A Court Decision That Focuses on the Reasons Behind Conflict of Interest Rules

Two months ago, <a href="http://www.cityethics.org/content/2009-local-land-use-ethics-update-now…
pointed
out</a> Patricia Salkin's new <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1493502">summary
of
2009
reported cases</a> dealing with ethical aspects of local government land use matters.
I'm finally getting around to analyzing one of them that provides a
fascinating perspective on why conflicts of interest are important. The
decision shows that, when you look at the reasons behind conflict rules,
you take a far more broad-minded, less technical approach to possible
conflict situations. It makes it clear that ethics training should
focus less on rules than on the reasons behind them.<br>
<br>

A New Jersey decision, <a href="http://www.law.com/jsp/PubArticle.jsp?id=1202428156036">Randolph
v. City of Brigantine Planning Board</a>, went beyond the
interpretation given to most conflicts laws, concluding, “it is not
simply the existence of a conflict that may be cause to overturn an action of
a public official, but also the appearance of a conflict.” Here's the
conflict language (it's from the state municipal land use statute, but
the court
said it applies equally to the conflict language in the state's local
government ethics law and common-law conflicts relating to
quasi-judicial proceedings):<br>
<ul>
[n]o member of the planning board shall be permitted to act on any
matter in which he has, either directly or indirectly, any personal or
financial interest.<br>
</ul>
Here is the situation in the Randolph case. A planning board chair had
cohabited for ten years with the
principal of an engineering firm that acted as planning engineer for
the board (an employee of the firm, not the principal, acted as engineer in this and most matters). The chair participated in the first
part of a proceeding involving review of
a hotel site plan, and then was asked by the plaintiff to
recuse herself, which she did for the second part, although she felt
she had no conflict.<br>
<br>
The court favorably quotes a 1956 decision, as follows:<br>
<ul>
Under
the common law, "[i]t is fundamental
that the public is entitled to have its representatives perform their
duties
free from any personal or pecuniary interests that may affect their
judgment." In
determining whether a conflict exists, "[t]he potential for
psychological
influences cannot be ignored." ... "[I]t is the mere
existence of the interest, not its actual effect, which requires the
official
action to be invalidated." <br>
</ul>
This is an unusually sensitive approach to conflicts, focusing on why
conflicts are important rather than the usual technicalities and
limitations. Here's one more quote concerning the ideas that lie behind
conflict of
interest provisions, from a 2007 New Jersey decision:<br>
<ul>
Officials
must
be free of even the potential for entangling interests that will erode
public trust in government actions. Thus, it is the potential for
conflict,
rather than proof of an actual conflict or of actual dishonesty, that
commands
a public official to disqualify himself from acting on a matter of
public
interest.<br>
</ul>
The court goes on to quote a New Jersey commentator on the standard to
use in conflict matters:<br>
<ul>
Would
an impartial and concerned citizen,
intelligent and apprised of all the facts in the situation, feel that
there was
the potential for non-objectivity on the part of the officeholder
making a
decision? If the answer is affirmative the appearance of conflict
exists.<br>
</ul>
But the court does acknowledge a limit on the application of an
appearance approach, quoting from a 1977 decision: <br>
<ul>
[Courts]
must also be mindful that to abrogate a municipal action at the
suggestion that
some remote and nebulous interest is present, would be to unjustifiably
deprive
a municipality in many important instances of the services of its duly
elected
or appointed officials.<br>
</ul>
The court notes
that the state ethics law, applying to local officials, broadens the
common-law definition of conflict, from applying only to interests to
applying to "involvement." Here's the language:<br>
<ul>
No
local government officer or employee shall
act in his official capacity in any matter where he, a member of his
immediate
family, or a business organization in which he has an interest, has a
direct or
indirect financial or personal involvement that might reasonably be
expected to
impair his objectivity or independence of judgment.<br>
</ul>
With respect to evidence of impairment of judgment, the court says, "
It is
not necessary to establish that [the chair] did
not exercise her independent judgment, it is only the potential that
she may
fail to exercise her judgment that need be shown."<br>
<br>
There is also the issue of family, since the conflict here involves
an official's domestic partner (the court notes that, although the
chair and the engineering
company principal are not married, the perception is the same, thus
effectively including domestic partners in the definition of "spouse").
With respect to family involvement, the
court discusses a 2004 case:<br>
<ul>
In
finding that "when a family member's
vote results in another family member obtaining a position in a
government
agency . . . a conflict is usually present," we focused on the public's
perception that the committeewoman had "a personal interest in the
reappointment of her husband to a prestigious and potentially very
influential
position." <br>
</ul>
The
court notes that conflicts usually involve a commission member and an
applicant, not a commission member and a board professional. But it
found one recent case, an appeal from a state ethics commission
decision, where a board member was the sister of a board employee, and
this was found to disqualify the board member from any matter where her
sister made a presentation or where her work product was used.<br>
<br>
Finally, the court details the appearance of impropriety in this case.
Primarily it involves the appearance of bias toward the engineer's
advice, because his advice would likely be based partially on the
domestic partner's advice (as the board's former engineer and the
current engineer's boss), and also because the chair would want the
engineer to look good so that his firm's annual contract would be
renewed by the board.<br>
<br>
It's noteworthy that the judge does not focus on
the fact that the failure to renew the contract would mean a financial
detriment to the chair's household. Unlike so many people who deal with
conflict matters, this judge is less interested in money than in the
appearance of bias.<br>
<br>
It's interesting that, in this very matter, the chair voted against the
engineer's advice to require a variance. The court says it is not
important whether bias is actually shown. The issue is whether it might
be
perceived. It is the situation rather than the specific facts that the
court focuses on, because conflicts are not determined by how an
official acts. One
of the most common mistakes in government ethics is believing that how an official votes on a matter is relevant.<br>
<br>
The court makes one last observation, and responds to it. This
observation is
important, given the opposition of many muncipal officials, and their
associations, on these very grounds:<br>
<ul>
We
recognize that our opinion could "reduce the number of qualified
persons .
. . willing to serve on local boards" in small municipalities. <i>Gunthner
v.
Planning
Bd.
of Bay Head, 335 N.J. Super. 452, 457, 762 A.2d 710 (Law
Div.
2000)</i> (quoting Assembly Local Government Committee Statement,
Assembly No.
826, Sept. 29, 1994). Yet, in reconciling the competing public
interests at
stake, the need for unfettered objectivity by planning board members
outweighs
the potential difficulties small municipalities may experience in
attracting
people to serve on local boards.<br>
</ul>
The court concludes that the proceeding must be voided and set aside.
This is something that ethics commissions rarely do, or have the power
to do. They can usually only slap officials' hands or fine them. This
is a topic for another blog post.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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