August 29, 1990 Number 2

August 29, 1990 Number 2 Daniel S. Greenbaum, Commissioner Department of Environmental Protection 1 Winter Street Boston, Massachusetts 02108 Dear Commissioner Greenbaum: Section 26 of chapter 21 of the General Laws provides that "[no] person may serve as a director (of the Division of Water Pollution Control] who receives, or who has during the preceding two years received, ten percent or more of his income directly or indirectly from persons who are required to obtain discharge permits under section forty-three [of chapter 21]." That statute also provides that "the attorney general upon request may issue guidelines and such opinions as may be necessary to implement this provi- sion." Pursuant to this latter provision, you have asked, through your general counsel and with the authorization of the Secretary of Environmen- tal Affairs, for my opinion whether the applicant whom you wish to appoint as Director of the Division of Water Pollution Control meets the requirements of section 26. I conclude, based on the facts set forth in the opinion request, that the applicant is not prohibited by section 26 from serving as Director. The relevant facts, as stated in your opinion request, are as follows. Within the previous two years, the applicant has been employed by a nationwide consultant engineering firm (the engineering firm) with a regional office in Boston.' The engineering firm is not itself an endty which is required to obtain a water discharge permit under G.L. c. 21, § 43.- ninety percent of the applicant's gross personal income. The applicant's position with the engineering firm was as the "Business Development I am informed that in recent months the applicant has become employed by the Division ofWatcr Pollu- tion Control, although not. of course, in the position of Director. ~ General Laws c. 21. § 43. provides in pertinent part that "[no] person shall discharge pollutants into waters of the commonwealth nor construct, install, modify, operate or maintain an outlet for such discharge or any treatment works, without a currently valid permit issued by the director |of the Division of Water Pollution Control]. No person shall engage in any other activity that may reasonably be expected to result, directly or indirectly, in discharge of pollutants into waters of the commonwealth, nor construct, effect, maintain, mod- ify or use any sewer extension or connection, without a currently valid permit issued by the director, unless exempted by regulation of the director." P.D. 12 87 The engineering firm compensated the applicant by means of a fixed salary paid from a general account, and this salary constituted more than Manager - Water Resources" in the "Government Business Development Department." In addition to other national business development activities, the applicant, as Business Development Manager, directed all phases of business development, marketing, and contract negotiations for current or potential municipal, state and federal government clients in the New England region. These clients included a significant number of Massachusetts governmental entities, and I infer from your letter that some of these entities are required to obtain discharge permits under secfion 43.^ The applicant's involvement with a client concerning a specific contract proposal and related contract negotiations, however, terminated once a contract between the client and the engineering firm was executed, and none of the applicant's time was billed to any client. The question whether G.L. c. 21. § 26. permits the appointment of the applicant as Director of the Division of Water Pollution Control requires a determination whether the applicant has during the preceding two years received ten percent or more of his income "directly or indirectly" from entities (I shall call them "permit holders") that are required to obtain water discharge permits. See G.L. c. 21. § 26; and ante, at nn. 1. 1.'* Since, during the preceding two years, the applicant has received at least ninety percent of his income through his salary from the engineering firm, his appointment as Director is permitted by section 26 if that salary does not constitute the direct or indirect receipt of income from permit holders. I conclude that his ' "Persons" required to obtain a discharge permits under section 43 include state and local governmental entities. See G.L. c. 21. § 26A (defining "Person" for purposes of G.L. c. 21. §§ 26-53). * This ten percent rule was added to section 26 in 1973. see St. 1973. c. 546. § 1. in apparent response to the Federal Water Pollution Control Act Amendments of 1972. Public Law 92-500. which mandated the Administrator of the Environmental Protection Agency to require states desiring to adminster their own permit programs for discharges into navigable waters to prohibit their permit granting bodies from includ- ing "any person who receives, or has during the previous two years received, a significant portion of his income directly or indirectly from permit holders or applicants for a permit." 33 U.S.C. § 1314(iK2KD)(1988 ed.). Federal guidelines issued under this provision define "significant portioii of income" to generally mean ten percent or more of gross personal income for a calendar year. 40C.F.R. § 123.25 (cHlKii) (1989). The guidelines, however, do not delineate what constitutes the "direct or indirect" receipt of income, and I am aware of no federal administrative interpretations of this requirement which would aid in my interpretation of the related state statutory requirement. 88 P.D. 12 salary does not constitute such a direct or indirect receipt of income."" To begin. I note that the engineering firm is not itself a permit holder. The salary the applicant receives from the engineering firm, therefore, phiinly does not constitute the direct receipt of income from a permit holder. The question then is whether the applicant's salary constitutes an indirect receipt of income from permit holders by virtue of the fact that the engineer- ing firm derives some of its income from permit holders.*" What constitutes the indirect receipt of income cannot be deduced from any lexical definition of the term "indirect." taken in the abstract. The term "indirect" is exceedingly general, and as such "may have varying meanings according to the circumstances in which it is used." Town of Oxford v. Oxford Water Co.. 391 Mass. 581. 587 n. 4( 1984). See QuincyCity Hospital v. Rate Setting Commission. 406 Mass. 431. 448 (1996); International Brotherhood of Electrical Workers v. Western Massachusetts Electric Co.. 15 Mass. App. Ct. 25. 27 (1982). I must therefore look to the statutory language as a whole and the purpose that can be discerned from it in order to find a meaning that is consistent with the intent of the Legislature. See Quincy City Hospital v. Rate Setting Commission. 406 Mass. at 442-443; Commissioner ofCorporations & Taxation v. Chilton Club. 318 Mass. 285. 288-289(1945). The express purpose of section 26 is to prevent the appointment to Direc- tor of persons who have in the recent past received substantial income from those whom the Director regulates. It is a confiict of interest provision aimed at ensuring that the person serving as Director shall both be and have the appearance of being dispassionate in executing his or her permit granting dudes. Excluding from consideration as Director as person such as the applicant, whose salary is not drawn from any fund attributable to a permit holder client and whose salary is fixed and in no part based on com- missions or bonuses derived from securing a permit holder as a client, would not serve this purpose to any signifcant degree. Although it would. ^ In light oflhis conclusion. I need not determine whether olhcr income (comprisini: less than ten percent of total income) received hy the applicant from private consulting activities iluriiii: the previous two years con- stituted the direct or indirect receipt of income from permit holders. I note, in addition, that you have not asked for my opinion whether the applicant could, consistent with section 26. continue to engage in private consulting activities to the extent that they generated income from permit holders. Your general counsel has informed me. moreover, that the applicant is no longerengaged in and docs not intend to engage in any such activities while employed at the Division. I therefore do not address this question, except to note that the ten percent rule of section 26 applies to income received while a person acts as Director as well as to income received during the two years prior to appointment. Sec Ci.L. c. 21. § 26. In addition, the state contlict of interest law. G.L. c. 26KA. imposes other reslriclions on a stale employee's receipt of outside income. ''The opinion request does not tell me what percent of the income of the engineering firm was tierived from permit holders during the preceding two years. Since the engineering firm does business nationwide, that figure may well be less than ten percent, in which case the applicant wtnild qualifv to be Direcloreven under a rule which attributed the percentage of income earned by the employer from permit holders as intiirecl income to its salaried employees. In any event, in light of my conclusion that the engineering firm's income is not indirectly attributable to the applicant. I do not require this information. P.D. 12 89 perhaps, not be impossible to view all of an employer's salaried employees as in some attenuated sense indirectly receiving the income received by the employer from permit holders, such a view of the prohibition would sweep too broadly and include employees who did not work with permit holder clients or who would even have reason to know that the employer's clients included permit holders. Not only would such a broad prohibition fail to serve any conflict of interest purpose, it would bar from service as Director many potentially qualified persons and would therefore impede the achievement of another legislative purpose expressed in the additional sec- tion 26 requirement that the person chosen to be Director "shall be qualified by training and experience to carry out the duties of the division [of water pollution control]." G.L. c. 21, § 26. In reaching this conclusion, I take note of the fact that previous Attorneys General as well as the State Ethics Commission have taken a similar approach in interpreting analogous language in the state conflict of interest laws prohibidng state employees from having a "direct or indirect financial interest" in a contract made by a state agency. G.L. c. 268A, § 7. Those decisions have concluded that, where an employer pays an employee with funds which are directly derived from a state contract, the employee has an indirect financial interest in the contract even though the pay is received from the employer and not from the state. See. e.g.. Op. Ethics Comm'n Nos. EC-COI-79-5 and EC-COI-79-70 (1979); Conf Op. Att'y Gen. No. 798 (1978). Where the employee is paid a fixed salary from a general fund not attributable to any specific contract, however, no indirect financial interest has been found. See Op. Ethics Comm'n No. EC-COI-81-12 (1981) (an insurance agency employee who sells insurance to agencies of the Com- monwealth has no direct or indirect financial interest in those contracts where his salary from the insurance agency is "unrelated to any specific insurance policy which [the employee] may sell"); Op. Ethics Comm'n No. EC-COI-79-86 (1979) (employee of a construcfion company which con- tracts with various state agencies does not have a direct or indirect financial interest in those contracts where his "hourly compensation is not directly funded from the company's contracts with the Commonwealth"); Conf Op. Att'y Gen. No. 810 (1978) (similar). Similarly, the federal Office ofGovernment Ethics has reached a conclu- sion like my own in deciding what consdtutes indirect compensation for puposes of 18 U.S.C. § 203, which in part prohibits a federal employee from "directly or indirectly" receiving compensation related to representational 90 P.D. 12 services before the federal government. See Op. Off Gov't Ethics No. 83-19 (1983) (a federal employee who receives compensation from a private cor- poration which itself earns compensation related to representational ser- vices before the federal government, does not directly or indirectly receive compensation based on those services where his compensation from the firm is a fixed salary and not. for example, contingent on the successful securing of a federal contract as a result of the corporation's represen- tational activities).^ In sum, I conclude that the applicant's salary from the engineering firm does not constitute the indirect receipt of income from holders.*^ It is my opi- nion, therefore, based on the facts you have provided me. that the applicant has not in the preceding two years received more than ten percent of his income directly or indirectly from person required to obtain water dis- charge permits. You may. therefore, appoint the applicant as Director of the Division of Water Pollution Control consistent with the ten percent rule of G.L. c. 21. § 26. Sincerely yours, JAMES M. SHANNON ATTORNEY GENERAL ' While the examples I have just cited involve the interpretation of statutory provisions which are not identi- cal to section 26. the purposes of these provisions, like that of section 26. is the avoidance of real or perceived conflicts of interest and the delimitations of the term "indirect" in those contexts are. in my view, relevant here. ** I need not decide whether there are any factual circumstances in which a salaried employee's work with permit holders might be so involved or practically speaking contingent on a permit holder's payments to the employer as to constitute the indirect receipt of income from a permit holder. Here, the applicant's work in developing business with a client ceased at the point when the contract was executed, and his .securing of the client's business for the firm did not result in his receipt of any bonuses or commissions. P.D. 12 91