential information gained by virtue of it, to obtain financial gain for, among others, himself or an associated business (i.e., his consulting company).[33] 

An example of a legislator violating § 1-84 (c) stems from Ethics Commission Docket No. 79-12.[34]  There, a legislator “mailed to lobbyists and to public officials in the legislative and executive branches of the State letters advertising the opening of” a restaurant in which he and his son had “substantial proprietary interests.”[35]  The problem (as in Docket No. 84-1, discussed above) was that the legislator “used official envelopes and copies of official stationary bearing the indicia of his office as a State representative . . . .”[36]  According to the former Commission, his “use of the official indicia of his office as a State Representative for the personal financial benefit of himself, his son, and [his restaurant], a business with which he is associated . . . was in violation of subsection 1-84 (c) . . . which prohibits such use of public office by public officials.”[37]     

            Another legislator was fined by the former Commission for a § 1-84 (c) violation in Ethics Commission Docket No. 93-4, which involved a legislator/lawyer who “was put on notice of a potential claim for malpractice by a former client.”[38]  “Under Connecticut law, [the] claim had a maximum six year statute of limitation.”[39]  In his legislative capacity, he asked a caucus attorney to draft an amendment to a bill that would have shortened that statute of limitations from six to five years.  According to the former Commission, the legislator “had reason to believe or expect that this would have prevented the former client from filing his malpractice suit . . . .”[40]  The legislator then “contacted one or more public officials to help ensure passage of the amendment . . . .”[41]  It was that contact, in the former Commission’s view, that constituted a violation of § 1-84 (c).   

            The legislator here must certainly avoid doing as did those legislators, and must also avoid doing any of the following: using his state title in any way in an effort to solicit business for the consulting firm[42]; exploiting contacts made in state service to recruit private clients for his consulting business[43]; creating or permitting the impression that he is acting on the state’s behalf[44]; “trad[ing] on his [state] position . . . in order to receive favorable treatment . . . including taking official action as a quid pro quo for any other business deal, opportunity, or advantage”[45]; or using state resources in the conduct of his consulting work.[46]

B.        Appearing before § 1-84 (d) agencies

Section 1-84 (d) prohibits, among other things, a public official from agreeing “to accept . . . any employment, fee or other thing of value, or portion thereof, for appearing, agreeing to appear, or taking any other action on behalf of another person before” the thirteen state agencies listed therein.  Its purpose “is to insulate the actions and decisions of those agencies from even the appearance of undue influence, whether the influence is the consequence of cronyism or the possibility of punitive or preferential legislative or administrative action.”[47]  That said, it constitutes a prohibited appearance or action under § 1-84 (d) for a public official to “transmit any document to or make any other contact with the listed agencies which reveals the identity of the individual to the agency in connection with any pending matter . . . .”[48]  Here, although it is unclear as to whether the firm intends to interact with state agencies on its clients’ behalf, it is abundantly clear that the legislator’s “consulting may not involve compensated representation before the state agencies listed in § 1-84 (d) . . . .”[49]  

C.        Being a “lobbyist”

            Under § 1-86 (c), a member of the General Assembly is prohibited from being a “lobbyist.”  The term “lobbyist” includes, among others, a person who receives or agrees to receive $2000 or more in compensation and reimbursement in a calendar year for lobbying and activities in furtherance thereof. [50]  And the term “lobbying” includes “communicating directly or soliciting others to communicate with any official or his staff in the legislative or executive branch of government or in a quasi-public agency, for the purpose of influencing any legislative or administrative action . . . .”[51]  Thus, the legislator may engage in the proposed employment activities—e.g., providing “strategic advice . . . messaging and communications help, and other services that will benefit the clients”[52]—only to the extent that those undefined activities do not involve “lobbying with an annual pro rata compensation of $2000 or more.”[53] 

D.        Interacting with lobbyists under certain circumstances         

Although the Petitioner states that the firm will not be engaging in lobbying activities on its clients’ behalf, it may seek work (e.g., fundraising work) from nonprofit entities, some of which may be registered lobbyists.  Any such financial interaction with registered lobbyists must comply with the four-part test set forth in Advisory Opinion No. 91-7.

In that opinion, the former Commission was asked whether a lawyer/legislator could accept a referral of legal business from a lawyer/lobbyist.  In response, the former Commission noted that, because “the ranks of . . . lobbyists include many of the State’s largest business entities, trade associations, unions, and other non-profit organizations,” they “undoubtedly have myriad economic relationships with Connecticut’s . . . legislators.”[54]  “Simply stated,” it continued, “given Connecticut’s system of a part-time, citizen legislature, such economic interaction is a virtual necessity for many members of the General Assembly.”[55]  In recognition of that “fundamental reality,” the former Commission decided to restrict such financial interaction only if:

a.      there exists evidence of a quid pro quo for official action in violation of the Ethics Code’s anti-bribery provisions, General Statutes §§ 1-84 (f) and (g);

b.      the transaction is lacking in fiscal rationality and is, therefore, tantamount to an illegal gift in violation of General Statutes §§ 1-84 (j) and 1-97 (a) (e.g., the lobbyist customer pays more for a product or service than is commercially reasonable, or the lobbyist employer pays compensation but requires little or no work);

c.      the activity involves a specific and unavoidable conflict of the type found in Advisory Opinion Nos. 89-7 and 89-28 (i.e., committee chairs seeking employment in an industry or engaging in an activity over which their committee has jurisdiction); or

d.      the financial relationship otherwise suggests a misuse of office, an impairment of official judgment, or an improper attempt to influence legislative action.[56]

Thus, any financial interaction between the legislator’s consulting firm and a registered lobbyist must comply with that four-part test.  As to those parts, the first two are straightforward, and the legislator need not concern himself with the third (at least not for the time being), as he does not hold a leadership position or committee chairmanship.  That leaves the fourth part, on which the former Commission did not expound.  Nevertheless, it would potentially be problematic under that part, for example, if the firm accepted paid work from a client that has (in the words of the former Commission) “a burning issue before the General Assembly, for impairment of independence of judgment could occur.”[57]  

E.        Having a substantial conflict of interest

A legislator has a substantial conflict of interest under General Statutes § 1-85 and may not take official action on the matter if he has reason to believe or expect that he, his spouse, a dependent child, or a business with which he is associated will derive a direct monetary gain or loss; unless, that is, any benefit or detriment accrues to him (or the other listed persons) as a member of a profession, occupation or group to no greater extent than any other member of such profession, occupation or group. A legislator has reason to so “believe or expect,” “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 or detriment would accrue or when the language of the . . . matter in question would so indicate.”[58]

For example, in Ethics Commission Docket No. 89-2, a legislator was deemed to have violated § 1-85 for voting on interstate banking legislation.  The legislator owned stock in Northeast Bancorp, Inc., which, unlike any other bank at the time, had a merger agreement with an out-of-state bank that was “contingent upon a change in Connecticut banking legislation which would allow such a merger.”[59]  The legislator spoke and voted in favor of legislation “which would have changed Connecticut’s banking laws to allow the [merger] to be consummated.”[60]  In doing so, explained the former Commission, the legislator

had reason to believe or expect that his financial interest . . . would increase in market value and/or be purchased by [the out-of-state bank] for an amount equal to 250% of its book value by reason of his [official] actions . . . . Therefore, [the legislator] had reason to believe or expect that he would derive a direct, although not necessarily immediate, monetary gain by reason of his official activity.  No other bank had a signed merger agreement [at the time].  Therefore, the gain would accrue to the [legislator] as a Northeast Bancorp stockholder to a greater extent than to persons with a financial interest in other banks that would have been affected by the legislation in question.[61]

As applied here, the legislator must be careful not to take an official action that would directly and uniquely affect his personal financial interests or the financial interests of his consulting firm. 

By order of the Board,

Dated February 24, 2011                             Thomas H. Dooley

Chairperson