No. 09-I-2 State Ethics Commission Official Advisory Opinion January 2009
The Indiana State Ethics Commission (“Commission”) issues the following advisory opinion concerning the State Code of Ethics pursuant to IC 4-2-6(b)(1).
Summary
42 IAC 1-5-6 Conflicts of interest; decisions and voting
42 IAC 1-5-7 Conflicts of interest; contracts
A member of the RMDB also served as the principal investigator for a study that was funded by a grant that had been issued to his employer, Purdue University, by the RMDB’s predecessor board prior to his appointment. SEC found that a conflict of interest would arise for the RMDB member if he were to vote on the renewal of the grant or were to continue to receive compensation from the grant while serving on the RMDB if the grant were to be renewed. Accordingly, the RMDB member would have to either (1) give up his financial interest in the grant or (2) terminate his service on the RMDB.
Background
A professor of mechanical engineering at Purdue University Calumet (“Purdue”) also currently serves on the Indiana Recycling Market Development Board (“RMDB”). He was appointed to the RMDB in August 2007 and attended his first meeting of the RMDB in February 2008.
In addition to his employment with Purdue and his service on the RMDB, the Professor is also the principal investigator for a Municipal Solid Waste Characterization Study for Indiana (“Study”). The Study is being funded by a grant (“Grant”) that was issued to Purdue by the Recycling and Energy Development Board (“RMDB”), the predecessor board of the RMDB. The Professor is compensated for his work on the study from the Grant.
Before joining the RMDB, the Professor consulted with an environmental engineer of the Indiana Department of Environmental Management (“IDEM”) regarding possible conflicts of interest that could arise due to his service on the RMDB and his involvement with the Grant. It was determined by IDEM that the Professor would recuse himself from any vote pertaining to his contract or any other contract that involved Purdue.
The contract for the Grant began on April 1, 2007 and is scheduled to end May 31, 2009. The Study, however, will not be completed before the expiration of the Grant. Purdue, in turn, intends to request a renewal/extension of the Grant to complete the Study.
Issues
Does a conflict of interest arise for the Professor if he continues to receive compensation from the Grant while serving on the RMDB if Purdue requests a renewal/extension of the Grant to complete the Study?
Relevant Law
IC 4-2-6-9: Conflict of economic interests
IC 4-2-6-10.5: Prohibition against financial interest in contract; exceptions
Analysis
The Professor is a special state appointee by virtue of his service on the RMDB. As a special state appointee, the Professor is subject to the Code of Ethics including the conflicts of interest provisions set forth in IC 4-2-6-9 and IC 4-2-6-10.5. The application of both conflicts of interest provisions to the Professor’s situation are analyzed below.
A. IC 4-2-6-9 Conflict of Economic Interests
In this case, Purdue has a contract with the RMDB for a Grant to complete the Study. The Professor receives compensation from the Grant for his work on the Study. Accordingly, both Purdue and the Professor would appear to have a financial interest in the Grant. While the Grant was issued to Purdue prior to the Professor’s appointment to the RMDB, the contract is still ongoing and could be renewed. The Professor would thus be prohibited from participating in any RMDB decision or vote regarding the Grant because both he and his employer have a financial interest in the outcome of any decision or vote regarding the Grant.
B. IC 4-2-6-10.5 Prohibition against financial interest in contract; exceptions
Pursuant to IC 4-2-6-10.5, a special state appointee may not knowingly have a financial interest in a contract made by an agency. The restriction, however, does not apply to a special state appointee that does not participate in or have official responsibility for any of the activities of the contracting agency, provided certain statutory criteria are met. The term “official responsibility” has been interpreted to refer to contracting responsibilities.
As a member of the RMDB, the Professor participates in decisions regarding the issuance of contracts. The Professor would therefore have “official responsibilities” for purposes of IC 4-2-6-10.5 for the RMDB. Because he participates in contracting decisions and has official responsibilities for the RMDB, the contracting agency for the Grant, the prohibition set forth in this rule would apply to the Professor. Accordingly, he cannot have a financial interest in a contract made by the RMDB.
IC 4-2-6-10.5(b)(2) states that a special state appointee who, acting in good faith, learns of an actual or prospective violation of this rule, must, within 30 days, make a full written disclosure of any financial interests to the contracting agency and the Ethics Commission and terminate or dispose of the financial interest. The Professor filed a financial disclosure with the Commission within 30 days upon learning of the conflict. To be in compliance, the Professor must dispose of his financial interest in the Grant upon the renewal of the Grant in 2009.
Conclusion
The Commission finds that a conflict of interest would arise for the Professor if he continues to receive compensation from the Grant while serving on the RMDB if the Grant is renewed in May 2009. Accordingly, the Professor would have to either (1) give up his financial interest in the Grant or (2) terminate his service on the RMDB.