What type of activity constitutes a conflict of interest?
That’s a question boards regularly ask themselves in order to protect against a real or apparent conflict that could endanger their reputation and support.
Is it a conflict of interest if the mother of the executive director of a subsidiary corporation serves on the board of the parent organization?
The Assistant Commissioner of New York City’s Human Resources Administration thinks so, and a court has said she cannot be sanctioned for saying that the executive director has to be fired. (Jenkins v. Tyler, S.D. N.Y., No. 00 Civ. 8980 (VM), 10/19/01.)
Joseph Jenkins and his mother both served on the board of Social Concern Vendor Agency, a subsidiary of Social Concern Committee of Springfield Gardens. Mrs. Jenkins also served on the board of the Committee and was a member of the State Assembly representing the district.
When the Agency ran into financial trouble in early 2000, it sought a new executive director, and the board identified Jenkins as a candidate for interim director. Mrs. Jenkins resigned from the board, and the board, without Joseph Jenkins’ participation, selected Joseph for the position. Joseph then resigned from the board prior to starting work.
The Agency was under a contract with the Human Resources Administration, which contained several provisions on conflicts of interest.
The Agreement provided that neither the contractor “nor any of its directors, officers, members, partners or employees have any interest nor shall they acquire any interest directly or indirectly which would or may conflict in any manner or degree with the performance of rendering of” its services.
It also provided that no employee or member of their immediate family could serve on the board or any committee with authority to order personnel action affecting his or her job and that no person could “hold a job or position over which a member of his immediate family exercises any supervisory, managerial, or other authority whatsoever, whether such authority is reflected in a job title or otherwise.”
When informed of the appointment, Kathleen Tyler, Assistant Commissioner of the Human Resources Administration, told Jenkins he could not serve as interim director.
She later wrote to the Agency, telling the board that his employment represented a conflict of interest given the influence of his mother over his selection and appointment, and given her continued influence over the Association as a result of her role as a member of the board of the Committee. The Association dismissed Jenkins from his position.
Joseph sued Tyler for deprivation of his First Amendment right of freedom of association and for tortious interference with a contract.
The federal District Court agreed that the Constitution protects the association in the context of family relationships, but found that Jenkins had not complained that Tyler had interfered with the mother-son relationship and thus had not stated a claim that she had violated is constitutional rights.
“Tyler insisted on having Jenkins removed from the position of interim director specifically because of the connection between Mrs. Jenkins’s action, as a member of the board of the [Agency’s] parent organization and a former member of the board of directors which appointed Jenkins, and Jenkins’s inability to perform his duties without the appearance of impropriety,” wrote the Court.
“There is no indication here that the intent or effect of Tyler’s action was to ‘penalize’ his mother-son relationship for any reason not legitimately connected with Tyler’s official duties in overseeing proper compliance with the relevant provisions of the Agreement.”
The Court also found that Tyler would be protected as a governmental official by qualified immunity on both the federal charge and on the state law charge of tortuous interference with the contract.
She was entitled to exercise her reasonable discretion and judgment in interpreting the contract. “By virtue of the duties of her office, Tyler was required to both interpret and apply the conflict of interest provision of the Agreement…. In light of this necessarily fact-intensive analysis of a legal issue, and especially given its potential for legal, political and public relations repercussions, the Court finds that there was room for, and Tyler’s actions represent, the exercise of discretion and reasoned judgment.”
You Need to Know
It does not appear that the appointment of the interim executive director, in this case, violated the literal language of the Agreement with the governmental agency, and even if it did, the only remedy the government can require is to terminate the contract, not the employee.
Like most alleged conflict situations, however, it doesn’t make a whole lot of difference what the facts are. When a politician or the press is out to get you, the most remote connection can be made out to be an egregious conflict. In this case, there was no protection in a court of law. It may be even harder to win in the court of public opinion.
If you are going to deal with insiders be sure you can fully justify your decision. Don’t give your detractors any extra ammunition.