Ethics Advisory Opinion No. 77
August 14,
2003
Issued By:
City Attorney’s Office
I. Issue
May a city employee purchase a business using a loan from the Small Business Administration (SBA) that is being administered through the San Antonio Local Development Company (SALDC)?
II. Factual
Background
A city employee has asked whether he and his family may purchase a business using a loan from the Small Business Administration that is administered through the San Antonio Local Development Company (SALDC). The employee works for the Code Compliance Department; none of his family members involved in the business work for the city.
The San Antonio Local Development Company (SALDC) is a
city corporation responsible for packaging and servicing Small Business
Administrative 504 loans. The
corporation is comprised of thirty-three (33) members called trustees who are
appointed by City Council. The council
also selects eleven directors from the trustees. The objective of SALDC is to combat community
deterioration in
III. The
Ethics Code
The
Ethics Code would not preclude the employee from purchasing the business using
funds from an SBA loan administered by SALDC.
However, as a city employee, he is required to follow the standards of
conduct set out in the Code. The
provisions with potential relevance to this situation follow:
A. Prohibited
Interest in Contracts
Section
141 of the City Charter and Part B, Section 10 of the Ethics Code (currently codified in Ethics Code Section 2-52) bar a city officer or
employee from having a financial interest in a contract with the city or its
agencies. In general, a city employee is
anyone on the city payroll. Ethics Code Part A, Section 2 (currently codified in Ethics Code Section 2-42). However, for purposes of Section 141 of the
City Charter, the definition of employee is limited to only employees who are
required to file a financial disclosure statement. Ethics Code Part B, Section 10(c) (currently codified in Ethics Code Section Section 2-52(e). Under the
Ethics Code Part B, Section 10(c) (currently
codified in Ethics Code Section 2-52(e)), an employee who files
a financial disclosure statement is not permitted to have any interest, direct
or indirect, in a contract with the city.
Such an employee would also have a prohibited financial interest if he
owned 10% or more of a business that had a contract with the city. Ethics Code Part B, Section 10(b) (currently codified in Ethics Code Section 2-52(b).
The employee in this inquiry is not an employee who is required to file the financial disclosure statement. Part B Section 10 (currently codified in Ethics Code Section 2-52), therefore, would not apply to him or preclude him from entering into a loan contract involving the San Antonio Local Development Company (SALDC).
B. Conflicting
Outside Employment
The Ethics Code Part B, Section 6 (currently codified in Ethics Code Section 2-48) states that a city employee cannot solicit accept or engage in concurrent outside employment which could impair or interfere with the employee’s official duties. In addition, under Personnel Rule XXIV, the employee must obtain written approval from his department before engaging in the outside employment. Assuming that the outside employment will not interfere with the employee’s work for the city and assuming the department head has approved the additional employment in writing, the employee may participate in the family-owned business without violating this section or the personnel rules.
C. Improper
Economic Benefit
A city
official or employee cannot take any official action that is likely to have an
effect on his or her economic interest or the economic interest of someone in
that person’s immediate family, household or business entity with which the
individual is closely connected. Part B,
Section 1 (currently codified in Ethics
Code Section
2-41).
Part A, Section 2(o) (currently codified in Ethics Code Section 2-42(v) defines “official
action” as
(1) any affirmative act
(including the making of a recommendation) within the scope of, or in violation
of, an official or employee’s duties, and
(2) any failure to act, if
the official or employee is under a duty to act and knows that inaction is
likely to affect substantially an economic interest of the official or employee
or other closely related person or entity.
In the
circumstances of this inquiry, it is possible that an issue concerning code
compliance and the family business might arise.
In such a situation, the employee would be prohibited from taking any
official action or neglecting to take action in any matter concerning the
business. The employee would also be
precluded from using his position to influence other city employees, especially
those in his department from taking or not taking action.
D. Unfair
Advancement of Private Interests
Part B,
Section 2 (currently codified in Ethics Code Section 2-44) prohibits the use of
a city employee’s position to unfairly advance or impede the private interests
of another or to grant or secure for any person, including the employee
himself, any form of special consideration beyond that which is lawfully
available to other persons. Again, should an issue regarding the family
business come before the employee’s department, he cannot participate in any
related action, nor use his position to influence others who work for the
city.
E. Representation
of Private Interests
Under
Part B, Section 5 (currently codified in
Ethics Code Section 2-47), a city official or
employee cannot represent for compensation any person, group, or entity other
than himself or herself, or his or her spouse or minor children before the
city. Part A, Section 2 (currently codified
in Ethics Code Section 2-42(o)) defines a “business entity”) as a “sole proprietorship,
partnership, firm, corporation, holding company, joint-stock company,
receivership, trust, unincorporated association, or any other entity recognized
by law.” Under these provisions, the employee could not represent his family’s
business for compensation before the city if the business is a legally
recognized entity. “Compensation” is
defined as “money or any other thing of value that is received, or is to be received,
in return for or in connection with such representation.” Part B, Section
5(b)(1) (currently codified in Ethics
Code Section
2-47 (b)(1)).
In
connection with any representation for himself or his immediate family or on
behalf of a business even without compensation, the city employee shall not:
A. assert the prestige of the official or employee’s city position for the purpose of advancing private interests; or
B. state or imply that he is
able to influence city action on any basis other than the merits.
Part B,
Section 5(b)(3) (currently codified in
Ethics Code Section 2-47 (c).
F. Confidential
Information
As a
city official or employee, an individual may have access to confidential
information not available to the general public. Under Part B, Section 4, that
individual cannot obtain or disclose confidential information for any purpose
other than the performance of his or her official duties.
G. Public
Property and Resources
A city
official or employee cannot use, request or permit the use of city facilities,
personnel, equipment or supplies for private purposes except to the extent and
according to the terms that those resources are lawfully available to the
public. Part B, Section 7 (currently codified in Ethics Code Section 2-49). The employee,
therefore, cannot use any city resource, including the time for which he is
scheduled to work for the city, for a private purpose, including attending to
the family business.
III. Conclusion
A city employee anticipates purchasing a business with his family using a SBA loan from a bank. The loan will be processed and serviced by SALDC, which would give this employee an interest in a contract with the city. The Ethics Code, though, precludes only an official or employee required to file a financial disclosure statement from having an interest in a contract with the city. Since this employee is not in this category, the prohibition would not apply. The employee, though, should remain cognizant of the other obligations and responsibilities imposed upon him by the Ethics Code as discussed in this opinion.