Advisory Opinion 09-06 (Service on the Board of a Nonprofit Entity)
Advisory Opinion No. 09-06
(Service on the Board of a Nonprofit Entity)
SUMMARY: It would not be a violation of Colorado Constitution Art. XXIX for the
Colorado Secretary of State to serve on the Board of Directors of a nonprofit entity that
is regulated by the Secretary of State¿s Office. Further, the Commission has not been
made aware of any Colorado statute that would prohibit such service. However, the
IEC believes that an appearance of impropriety may be created due to the uniqueness
of the role of the Secretary of State and his office.
I. BACKGROUND
The Independent Ethics Commission ("IEC" or "Commission") has received a
request for advisory opinion from the Colorado Secretary of State,1 asking whether he
may serve on the Board of Directors of a nonprofit organization in Colorado. The
Secretary of State's Office has broad authority over charitable organizations. It
registers charitable organizations and their professional fundraisers, and has the
authority to deny, suspend or revoke the registration of these entities. The Department
of State has enforcement power related to violations by charitable organizations. The
Department accepts some trade name and trademark filings of unincorporated nonprofit
associations, as well as corporate filings of nonprofit corporations, and licenses
nonprofits under specified conditions for bingo games and raffles. The Department is
charged with preventing fraud in charitable gaming activities. The Secretary of State's
Office, in its role as a reporting agency, has the authority to refer cases to the Attorney
General, the District Attorneys, or various federal agencies, including the Internal
Revenue Service, the U.S. Postal Service, and the Federal Trade Commission.2
II. JURISDICTION
The IEC finds that the Colorado Secretary of State is a ¿"public officer" subject to
the jurisdiction of the Commission. CO Const. Art. XXIX (2)(6) defines "public officer" to
include "any elected officer, including all statewide elected officeholders."
Pursuant to Constitution Art. XXIX, the Independent Ethics Commission is
charged with issuing advice on ethics issues "arising under this article and under any
other standards of conduct, as provided by law. "
III. IEC PRECEDENT
In Position Statement 08-01 (Gifts), as in all subsequent position statements and
opinions rendered by the Commission, the Commission has interpreted Article XXIX in a
manner that preserves what it believes was the intent of the electorate - "to improve and
promote honesty and integrity in government and to assure the public that those in
government are held to standards that place the public interest above their private
interests"
IV. DISCUSSION
A. Constitution Art. XXIX
There is no provision in Article XXIX that addresses this question. However, the
Commission believes that the statements contained in Section 1, Purposes and
Findings, reflect the intent of the voters and can be used as guidance in addressing this
question. See Position Statement 08-01 (Gifts), p. 3-4. That section provides:
(a) The conduct of public officers, members of the general assembly, local
government officials, and government employees must hold the respect and
confidence of the people;
(b) They shall carry out their duties for the benefit of the people of the state;
(c) They shall, therefore, avoid conduct that is in violation of their public trust or
that creates a justifiable impression among members of the public that such trust
is being violated;
(d) Any effort to realize personal financial gain through public office other than
compensation provided by law is a violation of that trust; and
(e) To ensure propriety and to preserve public confidence, they must have the
benefit of specific standards to guide their conduct, and of a penalty mechanism
to enforce those standards.
The Commission interprets the term "public trust" to mean that government
employees and officials shall carry out their duties for the benefit of the people of
Colorado. See, e.g.,§ 24-18-103, C.R.S., "The holding of public office or employment is
a public trust, created by the confidence which the electorate reposes in the integrity of
public officers, members of the general assembly, local government officials, and
employees." See also, Position Statement 08-01, p. 4.
B. Statutes
Colorado Revised Statutes sections 24-18-101 et seq. contain "standards of
conduct" and "ethical principles" relating to public officials and employees. 3 These
statutes address financial conflicts of interest, and prohibit public officials and
employees from acquiring or holding "an interest in any business or undertaking which
he has reason to believe may be directly and substantially affected to its economic
benefit by official action to be taken by an agency over which he has substantive
authority." See, §24-18-105(2). The Commission does not believe that under the
circumstances presented, the nonprofit in question would be "directly and substantially
affected to its economic benefit" by the service on its Board of Directors by the
Secretary of State. The nonprofit entity is an established organization with
distinguished board members. Although the Secretary of State regulates nonprofit
entities, the Commission does not believe that he would be in a position to directly
financially benefit the nonprofit.
The Commission, furthermore, does not believe that service on the Board of the
nonprofit would trigger any of the prohibitions contained in C.R.S. §§24-18-104, or 24-
18-108.
The Commission notes that C.R.S. §24-6-202(2)(d) requires certain elected
officials to file financial disclosures as well as disclosure of "all offices, directorships,
and fiduciary relationships held by the person making disclosure, his spouse, and minor
children residing with him." These disclosures are filed with the Secretary of State's
Office. The Commission is unaware of any statutes in Colorado which address
situations in which a public official or employee is required to recuse.
C. Ethics Opinions of the General Assembly:
General Assembly Board of Ethics Opinions are not binding on the Commission,
but are illustrative of how these issues have been addressed in the past. Board of
Ethics Opinions 2006-No. 2 and 2008-No. 1 discuss whether a member may vote on
legislation which affects businesses in which the legislator has an interest. In the 2006
opinion, the requesting member was an unpaid Board member of a non-profit which
could benefit from proposed legislation. The Board of Ethics Opinion permitted the
member to vote on the legislation, but urged the member to disclose the potential
conflict. In the 2008 case, the requesting member had a financial interest in a company
that had a contractual relationship with the State. The member requested an opinion on
whether he could vote on legislation which affected the budget for that State agency.
The Board of Ethics responded that the member could vote, as long as the money in
question was not tied in any way to the member's contract. Again, the Board cautioned
that disclosure was appropriate.4
D. Other Jurisdictions
The Commission then turned to other jurisdictions to determine how they handle
similar situations.
1. New York State
The New York State Ethics Commission, in 2006, considered a request from the
Attorney General, asking whether he could continue to serve as one of four trustees of a
family charitable trust. Although this case is distinguishable from the question before
the Commission, since the Attorney General had been a trustee of the trust prior to his
election, and the charity involved was a family foundation which did not solicit funds
from the public, some of the discussion in the opinion is relevant. The New York State
Ethics Commission noted several factors: the Attorney General was one of four
trustees, there were other enforcement mechanisms, there was public accountability
since there were public filings, and the Attorney General was not being paid for his
service. The Commission advised that continued service as a trustee was permissible,
although it did require the Attorney General to adhere to strict recusal guidelines,
including delegating all responsibility regarding the trust to the First Deputy Attorney
General. Advisory Opinion 06-06, page 3.
2. Philadelphia
The General Counsel to the Philadelphia Board of Ethics, in a nonpublic advice of
counsel opinion 5, similarly stated that there is no conflict of interest between City
employment and sitting on the Board of a nonprofit, provided that there is full disclosure,
that the employee did not take any "official action" regarding the nonprofit, and that the
official recuses himself from any decision affecting the nonprofit. See GC-2009-501.
3. Arkansas
The Arkansas Ethics Commission similarly stated that it would not be a conflict of
interest for a member of the Arkansas legislature to serve on the Board of Directors of a
homeowners association, provided there was full disclosure and recusal if appropriate.
2004-EC-005.
4. Florida
The Florida Ethics Commission stated that it would not be a conflict of interest for
a county commissioner to serve on the board of a mental health facility which did
business with the county, since the commissioner's involvement in the organization was
not for his personal benefit, but to benefit the county and the nonprofit. CEO 96-30.
E. Role of the Secretary of State as Head of the Department
The Commission notes that the issue of recusal is somewhat
problematic for the head of a principal department such as the Department of
State. Even if the Secretary fully recused himself from any decisions regarding
this nonprofit, the others in the agency would be acutely aware of the Secretary's
interest and involvement in the nonprofit. Unlike employees and middle level
supervisors who can disqualify themselves and expect that the department head
will assign another person to handle a particular matter, the department head
himself cannot decide who is to handle matters upon his disqualification without
raising the appearance that the department head is still directing the result thus
not avoiding the conflict at all. Therefore, the Commission recommends that
before the Secretary of State joins the board of this nonprofit, he should appoint
another person, such as the Deputy Secretary of State, to handle all issues
relating to the nonprofit, and should announce that decision to the department
staff.
Although there is no information before the Commission that the nonprofit in
question has ever faced an enforcement action by the Department of State or other
state agency, the Commission is concerned that there could be an appearance of
impropriety if the Secretary of State served on the board of directors of an entity over
which he has regulatory and/or enforcement authority. Appearances of impropriety are
generally referred to as "perception issues" or "violating the smell test." They can
weaken public confidence in government and create a perception of dishonesty, even
among government officials who are in technical compliance with the law. Such
conduct has the potential to damage an official's reputation just as much as illegal
conduct. This is further reason for the Secretary to assign someone else in the
Department to handle all issues relating to this nonprofit.
V. CONCLUSION
It would not be a violation of Colorado Constitution Art. XXIX or Colorado statute
for the Secretary of State to serve as a member of the Board of Directors of a nonprofit
entity registered with and regulated by the Secretary of State's Office, provided there
were full disclosure and recusal where appropriate. However, due to the fact that the
Secretary of State is a state constitutional officer, and any delegation could be
questionable; it is the Commission's strong belief that an appearance of impropriety
could be created. The Commission is concerned moreover, that the presence of a state
constitutional officer on the board of a nonprofit may appear to be an endorsement of
that nonprofit by the state.
The Independent Ethics Commission
Matt Smith, Chairperson
Roy Wood, Vice Chairperson
Dan Grossman, Commissioner
Sally H. Hopper, Commissioner
Larry R. Lasha, Commissioner
Dated: July 21, 2009
1 The subject of this opinion has consented to the use of his name and other identifying information.
2 The nonprofit involved also retains a professional lobbyist who is regulated by the Secretary of State.
3 It is unclear whether these statutes and others cited in this opinion have been superseded by the passage of Amendment 41 (Constitution Art. XXIX). The Commission notes that the drafters intended that the IEC preempt similar bodies charged with rendering advice on ethics-related issues. Proposed Initiative Measure 2005-2006 #118, Concerning Ethics in Government Transcript of May 4, 2006 Reviewand Comment Hearing, p. 24. Further, the drafters intended that Art. XXIX would preempt conflicting statutory provisions where less strict and that the General Assembly would enact legislation to make conforming amendments. Id. pp. 20-21.
4 Some jurisdictions have specific provisions relating to disclosure to the appropriate ethics commission. The Commission takes no position on how such a disclosure should be made, or to whom.
5 The Philadelphia Board of Ethics permits staff to issue informal advice to requestors in the form of advice of counsel opinions.