(a) Prohibitions. Unless permitted by a waiver, a public employee must not participate in:
(1) any matter that affects, in a manner distinct from its effect on the public generally, any:
(A) property in which the public employee holds an economic interest;
(B) business in which the public employee has an economic interest; or
(C) property or business in which a relative has an economic interest, if the public employee knows about the relative's interest;
(2) any matter if the public employee knows or reasonably should know that any party to the matter is:
(A) any business in which the public employee has an economic interest or is an officer, director, trustee, partner, or employee;
(B) any business in which a relative has an economic interest, if the public employee knows about the interest;
(C) any business with which the public employee has an active application, is negotiating, or has any arrangement for prospective employment;
(D) any business that is considering an application from, negotiating with, or has an arrangement with a relative about prospective employment, if the public employee knows about the application, negotiations, or the arrangement;
(E) any business or individual that is a party to an existing contract with the public employee or a relative, if the contract could reasonably result in a conflict between private interests and official duties;
(F) any business that is engaged in a transaction with a County agency if:
(i) another business owns a direct interest in the business;
(ii) the public employee or a relative has a direct interest in the other business; and
(iii) the public employee reasonably should know of both direct interests;
(G) any business that is subject to regulation by the agency with which the public employee is affiliated if:
(i) another business owns a direct interest in the business;
(ii) the public employee or a relative has a direct interest in the other business; and
(iii) the public employee reasonably should know of both direct interests;
(H) any creditor or debtor of the public employee or a relative if the creditor or debtor can directly and substantially affect an economic interest of the public employee or relative;
(I) any business or individual that in the previous 12 months employed the employee or an immediate family member of the employee; or
(J) any business in which the employee or an immediate family member of the employee was an officer, director, trustee, or partner in the previous 12 months; or
(3) any case, contract, or other specific matter affecting a party for whom, in the prior year, the public employee was required to register to engage in lobbying activity under this Chapter.
(b) Exceptions.
(1) If a disqualification under subsection (a) leaves less than a quorum capable of acting, or if the disqualified public employee is required by law to act or is the only person authorized to act, the disqualified public employee may participate or act if the public employee discloses the nature and circumstances of the conflict.
(2) Subsection (a) does not apply to an administrative or ministerial duty that does not affect an agency's decision on a matter.
(3) Paragraph (a)(1) does not apply to a public employee who is appointed to a regulatory or licensing body under a statutory provision that persons subject to the jurisdiction of the body may be represented in appointments to the body.
(4) Subparagraph (a)(2)(A) does not apply to a public employee, if the County Executive or the County Council appoints the public employee to serve as an officer, director, or trustee of a business to represent the public interest.
(5) Subparagraph (a)(2)(A) does not apply to a public employee who is an officer, director, or trustee of an organization, if the public employee discloses the relationship, is not compensated by the organization, and has no:
(A) managerial responsibility or fiduciary duty to the organization;
(B) authority to approve the organization's budget;
(C) authority to select any officer or employee of the organization; or
(D) authority to vote on matters as a member of the governing body of the organization.
(6) If expressly authorized by regulation, subsection (a) does not apply to:
(A) a police officer’s exercise of the officer’s police authority during approved outside employment; or
(B) a police officer or fire/rescue employee who is exercising the employee’s official duties in an emergency affecting a business or property in which the employee or a relative of the employee has an economic interest.
(c) Thresholds. In this section, interest or economic interest means:
(1) any source of income, direct or indirect, if the employee:
(A) received more than $1,000 from that source of income in any of the last 3 years;
(B) is currently receiving more than $1,000 per year from that source of income: or
(C) is entitled to receive at least $1,000 in any year in the future from that source of income;
(2) a business in which the public employee or a relative owns more than 3 percent;
(3) securities that represent ownership or can be converted into ownership of more than 3 percent of a business; or
(4) any other economic interest worth more than $1,000.
(d) Procurement disclosure. A public employee who participates in a procurement process with an individual or organization seeking to do business with the County that compensated the public employee for services performed more than 12 months before the participation began must disclose the prior relationship to the Procurement Director. The Procurement Director must include a statement of this disclosure in the procurement file. (1990 L.M.C., ch. 21, § 1; 1994 L.M.C., ch. 25, § 1 2015 L.M.C., ch. 38, § 1; 2018 L.M.C., ch. 7, §1; 2020 L.M.C., ch. 40, § 1; 2021 L.M.C., ch. 4, § 1.)
Editor’s note—See Montgomery County Ethics Commission Waiver 21-05-007, dated 5/24/21, which states:
On behalf of the Executive and Legislative branches of the Montgomery County Government, the County Attorney requested that the Ethics Commission issue a class waiver under § 19A-8 (a) of the County Code from the prohibitions of § 19A-11(a)(1) and (2) to allow public employees who hold a limited economic interest in certain large publicly traded entities to participate in matters that involve those entities. For the reasons stated below, the Ethics Commission grants the requested class waiver.
Section 19A-11(a)(1) prohibits a public employee from participating in a matter if the matter affects property or a business in which the employee has an economic interest worth $1,000 or more; § 19A-11(a)(2) prohibits a public employee from participation in a matter if a party to the matter is an entity in which the employee has an economic interest worth $1,000 or more.
On December 1, 2020, the County Council, at the request of the Ethics Commission, introduced Bill 47-20, Ethics, Ethics Commission - Conflicts of Interest – Financial Disclosure –Amendments. Bill 47-20 proposed to carve out an exception to § 19A-11(a)(1) and (2) to permit a public employee, who holds a limited economic interest in certain large publicly traded entities, to participate in a matter that involves those entities. The proposed amendment to § 19A-11(b) reads as follows:
(7) Subparagraph (a)(2) does not apply to an employee’s participation in a matter affecting a business with a principal place of business outside of the County where the employee’s economic interest is limited to ownership of publicly traded securities: (A) issued by a company that is part of the Standard & Poor’s 500 Index; and (B) the market value of the securities does not exceed $25,000.
(8) Subparagraph (a)(1) does not apply to an employee’s economic interest that is limited to the ownership of publicly traded securities issued by a company with a principal place of business outside the County if the market value of the securities does not exceed $50,000.
The Ethics Commission proposed this amendment due to the extreme unlikelihood that an action of the Montgomery County government would impact a large publicly traded entity to such an extent that the entity’s stock price would be materially impacted. At the insistence of the State Ethics Commission, the Council deleted this provision from Bill 47-20. The State Ethics Commission, however, suggested that the County Ethics Commission might accomplish the same outcome by issuing a class waiver.
Pursuant to § 19A-8, the Ethics Commission, after receiving a written request, may grant a class of public employees a waiver from the prohibitions of the Ethics Law if the Commission finds that: (1) the best interests of the County would be served by granting the waiver; (2) the importance to the County of a class of employees performing their official duties outweighs the actual or potential harm of any conflict of interest; and (3) granting the waiver will not give a class of employees an unfair economic advantage over other public employees or members of the public.
The proposed exemptions from the coverage of § 19A-11 in Bill 47-20 (described above) were modeled on exemptions in federal regulations from application of the federal conflict of interest law. See 18 U.S.C. Section 208 and 5 C.F.R. 2640.202. Given the national scope of federal action, the likelihood of federal action impacting public companies is immensely greater than action by a single Maryland county. Nonetheless, certain holdings of federal employees have been exempted from application of the federal conflict of interest law. As the County’s proposal is limited to the very largest public companies as represented in the Standard and Poor’s 500 Index, the proposal has an even narrower scope than what the federal regulation permits. Coverage by the County’s Ethics Law of circumstances that are inherently not problematic trivializes the Ethics Law and the application of that law. An employee with a few shares of a major corporation’s stock who is involved in a procurement involving that corporation’s products would reasonably conclude that there is no conflict of interest, because, in fact, there is no actual conflict. It would be the extremely unusual case that an employee could affect the value of the employee’s holding of the Company’s stock through action as a County employee. Nonetheless, the County’s Ethics Law imposes strict liability in this circumstance and makes the services of that employee unavailable to the County, unless a waiver is obtained from the Ethics Commission. Of course, the Ethics Commission could use “prosecutorial discretion” and decline to pursue a technical violation by an employee caused by the employee’s holding of a small amount of stock of a major corporation. But it is preferable to create a general rule through the issuance of a class waiver rather than rely on the ad hoc use of prosecutorial discretion where inconsequential technical violations have occurred.
Granting this class waiver request is in the best interest of the County, because the importance of having County employees do their respective jobs without fear of inconsequential violations of the Ethics Law that might occur in the absence of the waiver outweighs any theoretical harm of such violations. Granting the waiver will not confer an economic advantage over other employees or members of the public. There simply is no economic advantage as the exempted holdings will not be materially affected by employee action; so, granting the waiver would not confer economic advantage on any person.
For these reasons, the Commission grants a class waiver to establish the exemptions from the law that the Ethics Commission proposed to the Council in Bill 47-20.
The Commission imposes the following condition on use of the waiver. In the event an employee wishes to assert entitlement to the waiver, when requested by the Ethics Commission, the employee must attest to the precise value and extent of the employee’s holdings in the securities for the time period(s) for which the waiver is claimed to apply.
See County Attorney Opinion dated 12/14/98 addressing the creation of “Friends of Recreation” for revenue-raising activities.
2020 L.M.C., ch. 40, § 2, states: Name. This Act must be known as the Public Accountability and County Transparency (PACT) Act.