Ethics: Advisory Opinion No. 1998-21

Advisory Opinion No. 1998-21
Advisory Opinion No. 1998-21

Application Of Conn. Gen. Stat. 1-84b(b) To Former Department
Of Information Technology Employees

The Chief Administrative Officer for the Department of Information Technology (DOIT), Michael Krochmalny, and a former DOIT Manager, George Fox, have asked the Ethics Commission how 1-84b(b) of the Code’s post-state employment provisions applies to the following fact pattern:

The Department of Administrative Services has issued a request for proposals for the purpose of privatizing the State’s information technology operations. While this process is ongoing, DOIT has adopted a policy of replacing permanent employees only when absolutely necessary. In order to minimize the need for such replacements, DOIT has been utilizing the services of a number of former managers, who are working for the State under a provision that allows retirees to work up to 120 days per year without affecting their eligibility for retirement benefits.

These retirees are now reaching the limit of their allowable state work for this year. DOIT, however, wishes to continue utilizing their services. In order to allow for such a continuation, the various retirees must affiliate as consultants with private sector firms which are on the Data Processing Consulting Services Award Contract administered by DOIT.

Specifically, the petitioners have asked:

1.  Whether this vendor affiliation is an appropriate means, under the Ethics Code, for continuing the retirees' work for the State;

2.  Whether, under Commission precedent, the retirees' pay rate, as consultants, will be limited to their pay level at the time of separation from state service plus necessary expenses;

3.  Whether it is permissible to include certain state benefits in the calculation of this maximum pay rate; and

4.  Whether necessary expenses includes the vendor's administrative costs?

Under Conn. Gen. Stat. 1-84b(b): No former executive branch or quasi-public agency public official or state employee shall, for one year after leaving state service, represent anyone, other than the state, for compensation before the department, agency, board, commission, council or office in which he served at the time of his termination of service, concerning any matter in which the state has a substantial interest.

In interpreting this provision, the Commission has engaged in the following analysis. In the process of seeking consulting work with one’s former agency, a former state employee would be representing someone other than the State, i.e., himself, in violation of the express terms of 1-84b(b). At the same time, however, the Commission recognized as legitimate the former agency’s need to retain such individuals to fulfill essential functions; particularly in an era of downsizing and privatization. Consequently, the Commission established an exemption for such hirings, provided the former employee received no more than his pay rate at the time of separation from state service plus necessary expenses. In essence, the Commission reasoned that such a limitation would prevent the former employee from utilizing his contacts at the former agency for improper financial gain; while simultaneously allowing the agency to continue to benefit from the individual’s experience and expertise. State Ethics Commission Advisory Opinion No. 89-25 (Amended), 51 Conn. L.J. No. 24, p. 2E (December 12, 1989).

In order to apply Conn. Gen. Stat. 1-84b(b) and the Commission’s relevant precedent to the questions posed, it is first necessary to review: the status of the DOIT retirees as "120 day" employees; and the mechanics of the Data Processing Consulting Services Contract Award system.

As 120 day workers, the "retirees" occupy classified state positions for that time period; and, therefore, are considered state employees for purposes of the Code of Ethics. See, Conn. Gen. Stat. 1-79(m). "State employee means any employee in the executive…branch of state government, whether in the classified or unclassified service and whether full or part time…." Consequently, even if, for example, a DOIT retiree left permanent state service two years ago, he will still be subject to the one year restriction of 1-84b(b) for a year after completing his 120 service. Such a conclusion is not only legally mandated, but is also compelled by the rationale which underlies 1-84b(b): the establishment of a "cooling off" period to inhibit use of influence and contacts with one’s former agency colleagues for improper financial gain.

With regard to the Contract Award system, the State has established lists of approved data processing vendors for various job categories (e.g., programmer, analyst), with the vendors’ accompanying daily rates for the services in question. Agencies with the need for data processing consulting work submit their projects to DOIT. Each project is compared to the job classifications established under the Contract Award, and the agency is assigned the appropriate category of consultants. The agency is then allowed to contact the vendors on its list for the purpose of receiving resumes of available consultants. Agencies are expected to contact vendors in order, commencing with the lowest per diem rate. Based on those resumes, and subsequent interviews, the agency selects an appropriate vendor and submits a request for services to DOIT for final approval.

Taking the petitioners’ questions in turn:

1.  The reemployment policy sanctioned by Advisory Opinion No. 89-25 (Amended) clearly contemplated a direct consultant relationship between the State as payor and the former employee as payee. The Opinion did not contemplate and does not extend to the situation under review; wherein the former state employee is representing a vendor before his former state agency and the State is paying that vendor, not the retiree. Rather, such a relationship is in direct violation of the terms of 1-84b(b).

This violation cannot be cured or mitigated by the fact that the hiring agency is not DOIT. To the contrary, DOIT’s participation in the process, including administering the Contract Award system, matching the agency project to the proper job category, and, most significantly, approving the contract (which entails reviewing the former employee’s resume), clearly involves that former employee in compensated representation before his former agency. See, e.g., State Ethics Commission Advisory Opinion No. 98-12, 59 Conn. L.J. No. 46, p. 5D (5/12/98). For purposes of 1-84b(b) representation includes any activity which reveals the identity of the former employee to his former agency.

Nor is the violation cured or mitigated by the fact that, according to Mr. Fox, the retirees have negotiated an agreement with certain vendors whereby the retirees will receive 85% of the per diem rate paid by the State. Rather, this agreement raises more ethical questions than it resolves. Specifically, the arrangement leaves the vendors 15% to cover FICA, workers’ compensation and administrative costs; and, again according to Mr. Fox, will result in essentially no profit for those vendors. Mr. Fox adds that the zero profit agreement makes business sense for these vendors, because, by retaining former DOIT managers with extensive knowledge of the State’s data processing systems and requirements, the vendors will be in a favorable market position if and when privatization occurs. Notwithstanding this fact, it remains unarguable that a group of current DOIT employees have negotiated an agreement with certain vendors which pays those employees more than an individual would normally expect to receive for providing equivalent services under the Contract Award. Not only are these same vendors seeking DOIT approved work on an ongoing basis; but, compounding the conflict of interests, these same retiree/consultants could, under the 120 day rule, be free to move back to the administering agency next year. And, finally, their colleagues, DOIT’s current managers, would be in a position to sanction and facilitate this vendor/retiree relationship. At a minimum, with regard to the 120 day workers, the negotiated agreement with the Contract Award vendors raises the possibility of impairment of independence of judgment and misuse of office, however inadvertent, in violation of Conn. Gen. Stat. 1-84(b) and (c).

Based on the above enumerated concerns, the contemplated vendor/retiree consultant agreement for the provision of services to DOIT is not permissible under The Code Of Ethics. In making this Ruling, the Commission remains mindful of the legitimate needs of the State in this area as set forth in A.O. No. 89-25 (Amended). Furthermore, the Commission recognizes the integrity and good intentions of the involved DOIT retirees. Any arrangement to address these needs and fulfill these intentions must, however, be restructured to comply with the fundamental conflict of interests and post-state employment provisions of the Code.

Given the Commission’s answer to the petitioners’ first question, question 4 is now moot. However, questions 2 and 3 remain generally applicable to all former state employees and, therefore, will now be addressed.

As discussed supra, since the consulting work in question would involve representation before one’s former agency, the pay limits established in A.O. No. 89-25 (Amended) (salary grade at time of separation from state service plus fringe benefits plus necessary expenses) would apply for one year.

In his submission to the Commission, Mr. Fox asserts that this pay rate should be increased by also including in the calculation the value of: paid holidays; paid vacations; paid personal leave; paid sick days; and longevity payments. The Commission does not agree with this analysis.

As a preliminary matter, it must be understood that the compensation formula established by A.O. No. 89-25 (Amended) was not intended to be scientifically precise. Rather, it was designed to be fundamentally fair and equitable to a diverse population of former state employees. Furthermore, the Commission, in issuing A.O. No. 89-25 (Amended), sought not to micromanage agency agreements with former employees; but, rather, to create a general policy facilitating essential state functions, while not allowing the rehired individuals to improperly benefit from their contacts and influence with the former agency.

Increasing the 35% fringe benefit figure to over 60%, as proposed by Mr. Fox, would, however, go beyond fundamental fairness by including benefits either not applicable or not truly calculable. Specifically, longevity payments (payable after ten years of state service) are designed to reward and retain veteran state employees. This benefit should not apply to those who have chosen to leave state service. Additionally, paid holidays, paid vacation, paid personal leave and paid sick days are all benefits directly tied to yearly service, not periodic consulting agreements. Furthermore, paid holidays and paid personal leave days are not fungible; i.e., if not used during the year they do not transmute into a financial benefit payable to the worker. Finally, sick days are, similarly, not directly transferable, and can only be claimed to one-quarter of their value when an individual leaves state service.

The benefit calculation established under A.O. No. 89-25 (Amended) has proven to be workable, and essentially unobjectionable to all concerned, for the past decade. The Commission, therefore, declines to alter this formula to include benefits which it does not believe are properly applicable to former state employees seeking to enter into consulting agreements with their former agencies.

By order of the Commission,

Stanley Burdick

Content Last Modified on 9/7/2005 8:02:27 AM