APPENDIX A
July 24, 2001
Mr. Alexander J. Rose WAIVER GRANTED
Delaware Developmental Disabilities Council
Margaret M. O'Neill Building
410 Federal Street, Suite 2
Dover, DE 19901
Advisory Op. No. 01-22 - Concurrent Employment/Contracting with the State
Hearing and Decision by: John E. Burris, Chair;
Commissioners Mary Jane Willis, Paul E. Ellis, Arthur V. Episcopo, and Clifton H. Hubbard
Dear Mr. Rose:
The State Public Integrity Commission has granted a waiver so that three Council members of the Developmental Disabilities Council can work, in their private capacity, on a mini-grant for the University of Delaware's Center for Disabilities Studies. However, they should recuse themselves as Council members when issues on the mini-grant arise before the Council.
(A) Applicable Law
Honorary State officials are prohibited from reviewing or disposing of matters before the State where they have a personal or private interest. 29 Del. C. § 5805(a)(1). A personal or private interest is one which tends to impair judgment in performing official duties. Id.
Honorary State officials may not represent or otherwise assist a private enterprise on matters before the agency to which they are appointed. 29 Del. C. § 5805(b)(1).
(B) Application of Law to Facts
The Developmental Disabilities Council ("the Council") is a State agency created to insure self-determination, independence, productivity, integration, and inclusion in community life of persons with disabilities. It achieves its purpose, in part, by issuing mini-grants to persons or entities that can help accomplish its mission. During its most recent mini-grant cycle, it publicly noticed the opportunity to submit funding proposals. The Council received only one proposal. Theda M. Ellis submitted a proposal on behalf of her employer, the University of Delaware's Center for Disabilities Studies ("the Center"). By law, the Center must have a representative on the Council. 42 U.S.C. § 15025(b)(1)(C)(4)(II). Ms. Ellis serves as its representative.
The Center seeks a Council grant to contract with Phyllis Guinivan and Gary Mears to teach a course to University of Delaware undergraduates, consumers and family members on "Family Support, Self-determination and Disability." Phyllis Guinivan and Gary Mears are also Council members. This means the Council would award the grant to its own member's employer, who will then turn around and contract with two other council members.
However, federal law requires the Council to collaborate with entities represented on the Council, including the Center. 42 U.S.C. § 15025(c)(5)(G)(ii). While envisioning contracting with those entities, it tries to reduce conflicts by requiring the Council to have a plan so that Council members will not vote on matters if they would financially benefit; do not discuss grants or contracts if the entity they represent on the Council is the beneficiary, or otherwise engage in conduct that would give the appearance of a conflict. 42 U.S.C. § 15024 (c)(5)(D) and § 15025 (b)(1)(4)(B)(ii).
To comply with the federal requirement to have a conflict of interest plan, the Council's plan consists of obtaining a decision on whether the conduct would violate the State Code of Conduct. If so, it seeks a waiver pursuant to 29 Del. C. § 5807(a).(1)
(C) Background to the Proposal
The Center is part of the National Network of Centers for Excellence in Developmental Disabilities Education, Research and Services created by federal law. 42 U.S.C. § 15063. Among other things, it trains individuals with developmental disabilities, their families, professionals, para-professionals, policy makers, students, and other community members. Id. Earlier this year, it offered a free six-day course to consumers and parents of children with developmental disabilities on "Family Support, Self-Determination and Disability." The course was advertised Statewide. Though not mentioned in the ad, the Center planned to have students who completed the course serve as instructors for the same course which it now seeks to pay for with the Council's mini-grant. All 25 students who took the course were offered the chance to teach. Ms. Guinivan and Mr. Mears took the course as they have children with developmental disabilities. They were the only ones interested in contracting.
(D) Terms of the Proposal
The contract will be for one semester at the University of Delaware as part of the undergraduate course, adult education classes, etc. Ms. Guinivan and Mr. Mears will divide the amount paid for the course of $3,645. The mini-grant will also pay their FICA; costs of copying materials; the "university indirect," etc. The total will be $4,881. Thus, the salary/benefits received by each will be $2,440.50. The salary/benefits are based on what a University of Delaware professor would be paid. The proposal indicates that after these classes are taught, the Center plans to use students from those classes for future presentations.
(E) "Personal or Private Interests" of Ms. Ellis, Ms. Guinivan and Mr. Mears
Honorary State officials (appointees to Boards and Commissions) may not review or dispose of matters if they have a personal or private interest which tends to impair judgment in performing official duties. 29 Del. C. § 5805(a)(1). The personal or private interest of Ms. Ellis is that she wrote her employer's proposal. As an employee, she has a duty and vested interest in the proposal she wrote for the Center. See, e.g., Beebe Medical Center v. Certificate of Need Appeals Board, Del. Super., C.A. No. 94A-01-004, Terry, J. (June 30, 1995), aff'd, Del. Supr., No. 304, Veasey, J. (January 29, 1996)(improper for appointee to participate in decision when his employer was entering a business alliance with applicant appearing before the Board). Ms. Ellis' interest is more direct than the appointee in Beebe as her employer (through her) is directly applying for the grant.
Similarly, Council members Guinivan and Mears have a "personal or private interest" in the grant as they will benefit financially. See, Commission Op. No. 00-32 (appointee to Delaware Heritage Commission should not participate in its decision to award him a contract).
Thus, the three Council members should not review or dispose of the decision to award the contract or subsequent decisions on the grant, e.g., reviewing how the grant monies were used, whether the contract was properly performed, etc. The Council's letter says the three council members will not participate in the decision to award the grant. If they recuse themselves on all issues dealing with the grant, there will be no violation of 29 Del. C. § 5805(a)(1).
(F) "Representing or Otherwise Assisting" a Private Enterprise before One's Own Agency
Honorary officials also may not represent or otherwise assist a "private enterprise" on matters involving the State before their own agency. 29 Del. C. § 5805(b)(1).
The first issue is whether the University of Delaware's Center for Disabilities Studies (the Center) is a "private enterprise" or a State agency. The federal law says that the Centers may be a public or private entity. (Citation omitted). If it is a "State agency," then this particular provision would not apply. The Code of Conduct definition of "State agency" refers only to "school districts." 29 Del. C. § 5804(10). There is no reference to institutions of higher learning. Thus, it is not specifically defined as a "State agency" in the Code.
Delaware Courts, in trying to decide if the University of Delaware is a "State agency" or a "private entity," have recognized that the answer is not easy. In Rumsey Elec. Co. v. University of Delaware, Del. Supr., 358 A.2d 712 (1976), the Delaware Supreme Court said:
The question of whether the University of Delaware is an agency of the State is a vexing one because of its mixed proprietary activities and public funding. Parker v. University of Delaware, 31 Del. Ch. 381, 75 A.2d 225 (1950); City of Newark v. University of Delaware, Del. Ch., 304 A.2d 347 (1973). [However,] "In the contractual area its status appears to have been legislatively defined. In 1964, by specific enactment, the General Assembly conferred upon the University's Board of Trustees 'the entire control and management' of its affairs including 'the manner of awarding contracts.' 14 Del.C. § 5106."
Based on that law, the Court held that the University of Delaware was not a "State agency," but a private entity when it engaged in awarding contracts. Id. Thus, it is arguable that in this situation, as the Center is contracting, it could be considered a "private enterprise."(2)
Assuming it is a private enterprise, the next issue is whether Ms. Ellis "represented or otherwise assisted" the Center before her own agency. Here, Ms. Ellis wrote the proposal she submitted to her Council. Beyond that, if the Council has questions when it considers the proposal, it wants Ms. Ellis to answer the questions. As she has "represented or otherwise assisted" the Center before her own agency, and might continue to do so if the Council has questions about her proposal, it would violate the Code unless a waiver is granted.
It also is possible that Ms. Guinivan and Mr. Mears could end up representing or otherwise assisting the Center before their own agency. By law, the Council must conduct a comprehensive review and analysis of the services offered, including descriptions of how entities funded through it collaborated and contributed to the purpose of the law. 42 U.S.C. 15024(c)(3)(A) and (D). For example, if the Council has to inquire how the grant monies were used by Ms. Guinivan and Mr. Mears; look at whether they properly performed the contract; etc., or if Ms. Guinivan and Mr. Mears have to report on the success of the course to the Council, for the Council to complete its comprehensive review and analysis, then the Council would evaluate its own members' performance, and the Council members would be addressing their private work before their own Council.
(G) Request for a Waiver
Because of the Code issues raised by this arrangement, the Council seeks a waiver. A waiver may be granted if: (1) the literal application of the law is not necessary to serve the public purpose; or (2) there is an "undue hardship" on the agency. 29 Del. C. § 5807(a).
(1) Is the literal application of the law necessary to serve the public purpose?
The purpose of the Code of Conduct is to instill public confidence in the integrity of its government. 29 Del. C. § 5802(1). This is accomplished by setting specific standards to guide the conduct of State employees and officials. 29 Del. C. § 5802(2). The specific standards at issue are: (1) reviewing or disposing of matters if there is a personal or private interest; and (2) representing or otherwise assisting a private enterprise before one's own agency.
Regarding the first standard, it appears that the Council members can recuse themselves from acting in their official capacity on the grant matter. Thus, a waiver is not needed for that provision.
The second provision requires a waiver as it is clear that Ms. Ellis is representing the Center before her own agency. Also, as noted, the other two Council members may be put in a situation where they may have to explain to the Council how the monies were used, etc.
The restriction on representing or otherwise assisting a private enterprise before one's own agency is to insure that State officials do not use their influence within their own agency to affect the decisions of their colleagues or employees or use their access to information or influence within their own agency to obtain preferential treatment, unfair advantage, or unwarranted privileges, private advantage or gain. Commission Op. No. 00-32. See, Van EE v. Environmental Protection Agency, D.C. Dist. Ct. of Appeals, 202 F.3d 296(2000)(noting purpose of federal restriction on its employees and officials representing or assisting a private enterprise before federal agency).
In the context of State officials contracting with their own agency, Delaware Courts have noted that when State officials contract with their own agency the concern is that the award of such contracts "has been suspect, often because of alleged favoritism, undue influence, conflict and the like." Commission Op. No. 00-32 (citing W. Paynter Sharp & Son v. Heller, Del. Ch., 280 A.2d 748,752 (1971)).
Here, public concerns about awarding the contract out of favoritism, preferential treatment, etc., are diminished by the following facts: (1) the Council publicly noticed the opportunity of the grant monies to any person or entity which sought to apply; no one else did apply; (2) the Center course was also publicly noticed; (3) the course was free so no member of the public was financially hindered in taking the course; (4) all attendees were notified of the teaching opportunity if they completed the course; (5) the three Council members will not participate in deciding if the Center will be awarded the grant; (6) the credentials of the two Council members to teach the course are outlined in the proposal, giving an objective factual basis for their selection other than mere attendance at the free course; (7) federal law requires the Center and the Council to collaborate on services and programs for persons with developmental disabilities; and (8) by law, if a waiver is granted the proceedings become a matter of public record so that the public will know its concerns about favoritism, undue influence and the like were addressed. See, 29 Del. C. § 5807(b)(4).
We also note that if the two Council members are permitted to teach the course that 20-45 persons are expected to attend. According to the proposal, attendees could subsequently teach the course. That would mean the Council would not have to continue dealing with its own council members to fulfill subsequent contracts.
Those facts serve the public purpose--insuring that the contract is not granted out of favoritism, undue influence, and the like.
(2) Is there an "undue hardship" on the State agency--the Council.
If a waiver is not granted, the hardship for the Council is that it appears that the Council could not issue the grant because there were no other applicants. The effect of that would be that the training program could not be offered as there are no alternative entities to which to award the grant nor are there alternative persons to teach the course.
(H) Conclusion
Based on the above facts and law, we conclude that the three Council members should not participate in their official capacity on matters related to the mini-grant to avoid a violation of 29 Del. C. § 5805(a)(1). However, the facts show that the public purpose has been served (grant not awarded out of favoritism, undue influence and the like), and there is an undue hardship on the agency, so we grant a waiver of 29 Del. C. § 5805(b)(1) so that the three Council members can, if required, represent or otherwise assist the Center before their own Council.
Sincerely,
John E. Burris, Chair
JEB:lha
September 26, 2001
Orlando J. George, Jr. WAIVER GRANTED
President, Delaware Technical and Community College
Office of the President
P.O. Box 897
Dover, DE 19903
Advisory Op. No. 01-36 - Contracting with State
Hearing and Decision by: John E. Burris, Chair; Arthur G. Connolly, Jr., Vice-Chair;
Commissioners Mary Jane Willis; Paul E. Ellis; Arthur V. Episcopo; and Clifton H. Hubbard
Dear President George:
The State Public Integrity Commission reviewed the correspondence concerning Delaware Technical & Community College (Del Tech) contracting with a Board of Trustees member, John Mariorano, to provide services as a travel agency for a study tour in Turkey and Greece. While such contract would violate the Code of Conduct, a waiver is granted based on the following law and facts.
Where a State official seeks to contract with his own agency, the official then has a "personal or private interest" in the matter. Commission Op. No. 98-11. When an official has a "personal or private interest," the Code requires that he not, in his official capacity, review or dispose of matters related to the contract. 29 Del. C. § 5805(a)(1). Also, officials may not represent or otherwise assist a private enterprise on matters before the agency to which they are appointed. 29 Del. C. § 5805(b)(1). Accordingly, Mr. Mariorano should not participate in his official capacity on matters concerning the contract. However, as he wrote his company's response to the College's request for proposals, his actions would constitute representing or otherwise assisting his private enterprise before his own agency.
As the contract, at a minimum, appears to violate the provision on contracting with one's own agency, and may raise issues under the provision dealing with outside employment which restricts such employment if it may result in impaired judgment, preferential treatment, etc., the focus turns to the basis for a waiver.
Waivers may be granted if: (1) the literal application of the law is not necessary to serve the public purpose or (2) there is an "undue hardship" on the official or the agency. 29 Del. C. § 5807(a).
(1) Is the literal application of the law necessary to serve the public purpose?
The public purpose served by prohibiting State officials from contracting with their own agency was noted in a 1971 Court opinion. W.Paynter Sharp & Son v. Heller, Del. Ch., 280 A.2d 748 (1971). In Heller, the Court said that when State officials contract with their own agency the concern is that the award of such contracts "has been suspect, often because of alleged favoritism, undue influence, conflict and the like." The Court noted that, at that time, the State had no conflicts of interest law. Subsequently, the Code of Conduct was passed, and restricted officials from dealing with their own agency. 29 Del. C. § 5805(b)(1). This insures that officials do not use their influence with their agency to affect decisions by their colleagues or employees or use access to information or other influence to obtain preferential treatment, unfair advantage, or unwarranted privileges, private advantage or gain. Commission Op. No. 00-32.
Here, the agency, to insure that the contract award was not based on favoritism, but rather on the ability of the bidders to provide certain services, publicly noticed the opportunity for any person or company to compete if the bidder met the criteria outlined in the request for proposals. Public notice and bidding helps diminish the possibility of showing favoritism as it provides the competitive opportunity to all persons or organizations similarly situated to Mr. Mariorano's company. It also aids in diminishing the opportunity for Mr. Mariorano to use his State position to obtain the contract because neither the agency nor he would know, until after the fact, what competition he might have, what bid any competitor would make, etc. As it turned out, there was no competition, but that fact was unknown when he submitted his bid.
Public notice and bidding also helps insure a fair market price. Delaware Courts have held that an "economically meaningful way to judge fairness is to compare the price paid with the price likely to be available in alternative transactions." Commission Op. No. 97-17 (citing e.g., Oberly v. Kirby, Del. Supr., 592 A.2d 445 (1991).Your letter indicates that travel agencies are generally compensated through commissions from the service providers to the tour (e.g., airlines, hotels, etc.). When the compensation to a travel agency is paid by the airlines and hotel operators, it is fixed by the industry. Thus, the price would be the fixed market price. That aids in insuring that Mr. Mariorano's compensation is not based on favoritism, undue influence, and the like. In some instances, the commission to the travel agency is established by a direct fee from the participants. However, as his price was established in responding to the public bidding opportunity, that increases the likelihood that his bid would have been the market rate, even though it turned out that he had no competition.
Aside from the above facts, which aid in insuring that the public purpose is served, if a waiver is granted the proceedings before the Commission become a public record, thereby permitting the public to know that its concerns about favoritism, etc., were addressed. Commission Op. No. 01-22.
(2) Is there an "undue hardship" on the State official or the Agency?
No facts indicate any hardship on Mr. Mariorano. However, as there were no other bidders, it appears that Del Tech could not go forward with its study tour if Mr. Mariorano's company is not granted the contract.
Accordingly, since the possibility of the contract being awarded out of favoritism, undue influence and the like has been diminished by the College's actions in publicly noticing and bidding the contract, and as there is a hardship on the agency, a waiver is granted.
Sincerely,
John E. Burris, Chair
State Public Integrity Commission
cc: Kathi A. Karsnitz, Esq.
1. The Commission's jurisdiction is limited to interpreting the State Code of Conduct, and it has no authority to interpret federal law. Thus, to the extent the federal law may impose additional restrictions, this opinion is not meant to circumvent federal law.
2. In other situations, e.g., zoning, constitutional
issues, etc., the University has been held to be a "State
agency." See, e.g., Parker,
supra. If the
Commission assumed the University was a "State agency," it could
still raise issues under the Code of Conduct, e.g., 29
Del. C. § 5805(a)(1)(having an interest which tends to
impair judgment); 29 Del. C. §
5806(b)(accepting other employment); 29 Del. C.
§ 5806(e)(using public office for unwarranted privileges, private
advantage or gain); and 29 Del. C. §
5806(a) (appearance of impropriety).
