Rhode Island Ethics Commission

 

 

Advisory Opinion No. 2016-14

 

Approved:  April 26, 2016

 

Re:  Stephen S. Neuman

 

QUESTION PRESENTED:

 

The Petitioner, the Chief of Staff to the Governor of the State of Rhode Island, a state employee position, requests an advisory opinion concerning how to best manage and avoid potential conflicts of interest related to pending legislation regarding daily fantasy sports games, and potential regulation of such games, given that his spouse is employed by DraftKings and her compensation includes an equity interest in the company.

 

RESPONSE:

 

It is the opinion of the Rhode Island Ethics Commission that the proposed recusal procedures set forth by the Petitioner, the Chief of Staff to the Governor of the State of Rhode Island, a state employee position, are both reasonable and sufficient to avoid potential conflicts of interest related to pending legislation regarding daily fantasy sports games, and potential regulation of such games.

 

The Petitioner is the Chief of Staff to Governor Gina M. Raimondo.  He states that his duties involve advising the Governor on all aspects of her constitutional and statutory duties, including whether to sign or veto legislation presented to her by the Rhode Island General Assembly (“General Assembly”).  He represents that he supervises the Governor’s staff, has substantial involvement with state agencies under the Governor’s purview, and regularly meets with other state employees, members of the public, legislators and lobbyists. 

 

The Petitioner states that online daily fantasy sports (“DFS”) businesses, including FanDuel and DraftKings, are currently involved in a multi-state effort to ensure that DFS games can operate in states throughout the country.  He informs that the General Assembly is currently considering legislation related to the regulation of DFS games.  He states that if such legislation were enacted, one or more state agencies under the Governor’s purview could become involved in the operation and/or regulation of DFS games. 

 

The Petitioner represents that on February 22, 2016, his spouse accepted employment as the Vice President, Head of Regulatory for DraftKings.  He states that his spouse’s compensation from DraftKings includes a yearly fixed salary plus an equity interest in the company.  The Petitioner informs that when his spouse was first considering employment at DraftKings, he alerted the Governor’s senior staff and excluded himself from any and all discussions regarding DFS games.  He states that once his spouse formally accepted the DraftKings position, he consulted with the Governor’s Executive Counsel and she advised him to seek this advisory opinion. 

Cognizant of the Code of Ethics, the Petitioner represents that he has taken, and will continue to take, the following steps to avoid any conflicts of interest.  First, the Petitioner states that he has recused himself, and will continue to recuse, from participation in any discussions or decision making related to DFS games, including the passage of DFS games legislation, with other members of the Governor’s senior staff, or with cabinet officials or other members of the executive branch.  Second, he informs that if the proposed DFS games legislation is enacted, he would similarly recuse himself from discussions related to the regulation or operation of DFS games by any state agency.  Third, he represents that he has removed himself from the chain of command for all matters involving DFS games, whereupon all members of the Governor’s staff and employees of state agencies involved in DFS games regulation report to the Deputy Chief of Staff assigned to that regulatory entity, who reports directly to the Governor.  Fourth, he informs that he would recuse himself from participating in any agency budget items attributable to the operation, regulation, or oversight of DFS games.  Finally, he states that he will not provide the Governor with any input, consultation or advice related to any aspect of DFS games legislation, regulation or policy. 


Under the Code of Ethics, a public official may not participate in any matter in which he has an interest, financial or otherwise, that is in substantial conflict with the proper discharge of his duties or employment in the public interest.  R.I. Gen. Laws § 36-14-5(a).  A substantial conflict of interest exists if an official has reason to believe or expect that he, any person within his family, a business associate or an employer will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity.  Section 36-14-7(a).  Additionally, the Code prohibits a public official from using his public office or confidential information received through his public office to obtain financial gain for himself, his family, his business associate, or any business by which he is employed or which he represents.  Section 36-14-5(d). 

 

While the Code of Ethics clearly prohibits the Petitioner from participating in matters directly affecting his spouse, the Code does not generally preclude a public official from participating in matters affecting his spouse’s employer unless it is reasonably foreseeable that the matter involving the spouse’s employer would also financially impact the spouse.  For example, in Advisory Opinion 2005-14, the acting Director of the Department of Health (“DOH”) sought advice relating to his participation in DOH contracts with Quality Partners of Rhode Island (“Quality Partners”), a non-profit organization that received funding from DOH for four separate programs involving diabetes, immunizations, public reporting requirements, and health information technology.  The petitioner’s spouse held an executive position at Quality Partners, was a member of its leadership team, and was responsible for managing all of Quality Partners’ contracts with DOH.  In that case, given that there was uncertainty regarding whether the petitioner’s spouse would be financially impacted by the petitioner’s official actions relating to Quality Partners’ contracts with DOH, the Commission opined that it was prudent and advisable for the petitioner to recuse from such matters and refer them up the chain of command to the Managing Director of the Office of Health and Human Services.  See also A.O. 2000-16 (opining that the Executive Director of the Rhode Island Housing and Mortgage Finance Corporation (“RI Housing”) was required to recuse from matters involving SWAP, Inc., a nonprofit community development organization for which his spouse served as executive director, because SWAP was dependent on funding from RI Housing to accomplish its mission, and upon his recusal all SWAP matters would be referred up the chain of command to the Board of RI Housing). 

In the present matter, the Petitioner has proposed procedures for his recusal from all matters related to DFS games because his spouse is employed at DraftKings as Vice President, Head of Regulatory and her compensation includes equity interest in the company.  Here, we find that the Petitioner’s recusal from all matters related to DFS games is required by the Code of Ethics because it is reasonably foreseeable that the state’s pending legislation related to DFS games, and potential regulation of DFS games, would result in a financial impact on DraftKings and all those who have an equity interest in that company, including the Petitioner’s spouse. 

 

Therefore, it is the opinion of the Ethics Commission that the Petitioner’s above proposed recusal procedures are both reasonable and sufficient to avoid conflicts of interest related to DFS games and DraftKings.  Notice of recusal shall be filed with the Ethics Commission in accordance with section 36-14-6. 

 

This Advisory Opinion is strictly limited to the facts stated herein and relates only to the application of the Rhode Island Code of Ethics.  Under the Code of Ethics, advisory opinions are based on the representations made by, or on behalf of, a public official or employee and are not adversarial or investigative proceedings.  Finally, this Commission offers no opinion on the effect that any other statute, regulation, ordinance, constitutional provision, charter provision, or canon of professional ethics may have on this situation. 

 

Code Citations:

§ 36-14-5(a)

§ 36-14-5(d)

§ 36-14-6

§ 36-14-7(a)

 

Related Advisory Opinions:

A.O. 2005-14

A.O. 2000-16

 

Keywords

Family: Private Employment

Financial Interest

Recusal