Opinion ID: 1529516
Heading Depth: 2
Heading Rank: 1

Heading: The Jamestown Bridge Matter

Text: DiPrete contends that the trial justice and the commission erred by (1) misapplying § 36-14-5(a) and (d), § 36-14-7(a), and § 36-14-6, and (2) imposing fines that were excessive and not supported by the evidence. DiPrete also contends that the commission conducted hearings that were devoid of fundamental fairness, denying him his due-process rights. Section 36-14-5(a), as enacted by P.L. 1987, ch. 195, § 3 provides: No person subject to this code of ethics shall have any interest, financial or otherwise, direct or indirect, or engage in any business, employment, transaction or professional activity, or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties or employment in the public interest and of his responsibilities as prescribed in the laws of this state, as defined in section 36-14-7. (Emphasis added.) Section 36-14-7(a), as enacted by P.L. 1987, ch. 195, § 3 defines a substantial conflict as a person's having a reason to believe or expect that he or his spouse (if not estranged) or any dependent child, or any business associate or any business by which said person is employed or which said person represents will derive a direct monetary gain or suffer a direct monetary loss, as the case may be, by reason of his official activity. (Emphasis added.) Section 36-14-5(d) prohibits a public official from using his or her public office, or confidential information obtained through a public office, to obtain financial gain for himself or herself or for a related party. Section 36-14-6, as enacted by P.L. 1987, ch. 195, § 3 prescribes the steps that an official must take when his or her official activity requires him or her to take an action, make a decision or refrain therefrom that will or can reasonably be expected to directly result in an economic benefit to him or herself or to a related party. The official shall, among other possible action, before taking any such action or refraining therefrom file a written statement with the commission of the conflict of interest. Id. DiPrete employs most of his argument on the bridge matter in an effort to rebut the finding of the commission, upheld by the trial justice, that DiPrete was a business associate of Taft's. Before we reach DiPrete's business associate argument, we must first determine that it was DiPrete's official activity that caused Taft & McSally to be selected. Section 36-14-7(a) describes a substantial conflict as one that results from an expectation of financial gain to the public figure or to a related party by reason of [the public figure's] official activity. Both §§ 36-14-5(d) and 36-14-6 require some action on behalf of the public official, or a failure to act with knowledge of the possible conflict, that causes the conflict to arise. Therefore, our initial analysis of the bridge matter must begin with an inquiry into whether DiPrete took any official action that caused the selection of the joint firm. The record must persuade us that such an official action as will invoke that statutory dictate occurred. A conflict exists when `by reason of his [or her] official activity' an official will benefit himself [or herself], his [or her] spouse, his [or her] dependent child, his [or her] business associate, or a business activity in which he [or she] is involved.    We find from an examination of this statutory language    a consistent indication that all that is required of an official is the avoidance of any official action over a particular matter that represents the source of conflict. (Emphasis added.) In re Advisory Opinion to the Governor, 504 A.2d 456, 461 (R.I. 1986) (analyzing the former Rhode Island Conflict of Interest Laws, chapter 14 of title 36, repealed effective June 25, 1987). An act is defined as [t]hat which is done or doing; the exercise of power, or the effect whose cause is power exerted; a performance; a deed. Webster's New International Dictionary, 25 (2nd Unabridged ed. 1935). An official act is `[o]ne done by an officer in his official capacity under color and by virtue of his office.' Celona, 544 A.2d at 586. The commission found that DiPrete expressed orally or by informal note to Gill that the firm of Taft & McSally be considered for the position. The commission appears to have placed its reliance on the testimony of Lynette Labinger (Labinger) in reaching a conclusion that DiPrete's official activity caused the joint firm to be selected. Labinger is the law partner of the commission's attorney-designee, John Roney (Roney). Roney presented the case against DiPrete to the commission. Labinger testified that she was present at a meeting with Roney and DiPrete when DiPrete stated that he had written a memorandum to Gill stating that outside counsel was needed for the bridge litigation and he suggested the firm of Taft & McSally. Labinger testified that DiPrete averred that Gill then initiated DOT's process in soliciting counsel, and from that point forward he had no activity in the selection process. When asked for a copy of the memorandum, DiPrete suggested that there was a possibility that no such memorandum existed and that he may have made the suggestion orally. DiPrete testified that he initially thought a memorandum suggesting a number of firms had been forwarded to Gill. A subsequent investigation clarified that no such memorandum had been sent to Gill. DiPrete's recollection was that he had sent a handwritten note, on the reverse side of a memorandum he had received from Gill, stating that he had no specific objections to the selection of any law firm from outside the state but suggested that Gill consider qualified law firms within Rhode Island. DiPrete testified that the bottom line was that he did not specifically recommend Taft & McSally or any other law firm. Taft testified that he never spoke to DiPrete or any DiPrete family member regarding the selection. Taft stated that his conversations with DiPrete regarding the bridge took place after the joint firm had been retained. Taft testified that it was his idea to contact the law firm of Carroll, Kelly & Murphy and suggest a joint proposal for the bridge litigation. Carroll, Kelly & Murphy was one of the initial law firms that had received a letter from DOT requesting their qualifications in handling the impending bridge litigation. Peter Palombo, Jr. (Palombo), executive counsel to DiPrete at the time of the bridge litigation, testified that DiPrete never mentioned or suggested to him that Taft & McSally be considered for the bridge litigation. Palombo asserted that he never spoke to Gill or Ridolphi about adding Taft & McSally's name to the list of law firms to be considered for the litigation. Ridolfi testified that she was told by Gill to add the name of Taft & McSally to the list of law firms being solicited by DOT. Ridolfi stated that she expressed her concerns to Gill regarding the addition of Taft & McSally because she knew that Taft was a close associate of DiPrete and was concerned about the public perception if Taft & McSally was retained as legal counsel. Subsequently Ridolfi was informed by Gill that he had chosen the joint firm. Ridolfi averred that Gill chose the joint firm for a number of reasons, one of which was that Taft had the trust of the Governor. Gill testified that it was DiPrete's general concern to hire qualified Rhode Island entities to do state work whenever possible. Gill unequivocally stated that it was his decision to hire the joint firm. He stated that DiPrete never mentioned the name of Taft & McSally before the joint firm was selected. The commission was faced with the standard witness-credibility issue. The commission was free to weigh the credibility of all the witnesses and to decide the issue on the basis of whom they believed to be more credible. The commission placed its reliance on the recollection of Labinger. This court does not substitute its judgment for that of the agency in regard to witness credibility. Costa v. Registrar of Motor Vehicles, 543 A.2d 1307, 1309 (R.I. 1988). When more than one inference is possible, we may not substitute our judgment. Guarino v. Department of Social Welfare, 122 R.I. 583, 410 A.2d 425 (1980). There was some evidence to support the commission's finding that DiPrete had caused the joint firm to be selected. Sartor, 542 A.2d at 1082-83. Although our review of Gill's testimony seemed to enhance the credibility of DiPrete's position, the trial justice was not clearly wrong in upholding the commission's finding that DiPrete's official action had caused the joint firm to be selected. See Environmental Scientific Corp., 621 A.2d at 208. DiPrete next contends that he was not a business associate of Taft's and consequently could not have had a substantial conflict as outlined in § 36-14-7(a). Section 36-14-2, as enacted by P.L. 1987, ch. 195, § 3, defines a business associate as a person joined together with another person to achieve a common financial objective. The record reflects that as of April 1986 DiPrete was a one-third owner in DiPrete/Laurienzo construction company. Sometime during August 1987 a partnership-trust agreement was executed whereby Taft and DiPrete/Laurienzo formed Atwood. DiPrete/Laurienzo owned 80 percent of the partnership while Taft owned the remaining 20 percent. A simple exercise in arithmetic leads us to the conclusion that as a result of DiPrete/Laurienzo's owning 80 percent of the new partnership, DiPrete, as a one-third owner of DiPrete/Laurienzo, acquired approximately a one-quarter ownership interest in Atwood. Taft acquired a one-fifth ownership interest in Atwood. Therefore, DiPrete and Taft were joined together to achieve a common financial objective, the success of the partnership. Consequently the record yields adequate evidence to support the conclusion that DiPrete and Taft were business associates. We note that the definition of business associate, as outlined in the statute, appears quite broad. We are persuaded that the record reflects that even if the respective ownership interests in Atwood were not so significant as noted, the relationship would in fact be within the statutory language. DiPrete argues that even if he and Taft were considered business associates, he did not violate § 36-14-5(a) or § 36-14-7(a) because he and Taft were not business associates at the time he allegedly interceded on Taft's behalf. The commission contends that the record contains ample evidence to support the finding that DiPrete and Taft were business associates at the time of the intercession. The record reflects that Ridolfi generated a letter to Taft & McSally requesting a proposal on September 8, 1987. The partnership agreement forming Atwood was not executed until September 9, 1987; however, the agreement was retroactive to August 15, 1987. The trial justice found that it would be inconceivable to expect that prior to [September 9, 1987] no negotiations between Taft [and] DiPrete/Laurienzo had occurred. Although negotiations alone do not constitute a legal relationship, they may be considered in determining whether two or more people are joined to achieve a common financial objective. Negotiations may be a factor in considering whether a business association exists, but no single factor should be conclusive. We believe that the inference of the negotiations, in addition to the testimony before the commission, and the fact that the partnership agreement was retroactive to August 15, 1987, were sufficient to establish that a business association existed according to the broad definition in the statute. Therefore, the commission could properly and reasonably infer that DiPrete and Taft were business associates at the time DiPrete's official action caused the joint firm to be selected. Consequently the trial justice did not err in holding that DiPrete and Taft were business associates at the time DiPrete interceded on behalf of Taft. DiPrete next avers that there was insufficient evidence to show that he knowingly and willfully violated the statute. Section 36-14-13(d)(6), as enacted by P.L. 1987, ch. 195, § 3 provides that at the conclusion of proceedings concerning such an alleged violation, the adjudicative panel shall immediately begin deliberations on the evidence and then proceed to determine whether there has been a knowing and willful violation of this chapter. (Emphasis added.) The chapter is silent concerning the definition of what constitutes a knowing-and-willful violation. In Carmody v. Rhode Island Conflict of Interest Commission, 509 A.2d 453 (R.I. 1986), this court discussed the knowing-and-willful requirement necessary to show a violation of the Rhode Island conflict-of-interest laws. In Carmody we adopted different analyses of what constitutes a knowing-and-willful violation of the statute depending upon the reasonableness of the violation. Id. at 460-61. Because the statutes analyzed in Carmody were part of the conflict-of-interest law that preceded the present Code of Ethics and because the present code does not enlighten us about what a knowing-and-willful violation of the code involves, our analysis in Carmody is precedential and persuasive. This court has held that when a violation of the statute is reasonable and made in good faith, it must be shown that the official either knew or showed reckless disregard for the question of whether the conduct was prohibited by [the] statute   . Id. at 460. Consequently an official may escape liability when he or she acts in accordance with reason and in good faith. We have observed, however, that it is difficult to conceive of a violation that could be reasonable and in good faith. Id. at 461. In contrast, when the violative conduct is not reasonable, it must be shown that the official was `cognizant of an appreciable possibility that he [might] be subject to the statutory requirements and [he] failed to take steps reasonably calculated to resolve the doubt.' Id. at 461. As noted above, it may be difficult to conceive of a violation that could be reasonable and in good faith. We do not believe that DiPrete's violation of the statute was in accordance with reason or in good faith. The commission had before it a record of sufficient evidence to conclude that DiPrete's actions were deliberate and unreasonable. DiPrete, as chief executive, was at least aware of an appreciable possibility that he might be subject to the statutory requirements, and he failed to take any steps to resolve that problem, such as delivery of a statement of potential conflict of interest to the commission. See § 36-14-6. DiPrete next contends that the fines imposed by the commission and approved by the trial justice were excessive and not supported by the evidence. At the time of these hearings, the commission was authorized by § 36-14-13(e)(3) to assess civil penalties of not more than $10,000 for each violation of the chapter. As a result of his involvement in the bridge matter, DiPrete was fined $10,000 for violating § 36-14-5, subsections (a) and (d). In addition he was fined $5,000 for failure to prepare and to deliver a copy of a statement of the potential conflict to the commission, as mandated by § 36-14-6. DiPrete initially contends that absent a showing of a knowing-and-willful violation of the statutes, civil penalties cannot be assessed. Premised upon our discussion and disposition of the previous issue, our finding is that this contention is without merit. The evidence of record supports a knowing-and-willful violation of the statute. DiPrete further argues that the civil penalties assessed against him were in violation of article 1, section 8, of the Rhode Island Constitution. Article 1, section 8, states that [e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel punishments inflicted; and all punishments ought to be proportioned to the offense. DiPrete's contention that the commission based the amount of the fine on the amount of its projected budget shortfall for the fiscal year is unsupported by the evidence of record. We believe that a sum total $15,000 fine is proportioned to the offenses. See R.I. Const. art. 1, sec. 8. A business associate of DiPrete's, as of the date of the ethics hearings, gained some $250,000 as a result of DiPrete's actions. The commission, in carrying out the intent of the Code of Ethics, responded reasonably to the mandate of the law, on the basis of the evidence of record. DiPrete's comparison of the minimal fines mandated in Carmody does little to persuade us that these fines are excessive. The facts of Carmody did not concern financial gain accruing to the parties involved, nor did the facts in Carmody rise to the level of the record before this court in the instant case. We find that the civil penalties assessed were fair and reasonable and did not violate article 1, section 8, of the Rhode Island Constitution. DiPrete's contention that the ethics panel conducted a hearing that was devoid of fundamental fairness will be discussed later in this opinion.