AO 81-002

February 19, 1981

Ms. Eva M.Clayton, 903 Lexington Court, Cary, NC 27511

Dear Ms. Clayton:

The Board has discussed your question about future business transactions between the consulting firm you plan to incorporate and your former employer, the NC Department of Natural Resources and Community Development (NRCD). In our view, the situation you present is generically a species of the so-called "revolving door" phenomenon: where a former state employee as a private citizen does business with the same units of government which formerly employed him or her.

As you noted, Executive Order Number One does not give guidance about a state employee's activities with respect to his or her state employer once the employer employee relationship ends. Rather, the Order as interpreted by the Board was designed to identify only those conflicts arising during state employment which are detrimental to the public interest and public confidence in government.

Therefore, we do not believe that the Board can properly advise you on the question of whether there is a potential for future conflict of interest if your firm does business with NRCD. Rather, we believe that our proper function is: (1) to identify only those issues the "revolving door" is thought to present which look backward to the former employee's activities during the period of state service, and (Z) to discuss some approaches to resolving these issues.

A fundamental concern about "revolving door" transactions seems to be the potential for an appearance that the employee had a conflict of interest while in state service. That is, that the employee was in a position to use his or her state job to enhance prospects for future employment in the private sector. For example, it might appear to some that the employee's decisions to set government projects or programs in motion were influenced by the possibility that he might later be involved with them in a private capacity. Or, it might appear that the employee set project specifications and guidelines which only his future private employer could meet. Or, it might appear that the employee's government work with persons affected by the agency's programs was influenced by the possibility that these persons might later become private clients. To the extent that a future transaction would lead to an appearance that the former employee had a conflict of interest during state service, it could reflect unfavorably upon both the former employee and the state agency involved.

We recognize that it is not unusual for employees to leave state service for jobs in the private sector involving the same general subject matter they dealt with in their government jobs. Indeed, such employees may have been hired by the government because of their prior knowledge of a particular subject area. Thus, it seems to us that there is an inherent risk in state service (1) that a state employee will deal with matters or subjects in his state job that he will later be involved with in his future private employment, and (2) that his private business activities will include contacts with his former state employer. This seems especially likely if the state agency is extensively involved in the subject area in which the former employee plans to work in the private sector.

Given this risk, it is usually possible to hypothesize at least an appearance of conflict of interest between the state job and future employment plans. However, we believe that distinctions can be drawn between those appearances of conflict which are likely, significant and avoidable those which are merely remote, insignificant, and unavoidable. In drawing such distinctions, we believe that two important interests should be considered. One is the government's interest in maintaining public confidence in government and its officers and employees. The other is the former state employee's interest in doing whatever business he wants with whomever he wants in his chosen career area upon leaving state service.

Obviously, the sure way 4o prevent an appearance of conflict in a "revolving door" situation is for a former employee to avoid any business dealings with or involving the same units of government which formerly employed him. This approach would have the advantage of promoting public confidence by removing even the remotest possibility of an appearance of impropriety. But, it would have the disadvantage of limiting the former employee's business activities, even in instances where an appearance of impropriety would not really arise to any significant degree.

Another approach is for the former employee to limit business activities involving the former state employer only to the extent that limitations have been established by governmental laws, regulations, or policies. A check of appropriate administrative and legal authorities would reveal any post-employment restrictions. This approach would have the advantage of providing an objective way to decide the question. A possible disadvantage is that the approach might not wholly eliminate the potential for an appearance of impropriety.

A third approach to "revolving door" transactions is for the former employee to consider each proposed transaction individually and to assess whether a significant and avoidable appearance of impropriety is likely to result. A number of questions seem relevant to this assessment:

1. Subject matter of proposed transaction. Is the subject of the proposed transaction a subject the former employee was personally responsible for or involved in as decision maker while in state service? Is the subject something the former employee set in motion or something already set in motion but administered by the former employee? Is the subject one that the former employee was neither personally responsible for or involved in?

2. Time element. How much time has passed since the employee left state service? Is the former employee still closely identified in the public mind with a program of the former state employer which is now the subject of a proposed business transaction?

3. Interests of the employee and former state employer. With respect to a proposed transaction involving the former state employer: will the interests of the state and the former employee be adverse, or will both parties stand to benefit equally?

This approach could have the advantage of limiting the former employee's activities only in those instances where a significant appearance of impropriety would be likely to arise. The disadvantage is that the approach is necessarily speculative.

Approaches to the question you present are complicated. Having reviewed materials on the "revolving door" generally, we are struck by the lack of agreement among those who have debated the subject on just how real the appearance problem is and on how to deal with it effectively. The issues and approaches discussed above are those noted most frequently.

We appreciate your sensitivity to the questions involved and the spirit of cooperation shown by your letter. We are confident that this sensitivity will enable you to determine whatever steps may be appropriate in your particular circumstances as they develop.

In accordance with the Board's rules, a summary of the facts presented and our opinion will be made available for public inspection with identifying information deleted.

Very truly yours,

McNeill Smith, Chairman

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