The Indiana State Ethics Commission (Commission) issues the following advisory opinion concerning Indiana Code 4-2-6. Any opinion rendered by the Commission, until amended or revoked, is binding on the Commission in any subsequent allegations concerning the person who requested the opinion and who acted in good faith in accordance with the advice rendered, unless material facts were omitted or misstated by the person in the request for the opinion or testimony before the Commission.
Background
The Executive Director of the Indiana Department of Homeland Security (IDHS), requests an official advisory opinion regarding his intended service on the Board of Directors for a not-for-profit organization that is in the process of being created.
The Executive Director is an employee of a University in Indiana as well as a special state appointee. Pursuant to the Commission’s Official Advisory Opinion No. 06-I-13, the Executive Director is currently being screened from all IDHS decisions that benefit the University.
The Executive Director has been invited to serve on the Board of Directors of the not-for-profit organization. This is currently the University’s project, but the members who established the project are forming the not-for-profit corporation.
IDHS does not anticipate that it will have a business relationship with the not-for-profit corporation when it is established. However, the not-for-profit corporation has and will be seeking funding from and partnering with corporations that do have business relationships with IDHS through the regulatory activities of the Fire and Building Safety Division of IDHS. Specifically, the Fire and Building Safety Division of IDHS permits or licenses building construction, the installation and operation of elevators and the installation and operation of boilers and pressure vessels.
According to the not-for-profit, the organization currently has three major sponsors with one being the University. IDHS currently has a business relationship with the University, but the Executive Director is already being screened from decisions regarding the University. IDHS does not have a business relationship with the second major sponsor. However, the third major sponsor is part of a company, which does have a few facilities in Indiana that IDHS would regulate.
Issue
The issue is whether the Executive Director’s service on the Board of Directors of the not-for-profit organization that is currently in the process of being created, would pose a conflict of interest under IC 4-2-6-9, or any other state ethics law or rule, with regard to his duties as Executive Director of IDHS. If so, what screening mechanism must be put in place to ensure compliance with the State’s Ethics laws?
Relevant Law
IC 4-2-6-5.5
Conflict of interest; advisory opinion by inspector general
IC 4-2-6-10
Conflict of economic interests
42 IAC 1-5-1
Gifts; travel expenses; waivers
Analysis
The Executive Director’s intended outside professional activity with the not-for-profit organization invokes consideration of IC 4-2-6-5.5, which deals with conflicts of interest that may arise as a result of a special state appointee’s outside professional activity. Specifically, IC 4-2-6-5.5(a)(2) would prohibit the Executive Director from engaging in professional activity that would require him to disclose confidential information that was gained in the course of state employment. Based on the facts that presented, the Commission finds that there is no evidence to indicate that the Executive Director’s service on the not-for-profit organization’s Board of Directors would require him to disclose confidential information that he may have gained during the course of his employment with IDHS. Further, the Executive Director’s service on the Board would not be contrary to the IC 4-2-6-5.5 (a) (1) as he will not be compensated for his service. To the extent that the Executive Director was to receive any compensation for his professional activity with not-for-profit organization, the Executive Director shall disclose the nature of the compensation to the Commission to determine whether receipt of any such compensation would be a violation of IC 4-2-6-5.5(a)(1).
With regard to IC 4-2-6-9, the Commission finds that the Executive Director’s service on the not-for-profit organization’s Board of Directors would constitute a conflict of interest with respect to his duties as Executive Director of IDHS. Specifically, IC 4-2-6-9(a)(4) provides that a special state appointee may not participate in any decision or vote if such person has knowledge that a business organization in which the special state appointee is an officer, a director, a trustee, a partner, or an employee has a financial interest in the outcome of the matter.
In this case, the Executive Director would be serving as a director for the not-for-profit organization and would be prohibited from participating in any decision or vote if he had knowledge that the not-for-profit organization had a financial interest in the outcome of any given matter. Given that the not-for-profit organization intends to seek funding from and/or partner with corporations that are regulated by IDHS, the not-for-profit organization would have a financial interest in the outcome of matters pertaining to those companies. Accordingly, the Executive Director would be prohibited from participating in any decision or vote involving any such corporations.
IC 4-2-6-9(b)(1) generally states that the Commission shall, with the approval of the appointing authority, assign a particular matter that would create a conflict of interest to another person and implement all necessary procedures to screen the special state appointee seeking an advisory opinion from involvement in the matter. In this case, the Commission approves of the screening mechanism proposed by the IDHS in which the University faculty member leading the not-for-profit organization project would provide the IDHS Ethics Officer with a list of the corporations that the not-for-profit organization contacts for purposes of obtaining funds or support for the project on a weekly basis. Accordingly, the IDHS Ethics Officer, the General Counsel, and Director of the Support Services Division shall screen the Executive Director from participating in any decision or vote involving these corporations.
Finally, the Executive Director’s service on the Board of Directors for the not-for-profit organization could potentially implicate 42 IAC 1-5-1, the state ethics rule that pertains to gifts. In this case, the facts presented indicate that the not-for-profit organization has and will be seeking funding from corporations that have a business relationship with IDHS. As a special state appointee, the Executive Director would be prohibited from soliciting any of the enumerated items set forth in the gift rule from a person that has a business relationship with IDHS or who may seek to influence him in his official capacity.
Conclusion
Subject to the foregoing analysis, the Executive Director would be permitted to serve on the Board of Directors for the not-for-profit organization. In addition, the Executive Director must ensure continued compliance with this advisory opinion and the State Code of Ethics.