What is a Conflict of Interest in Massachusetts?
A conflict of interest in Massachusetts exists when a person’s commitment to a group or some other legal entity such as a corporation, requires them to prioritize the interests of that group or entity above the interest the person has in providing impartial services to the public or the group in question. In situations where a person in a position to do so, is appointed by a group or legal entity, to serve a public function, their role as a member of the public is understood as limited. The expectation on the part of the principle that they will be responsible and responsive when need be, to the needs of the public of which they are also a part in relation to their public duties. However, if in pursuing their duties to the group or legal entity, they engage in practices that are contrary to the best interests of the group or entity that they serve on behalf of public need, then their role as a public servant can become compromised. In short, a situation results when their choices and actions are seen as reflecting more on their allegiance to the group or entity than on their commitment as an impartial public servant. The context of the decision that they must make to act in a way that is primarily supportive of this group or legal entity, may be defined further by the laws governing the operation of this entity, or by norms that apply to the work of those who work for this entity. To illustrate, those who work in management, or as an administrator in a school district, are subject to conflict of interest laws that apply to them, by virtue of their status as school district officers. School districts in Massachusetts operate under a different set of conflict of interest laws that do not apply to other local government bodies and service providers. As regards how these statutes define a conflict of interest , the measureable and practical index of determination is the relationship that exists between the interests of the group or entity, in relation to how these interests are served, and whether or not the service that is rendered can be seen as to some degree, impeding or an impediment to the interests of the group or entity in question. The existence of a conflict of interest may not always be so cut and dry. Situations where there are competing interests at play, require the careful weighing of one interest against the other. Often, the shareholders or members of a legal entity, or the agency that has appointed the public servant in question, will have an interest in how the elements of the conflict come into play in relation to one another. Finding a means of avoiding or minimizing the potential for conflicts is often the goal of public officials. Yet it is also the case that when the potential for conflicts is resolved, the resulting situation can lead to the minimization of the capacity for a public servant to deliver the new and appropriate service to the public. Citizens often expect that their officials will have the capacity to make decisions that are based solely on their interest to deliver services as a public servant, with none or as little as possible, of the potential for bias in their perspectives. However, there are often cases where bias in one area can reveal to actually be a strength, in relation to the concept of serving the needs of the public. The reality of this can come into stark relief when the capacity for a conflict of interest, is reduced.
Overview of Massachusetts Conflict of Interest Statute
Massachusetts’ conflict of interest laws are codified at Massachusetts General Laws c. 268A. These laws apply to all state and county officials as well as to most municipal officials, but only for their activities in a municipal capacity. They do not apply to municipal employees, volunteers, or "special municipal employees," which is a status that only a few municipal officials actually meet the requirements for. The statute is enforced by the State’s Ethics Commission, which employs a staff of investigators and attorneys but also relies heavily on complaints from the public. Complaints can be submitted online or by mail. The Commission can investigate anonymous complaints, but those are not given as much weight as others. With a complaint showing probable cause, the Commission can commence a civil enforcement action in Superior Court. Otherwise it can seek further information by serving a request for an opinion of the Commission and, if the respondent declines to comply, move to compel a response. Respondents must answer within ten days or face consequences under Section 23(b) of the statute.
Three specific provisions of the statute bear emphasis. Section 23(b) prohibits public employees from using their public position to obtain a financial interest for themselves. Section 23(b) has been used by the Commission in several municipal contexts to sanction former employees who, after leaving their public roles, took advantage of their former positions.
Section 17(c) is intended to ensure that municipal employees are not rewarded for conducting their public employment in an unconflicted manner, and Section 17(c) places restrictions on outside income that some municipal officials may inadvertently exceed. For example, the statute limits the total amount of income that a town employee can earn, before taxes, in calendar year 2019 to $108,482.50, which directly corresponds to the average median salary for town employees, considering the significant benefits that are also offered to full time employees within most municipalities. Because Section 17(c) defines "employee" to include a "special municipal employee," the statute’s limits will also restrict the ability of such "specials" to earn outside income, which could prevent many quasi-volunteer municipal officials from engaging in private endeavors.
Major Provisions of Massachusetts Conflict of Interest Statute
The Massachusetts conflict of interest law comprises eight statutory provisions, each of which outlines different restrictions, requirements, or standards that public officials and employees must follow. These are:
• Section 23(b)(2)(iv), which generally prohibits a public employee from having a direct financial interest in a company or contract that will be voted on or otherwise acted upon by a municipal agency of which the employee is a member.
• Section 23(b)(2)(v), which establishes that a violation of the city or town’s code of ethics, or any other general laws will result in a presumption of a conflict of interest under this provision.
• Section 23(b)(2)( vi), which requires that a public employee disclose financial interests exceeding $50 in a business which will be voted on or otherwise acted upon by a municipal agency of which they are a member.
• Section 23(b)(2)( viii) and (ix), which both address advisory board and committee members, establish that they cannot participate in the vote or discussion of a matter before the body in which they serve- as long as it’s not a matter in which they own more than a 10% stake.
• Section 23(b)(3)(i), which generally prohibits participation in votes or discussion of a matter by a public employee that alone or together with other financial interests owned by the public employee would yield more than $50 in potential income.
• Section 23(b)(3)( ii), which prohibits municipal employees from participating in a vote or discussion of a matter which will result in a gift or entertainment being received by a family member.
• Section 23(b)(4), which generally prohibits participation in votes or discussion of a matter by a public employee if it will result in the receipt of anything of substantial value.
• Section 23( g), which establishes that intentional and knowing violation of these provisions may result in fines of up to $2,000. Troublesome to some degree is the fact that no fine is associated with a simple violation of the law, the discretionary nature of the penalties imposed under this law is the subject of continued discussion and controversy.
Enforcing Agencies and Their Responsibilities
Regulatory agencies play a significant role in overseeing the implementation of conflict of interest laws in Massachusetts. The Massachusetts State Ethics Commission oversees all areas of ethics in state and local government. They provide technical assistance to public officials, seek to proactively educate and prevent potential ethical issues and encourage full compliance with Massachusetts laws. The Commission investigates potential violations, makes determinations, holds hearings, prosecutes accused parties, and assesses penalties for ethics law violations. Additionally, the State Ethics Commission provides guidance on such issues as post employment of former state employees and financial disclosure requirements. Other key regulatory agencies include the Massachusetts Political Campaign and Finance Bureau which regulates campaign financing and the State Elections Division which oversees ethics relating to individuals on electoral boards.
Penalties for Conflict of Interest Statute Violations
Violating the conflict of interest laws can result in both criminal and civil penalties. Though the penalties are not often handed out, there are cases when people are convicted of a crime for violations of the conflict of interest laws. This is a felony, punishable by up to two and one-half years in the House of Correction, with a minimum of six months to be served in a House of Correction for any public official or employee who is convicted of a felony. In addition, the convicted person must pay a fine of up to $10,000. There is also a suspension of state employee pension benefits for persons who are convicted on a felony charge concerning violation of the conflict of interest law for a period of one year, for failure to file annual disclosures, for unlawful interest in public contracts, and in other circumstances.
In addition to these criminal penalties, people found guilty of violating the conflict of interest laws may also face civil penalties. These civil penalties carry a maximum fine of $25,000 for each violation of the statute. They may also face civil referral from the State Ethics Committee, which seeks to bar the person from holding public office, employment, or position for a period of five years . Individuals found to have violated the conflict of interest laws may also be required to file back income, restitution of illegal gifts, or settlement of an unlawful contractual benefit to the Commonwealth or political subdivision.
However, the penalties described above are generally reserved for serious violations in which there is clear and compelling evidence of malfeasance or repeated offenses. The Ethics Commission will often first try to negotiate a settlement with the person, who agrees in writing to be bound by the provisions of the conflict of interest laws. The Ethics Commission may also vote to issue a reprimand or nonpublic disposition letter, advising of violation of the law.
Violations of the conflict of interest law do not only affect the person allegedly committing the violation; they can also impact the reputation and future of the government body and other employees or officials associated with the government. Businesses and other organizations may also be impacted negatively by a violation of conflict of interest laws by someone employed there.
Conflict of Interest Statutes in Action
The enforcement of the conflict of interest laws has real-life examples from a handful of cases:
In Ayala v. Lawrence, Ayala filed a 23-page complaint alleging violations of G.L. c. 268A against Board of Health members, screening committees (comprised of Lawrence Board of Health and Board of Alderman members), and the mayor (a former Board of Alderman member). The allegations included that the Board of Health failed to properly monitor and enforce the State Sanitary Code and other laws and regulations; there was an absence of adequate health and environmental protection; and there was a favorable market for persons living or doing business in Lawrence who violated the State Sanitary Code. The AG’s office dismissed the case after a year-long investigation because they did not believe there was sufficient evidence of individual misconduct. However, they did cite the screening committee for failure to disclose conflicts of interest in failing to remove the Board of Health chairperson.
In McCarthy v. Melrose, the plaintiff filed a complaint with the AG’s office alleging G.L. c. 268A violations by three members of the Board of Aldermen. A year later, the AG’s office dismissed the complaint citing no evidence of intentions to influence municipal actions.
How to Prevent Conflict of Interest
Best practices for avoiding conflicts of interest in Massachusetts, whether in your professional practice or charity work
Transparency is the key to successfully negotiating the complexities of conflict of interest laws in Massachusetts. A clear, public set of policies should be adopted, carefully prescribing the procedures that must be followed to disclose, manage and avoid conflicts; and those procedures must be followed assiduously. Beyond internal controls and policies, the greatest best practice for avoiding conflicts is exercising wisdom and judgment. Conflicts cannot be avoided in situations where employees (and volunteers) cannot be completely excluded from wealth or opportunity creation (this is a fundamental tenet of capitalism). Unfortunately, conflicts cannot be eliminated while preserving the unconflicted opportunities for employees who create wealth or the opportunities for people who have previously been disenfranchised. On the positive side , people who are aware of how conflicts can manifest and how to properly handle them are much better able to avoid them altogether. There are a number of ways that organizations can better assure that employees understand their values and ethical obligations. Many have suggested that this should be part of their onboarding. In addition, organizations can provide regular updates and training materials for all employees. Both private and public organizations must avoid the appearance of self-dealing. That means that an individual cannot have a hand or say in purchasing decisions that benefit them or their family — even if they do not directly profit from the purchase. In board settings, board members and executives can avoid any perceptions of complicity in self-interested transactions by strictly adhering to state guidelines and implementing strict policies of disclosure and recusal. Board members, executive team members, and all employees have a duty to act in good faith, act with loyalty, act with care, avoid self-interest, and place the interests of the organization before their own. Risk assessment is probably one of the most important strategies an organization can adopt to prevent conflicts of interest.