January 18, 2007
ETHICAL CONFLICT OF INTEREST
By: Sandra Norman-Eady, Chief Attorney
Since service in the Connecticut legislature is part-time and a number of legislators have other jobs or positions, you asked if the law prohibits public officials from taking official action on a matter that benefits their employers. The Office of Legislative Research is not authorized to give legal opinions and this report should not be considered as one.
There is no specific prohibition in the law against a public official or state employee taking official action on any matter that is expected to benefit his employer. However, the State Code of Ethics for Public Officials prohibits a public official, including an elected official, or state employee from taking official action if he, a member of his immediate family, or a business with which he is associated would receive a direct benefit or loss as a result. “Official action” is generally understood to mean voting, speaking, or otherwise commenting on a matter.
Although no court has decided if a public official or state employee can take official action on a matter that is expected to benefit his employer, whether a public official or state employee can do so appears to depend on whether the official or employee could expect to receive a financial gain or loss as a result of his actions.
Two other provisions of the State Code of Ethics for Public Officials relate to your question. The first (CGS § 1-84 (a)) prohibits public officials and state employees from having any financial interest in, or engaging in, any business, employment, transaction, or professional activity that conflicts substantially with the proper discharge of their public service duties. The second (CGS § 1-84 (g)) prohibits a public official, candidate for public office, and state employee from soliciting or accepting anything of value based on any understanding that his vote, official action, or judgment would or had been influenced thereby.
PROHIBITION AGAINST TAKING OFFICIAL ACTION
A public official or state employee cannot take official action when he has a substantial conflict of interest. A public official or state employee has a “substantial conflict” if he has reason to think he, his spouse or dependent child, or a business with which he is associated will experience a direct financial gain or loss if he takes the action. If his (or their) gain or loss would be no greater than the gain or loss to others in his (or their) profession, occupation, or group, it is not a substantial conflict (CGS § 1-85).
A “business with which he is associated” is any business entity in which the public official, state employee, or member of his immediate family is a director, officer, owner, limited or general partner, beneficiary of a trust, or holder of 5% or more of any class of stock. The term does not otherwise encompass a public official's or state employee's employer. The code exempts from “associated business” a nonprofit agency where a public official or state employee is an unpaid director or officer (CGS § 1-79(b)).
OFFICIAL ACTION AFFECTING AN EMPLOYER
When determining whether a public official or state employee has a substantial conflict of interest, the Office of State Ethics would likely consider if the person, his spouse or dependent child, or an associated business stood to receive a direct benefit. If so, it appears as though the official or employee could not take official action.
In the case of a benefit or detriment accruing to a public official or state employee's employer only, the inquiry would be whether the official or employee expects to receive a direct benefit as a result of his actions. In Advisory Opinion 2004-11, the State Ethics Commission appears to conclude that an official or employee has a direct benefit that prohibits him from taking official action if he shares in the employer's profitability. In other words, if the official or employee's salary is based on the employer's performance it appears that the State Ethics Commission would have found a substantial conflict. If the salary was not based on the employer's performance, it appears that the State Ethics Commission would have found no conflict.
If the official action affects a group, occupation, or profession to which the official or employee's employer belongs, the Office of State Ethics would likely consider whether the benefit or detriment the employer was expected to accrue was greater than that of other members of the group, occupation, or profession. If not, there is no conflict and official action can be taken. If so, the analysis describe above would take place. (See Advisory Opinions 2004-11, 2003-21, and 2002-14).
Although there is no guarantee how the Office of State Ethics would decide a case involving official action that benefits an employer, as the successor agency to the State Ethics Commission the Office of State Ethics is bound by the former commission's orders until they are amended, repealed, or suspended (CGS §§ 1-80 and 4-38d). (Presumably, this includes advisory opinions that were binding on the commission.)
SPECIFIC MATTERS THAT POSE NO SUBSTANTIAL CONFLICT
Regulations adopted by the State Ethics Commission, rather than the new Office of State Ethics, provide that public officials and state employees can take official action on any tax issue or benefit entitlement that “may apply different tax rates or entitlement qualifications to different groups or income levels.”
The regulations also provide that public officials and state employees can take official action on a general matter that includes a specific issue creating a substantial conflict if the person does not speak or otherwise comment on the specific issue during any debate, discussion, or consideration of the general matter. By way of example, the regulations provide that a legislator with a substantial conflict regarding a specific bonding or appropriations issue is not precluded from taking official action when the overall bonding package or budget comes before his committee or the General Assembly for consideration (St. Agency Regulations § 1-81-28 (f) and (g)).
The Office of State Ethics advises us that new regulations will be forthcoming after its transition is completed.