11-I-7
No. 11-I-7 State Ethics Commission Official Advisory Opinion February 2011
The Indiana State Ethics Commission (“Commission”) issues the following advisory opinion concerning the State Code of Ethics pursuant to I.C. 4-2-6-4(b)(1).
SUMMARY
42 IAC 1-5-14 Postemployment restrictions (IC 4-2-6-11)
An employee with the IHCDA serves as a Multifamily Housing Compliance Monitor and was offered employment as a Compliance Director by a real estate services company for which she had recently monitored tenant files and reviewed owner certification for developments owned by the Company. SEC found the Compliance Monitor’s involvement with the tenant files and certification for developments amounted to making a regulatory decision under the Postemployment rule, and she would need to observe the 365-day cooling off period before accepting employment with the Company, absent a waiver from her agency.
BACKGROUND
An employee has been employed by the Indiana Housing and Community Development Authority (“IHCDA”) since April 22, 2002, and currently serves as a Multifamily Housing Compliance Monitor. Her primary job duties are to complete compliance reviews of tenant files to ensure the development owners or award recipients who receive Section 42, HOME, CDBG, or Development allocations are renting units to qualified tenants as required by Section 42 and/or HOME, CDBG, or Development Fund programs. The Compliance Monitor also reviews the accuracy of annual Owner Certifications of Compliance to ensure the tenant events that occur in a development are entered in the IHCDA Online reporting system and are in compliance with the program requirements. The Compliance Monitor also notifies developments of monitoring letters and follow-up through complete resolution of monitoring issues. She also prepares and issues IRS Form 8823 on properties that do not comply with Section 42 of the Internal Revenue Code and provides technical assistance by conducting instructional workshops on Section 42. The Compliance Monitor’s job duties also require her to review the RHTC Compliance Manual annually and make appropriate changes/suggestions based on any new changes to Section 42 Code or HOME, CDBG, or Development Fund federal and state regulations by Congress.
On January 6, 2011, a real estate services company contacted the Compliance Monitor regarding an employment opportunity as a Compliance Director. As a Compliance Director, her responsibilities would include ensuring the real estate services company’s compliance with Section 42 tax credit, HOME, and CDBG programs through reviewing resident files for accuracy at initial certification or annual re-certification; developing the system, procedure, and tools needed to ensure compliance with the above mentioned programs; preparing the budget; entering tenant certification in the IHCDA Online Reporting System and reviewing of online reports to ensure no tenant certification has been missed; developing and revising company forms and procedures; and overseeing and/or supervising managed properties. In this position, the Compliance Monitor would also have compliance responsibilities for the NSP program.
The Compliance Monitor does not anticipate working on a “particular matter” during her employment with the real estate services company because specific guidelines for compliance with the rules and regulations of the programs require that all items be remedied within specific timeframes to remain compliant. Accordingly, any items that were considered issues would presumably already be corrected. The Compliance Monitor and the real estate services company recognize that she would be required to recuse herself from any particular matter she may have been involved with as a state employee should such a matter arise.
On January 14, 2011, the Compliance Monitor requested an Informal Advisory Opinion to determine whether her intended employment with the real estate services company would be contrary to the Code of Ethics. In this request, the Compliance Monitor disclosed that her most recent interaction with the real estate services company included monitoring tenant files of two developments that they managed in 2010 and reviewing four owner certifications for developments that they managed in 2010. As a result, the Compliance Monitor was advised that it was unclear whether conducting tenant file reviews to ensure regulatory compliance would constitute making regulatory decisions.
ISSUE
What rules in the Code of Ethics would apply to the Compliance Monitor’s intended employment opportunity with the real estate services company? Would her acceptance of the proffered position subject her to any post-employment restrictions under I.C. 4-2-6-11?
I.C. 4-2-6-6
Present or former state officers, employees, and special state appointees; compensation resulting from confidential information
I.C. 4-2-6-9 (42 IAC 1-5-6)
Conflict of economic interests
I.C. 4-2-6-11 (42 IAC 1-5-14)
One year restriction on certain employment or representation; advisory opinion; exceptions
ANALYSIS
The Compliance Monitor’s intended employment with the real estate services company invokes consideration of the provisions of the Code of Ethics pertaining to confidential information, conflicts of interest, and post-employment. The application of each provision to the Compliance Monitor’s prospective employment is analyzed below.
Confidential Information
I.C. 4-2-6-6 prohibits the Compliance Monitor from accepting any compensation from any employment, transaction, or investment which was entered into or made as a result of material information of a confidential nature. Based on the information provided by the Compliance Monitor, it would not appear that the real estate services company’s offer of employment resulted from information of a confidential nature. Accordingly, the Commission finds that the Compliance Monitor’s acceptance of the real estate services company’s employment offer would not be in violation of I.C. 4-2-6-6.
Conflicts of Interest
I.C. 4-2-6-9 prohibits the Compliance Monitor from participating in any decision or vote if she has knowledge that various persons may have a “financial interest” in the outcome of the matter, including herself and a potential employer. The term financial interest as defined in I.C. 4-2-6-1(a)(10) includes the interest an employee has that arises from employment or prospective employment for which negotiations have begun. In this case, the Compliance Monitor appears to have an arrangement for prospective employment with the real estate services company. Accordingly, the Compliance Monitor is prohibited from participating in any decision or vote so long as she or the real estate services company has a financial interest in the outcome of the matter. To the extent that the Compliance Monitor has and continues to observe this provision for the remainder of her tenure with the State, the Commission finds that the Compliance Monitor would not be in violation of I.C. 4-2-6-9.
Post-Employment
I.C. 4-2-6-11 consists of two separate limitations: a “cooling off” period and a particular matter restriction. The first prohibition commonly referred to as the cooling off period, prevents the Compliance Monitor from accepting employment for 365-days from the date she leaves state government under various circumstances.
First, the Compliance Monitor would be prohibited from accepting employment as an executive branch lobbyist pursuant to I.C. 4-2-7-1(5) for the entirety of the cooling off period. Based on the information provided, the Commission finds that this provision would apply to the Compliance Monitor as long as she continues to ensure compliance with this restriction for 365-days from her final date of state employment. Specifically, the job duties associated with the prospective employment do not indicate that the Compliance Monitor would be performing duties that would require her to register as an executive branch lobbyist.
Second, the Compliance Monitor would be prohibited from accepting employment from an employer with whom 1) she engaged in the negotiation or administration of a contract on behalf of her state agency and 2) was in a position to make a discretionary decision affecting the outcome of the negotiation or nature of the administration of the contract. In this case, it does not appear that the Compliance Monitor was involved in the negotiation or administration of any contracts with the real estate services company on behalf of the State. Specifically, the Compliance Monitor’s job duties with the State do not indicate that she had any involvement with contracts. Accordingly, the Commission finds that this provision would not apply to the Compliance Monitor.
Third, the post-employment rule would prohibit the Compliance Monitor from accepting employment from an employer for whom she made a regulatory or licensing decision that directly applied to the employer or its parent or subsidiary. In this case, it is the opinion of the Commission that the Compliance Monitor makes regulatory decisions as an employee of the IHCDA. Specifically, the Compliance Monitor is charged with making decisions by monitoring compliance of development owners and award recipients with various rules and regulations. Her job duties at the IHCDA require the Compliance Monitor to complete compliance reviews of tenant files to ensure the development owners or award recipients who receive Section 42, HOME, CDBG, or Development allocations are renting units to qualified tenants as required by Section 42 and/or HOME, CDBG, or Development Fund programs. The Compliance Monitor also reviews the accuracy of annual Owner Certifications of Compliance to ensure the tenant events that occur in a development are entered in the IHCDA Online reporting system and are in compliance with the program requirements. The Compliance Monitor also notifies developments of monitoring letters and follow-up through complete resolution of monitoring issues.
Having found that the Compliance Monitor makes regulatory decisions at IHCDA, the Commission must then determine whether she made a regulatory or licensing decision affecting the real estate services company or its parent or subsidiary to determine whether the one-year “cooling off” period would restrict the Compliance Monitor from accepting the proposed employment. In her request for an informal advisory opinion, the Compliance Monitor discloses that she reviewed some (not more than 20% per development) of the real estate services company’s tenant files and owner certifications to verify that they are complying with the applicable program requirements based on the type of funding the development has. The tenant files and annual owner certifications she reviewed were for tenants that have already moved into the developments the real estate services company owns and/or manages. Based on the information provided, it appears that the Compliance Monitor’s review of the real estate services company’s tenant files would be considered regulatory decisions that directly affect the real estate services company. Specifically, her job description indicates that she reviews tenant files to ensure the development owners or award recipients who receive Section 42, HOME, CDBG, or Development allocations are renting units to qualified tenants as required by Section 42 and/or HOME, CDBG, or Development Fund program. (Emphasis added). Similarly, it would appear that her review of the real estate services company’s ownership certificates for compliance with applicable program requirements would be a regulatory decision that directly applied to the real estate services company. The Commission therefore finds that the Compliance Monitor made a regulatory decision that directly applied to her intended employer during her tenure with the State. Accordingly, the Commission determines that the one-year cooling off period would apply to the Compliance Monitor and she would therefore be prohibited from accepting employment from the real estate services company until after the expiration of 365-days from the last date of her state employment absent a waiver from her agency appointing authority.
Should the Compliance Monitor accept employment with the real estate services company after the expiration of 365-days from the last date of her state employment or upon receiving a waiver, she would still be subject to the post-employment rule’s “particular matter” prohibition in her potential employment. This restriction prevents her from working on any of the following twelve matters for an employer if she personally and substantially participated in the matter as a state employee: 1) an application, 2) a business transaction, 3) a claim, 4) a contract, 5) a determination, 6) an enforcement proceeding, 7) an investigation, 8) a judicial proceeding, 9) a lawsuit, 10) a license, 11) an economic development project, or 12) a public works project. The particular matter restriction is not limited to 365-days but instead extends for the entire life of the matter at issue, which may be indefinite. In this case, while the Compliance Monitor has not identified any particular matters in which she anticipates the real estate services company would require her to work, it is the opinion of the Commission that the Compliance Monitor must continue to ensure compliance with this restriction.
CONCLUSION
The Commission finds that the Compliance Monitor’s intended employment with the real estate services company would not violate I.C. 4-2-6-6 or I.C. 4-2-6-9. The Commission further finds that the one-year restriction set forth in I.C. 4-2-6-11(b)(3) does apply to the Compliance Monitor’s intended employment with the real estate services company. Accordingly, the Compliance Monitor is prohibited from accepting employment with the real estate services company until after the expiration of 365-days of her last day of state employment.
