IN THE MATTER OF BASIL CAPETANAKIS
COIB Case No. 99-157
OATH Index No. 604/01
July 16, 2001
SUMMARY: In a summary judgment based upon stipulated facts and the report and recommendation
of an Administrative Law Judge of the Office of Administrative Trials and Hearings, the Board fined a
community board member $4,000 for voting on a matter involving real property which he and his
siblings owned. Because a vote expressing the community’s preference for land use “may result” in a
personal and direct economic gain to the community board member, such votes are not permitted. The
Board ruled that the language “may result” in the relevant City Charter provision means even a
possibility greater than zero. The member may even retain the financial interest and discuss the matter,
but is not allowed to vote. COIB v. Basil Capetanakis, COIB Case No. 99-157 (2001). This case was the
first one in the Board’s history that resulted in a summary judgment (eliminating the need for trial in the
absence of any genuine issues of material fact). Respondent has appealed the decision.
STIPULATION AND DISPOSITION
FINAL FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER
Upon consideration of all the evidence presented in this matter and upon the full record, including the
written comments submitted by counsel for the parties, the Conflicts of Interest Board (the "Board")
hereby adopts in substantial part the annexed Report and Recommendation (the "Report") of the Office
of Administrative Trials and Hearings ("OATH"), dated February 27, 2001, in the above-captioned
matter, with a clarification of the Report's recommended construction of §§ 2604(b)(2) and
2604(b)(1)(b) of the New York City Charter (the "Charter"). These two changes do not alter the ultimate
recommendations in the Report.
This enforcement matter involved a Brooklyn Community Board 10 ("CB 10") member who had a
financial interest in certain vacant lots located within his community board's jurisdiction. The lots were
the subjects of various development plans, one of which was senior assisted living. At the February 1997
meeting, CB 10 was asked to vote on whether it supported the senior assisted living use for these lots.
Respondent voted to support this use, refusing an express invitation from the CB 10 Chair to recuse
himself because of his financial interest in the lots. Respondent also voted on two other resolutions
affecting the lots, one resolution at the February 1997 CB 10 meeting and another at the March 1997 CB
10 meeting. The lots had been appraised, by Mr. Capetanakis's own appraiser, shortly before Mr.
Capetanakis's votes, at $1.725 million. Eight months after the vote, the lots sold for $3 million.
Because there are no genuine issues of material fact, and because Petitioner is entitled to judgment as a
matter of law, OATH properly granted summary judgment as to liability in this case, finding that
Respondent violated Charter §§ 2604(b)(1)(b) and 2604(b)(3). See, e.g., In the Matter of Karen D.
Barth, Index No. 1574/97 (Fraser, ALJ) ("the procedural issue before me is whether disposition of the
case requires resolution of any factual dispute. If not, then disposition of the matter without trial is
appropriate.").
Section 2604(b)(1)(b)
This section states:
"A public servant who has an interest in a firm which is not prohibited by subdivision a of this
section, shall not take any action as a public servant particularly affecting that interest, except that ... (b)
in the case of an appointed community board member, such action shall not be prohibited, but no
member may vote on any matter before the community or borough board which may result in a personal
and direct economic gain to the member or any person with whom the member is associated ...."
(Emphasis added.)
Simply put, this provision means that community board members may keep their financial interests in
firms even where the interests may be affected by community board actions. Members may take any
action at board meetings relating to their interests, except they shall not vote on community board
resolutions which "may result" in a personal and direct economic gain to them arising from their
personal financial interests.
For purposes of § 2604(b)(1)(b), an "interest" is not limited to those that are less than the $32,000 or 5%
level of "ownership interest" defined in Charter §§ 2601(12) and (16). Rather, the Board reads "interest"
in (b)(1)(b) to mean any interest in a firm, [FNa1] for the reasons set forth in the Report at pages 6-11.
The term "may result" in § 2604(b)(1)(b) means even a mere possibility greater than zero. The identical
language has been interpreted by the New York courts, in other contexts, very broadly. For example, in
People v. Butterfield, 267 A.D.2d 870, 702 N.Y.S.2d 140, 143 (3d Dep't 1999), leave to appeal denied,
95 N.Y.2d 833, 713 N.Y.S.2d 139, 735 N.E.2d 419 (2000), the Appellate Division held that the words
"may result" in a statute providing for dismissal of an indictment where prejudice to the defendant "may
result" meant that "[r]elief under this less than exacting standard may be denied only where there was no
possibility that defendant was prejudiced by the denial of his request." In an insurance coverage matter,
another court construed the "may result" language in an insurance policy to mean the "mere possibility."
Martini v. Lafayette Studios Corp., 177 Misc.2d 383, 386-387, 676 N.Y.S.2d 808, 811 (Sup. Ct. N.Y.
Co. 1998), aff'd as modified on other grounds, 273 A.D.2d 112, 710 N.Y.S.2d 39 (1st Dep't 2000).
The Board fully adopts the Report's recommendation that Respondent violated Charter § 2604(b)(1)(b).
Section 2604(b)(2) states:
"No public servant shall engage in any business, transaction or private employment, or have any
financial or other private interest, direct or indirect, which is in conflict with the proper discharge of his
or her official duties."
The Report concludes in effect that Respondent did not violate § 2604(b)(2) because community board
members' financial ownership interests, as defined by Charter § 2601(16), are governed exclusively by §
2604(b)(1)(b). See Report at page 16. We agree, except that we note that community board members
nonetheless are prohibited by Charter Section 2604(a)(1)(a) from having an interest in firms doing
business with the community board itself. Moreover, the Board has specifically applied § 2604(b)(2) to
community board members when, for example, they also work for other City agencies. See Advisory
Opinion No. 91-3. The drafters of the community board provisions of Chapter 68 specifically recognized
that community board members have business interests in their communities and are selected to reflect
local concerns: "[C]ommunity board members are not prohibited from having interests in firms which
may be affected by an action of a community board. Indeed, members of community boards are selected
to reflect the interests of the community and may include representatives of the local business
community, who may or may not reside in the area. To prohibit members from having interests in firms
whose activities are subject to review by a community board would deprive the community boards of
this desired diversity. Section 2604(b)(1) nevertheless prohibits community board members from voting
on any matter before the community board which may result in a personal and direct economic gain.
This exception does not waive the general prohibition against having an interest in firms doing business
with the community board itself, e.g., by contracting with, or otherwise providing services to, the
community board." Vol. II, Report of The New York City Charter Revision Commission, December
1986-November 1988, at page 170.
While we adopt the Report's recommendation concerning § 2604(b)(2) in this case -- because
Respondent here had only a financial ownership interest -- we hold that community board members are
still subject to § 2604(b)(2) if they have private interests other than a "financial ... interest," namely, any
of the other types of private interests enumerated in the statute: "business," "transaction," "private
employment," or "other private interest."
In our decision in Holtzman, COIB Case No. 93-121 (April 3, 1996), aff'd sub nom. Holtzman v.
Oliensis, 240 A.D.2d 254, 659 N.Y.S.2d 732 (1st Dep't 1997), aff'd, 91 N.Y.S.2d 488, 673 N.Y.S.2d 23
(1998), we wrote that the catch-all provision, section 2604(b)(2), is very broad:
"Section 2604(b)(2) reaches all forms of private conduct by public servants that may reasonably
cause the public to question the public servant's undivided loyalty to the City."
(Emphasis added.)
The legislative history of this provision confirms that it was intended to provide flexibility to the Board
to handle new situations as they arise: "Paragraph two continues the general prohibition against
engaging in any business, transaction or private employment, or having any financial or other private
interest, which is in conflict with the proper discharge of official duties. The commission has retained
this 'catch-all' prohibition in recognition of the fact that the specific prohibitions set forth in the chapter
cannot address all conflict of interest situations, which may arise in the future and that the board must
retain the flexibility to handle new situations as they arise." Vol. II, Report of The New York City
Charter Revision Commission, December 1986-November 1988, at page 175.
In the following Board dispositions, the respondents violated section 2604(b)(2) by virtue of private
conduct that was not limited to ownership of a financial interest: COIB v. Naomi Rubin, Case No. 94242 (a Parking Violations Bureau Judge had no private ownership interest but, rather, adjudicated two
summonses for her father-in-law, dismissing one and reducing the fine on the other); COIB v. Rudolph
Hahn, Case No. 97-102 (the public servant's private conduct consisted of using the City's phone and
phone number for a private business); COIB v. Frances T. Vella-Marrone, Case No. 98-169 (the public
servant's private conduct consisted of using her official position to help get her husband a City job and
to attempt to get him a promotion); COIB v. Christopher Sullivan, Case No. 98-288 (City Tax Assessor
rented an apartment that was not advertised publicly from a building owner after learning about a
vacancy during his official inspection); COIB v. David Carlin, Case No. 99-250 (sewage treatment
worker at DEP used City equipment for his moonlighting job).
Subject to the above clarification regarding the applicability of section 2604(b)(2) to community board
members, we adopt the Report's findings and recommendations that respondent did not violate Charter §
2604(b)(2).
Section 2604(b)(3)
We fully adopt the Report's findings and recommendations that respondent violated Charter §
2604(b)(3).
Other Arguments Raised by Respondent
In his comments to the Report, Respondent has raised several arguments, none of which requires any
modification of the Report.
Respondent claims that he is insulated from liability under Chapter 68 because he never received ethics
training from the Board. This argument was never raised at OATH and fails now, factually and legally.
Mr. Capetanakis was in fact offered conflicts of interest training, as the Board's training staff conducted
training for CB 10 in 1994, a time when Respondent served on the community board. Even if he had
never been offered such training, ignorance of the law is not a defense to an enforcement case. See, e.g.,
People v. Marrero, 69 N.Y.S.2d 382, 385, 515 N.Y.S.2d 212, 213, 507 N.E.2d 1068, 1069 (1987);
Center Moriches Monument Co. v. Taxation & Finance Comm'r, 211 A.D.2d 947, 621 N.Y.S.2d 720
(3rd Dep't 1995). In addition, the ethics training section of the Charter does not operate as a "condition
precedent" to Chapter 68 liability, nor does the language of Chapter 68 of the Charter condition
enforcement actions on the Respondent's reading the law. In the absence of such language, there is no
"condition precedent." Cf. Reining v. City of Buffalo, 102 N.Y. 308, 6 N.E. 792 (1886); Wolfe v.
Bellizzi, 58 Misc. 2d 773, 296 N.Y.S.2d 860 (Sup. Ct. Schenectady Co. 1969) (condition to maintenance
of an action was statutory), aff'd sub nom. Bremer v. Bellizzi, 37 A.D.2d 1041, 325 N.Y.S.2d 919 (3rd
Dep't 1971). If the law were as Respondent asserts, there could be no enforcement of the conflicts of
interest provisions of the Charter because any violator could defeat prosecution merely by failing to read
the law or to attend training sessions, thereby deliberately insulating himself from liability.
Respondent also claims that the conflicts of interest law is unconstitutionally vague. Charter sections
2604(b)(2), (b)(3), and (b)(1)(b) are sufficiently clear so that Respondent was not required to guess at
what conduct is proscribed. Pringle v. Wolf, 88 N.Y.2d 426, 435, 646 N.Y.S.2d 82, 88, 668 N.E.2d 1376
(1996), cert. denied, 519 U.S. 1009 (1996) (quoting Foss v. City of Rochester, 65 N.Y.2d 247, 491
N.Y.S.2d 128, 131, 480 N.E.2d 717 (1985)). The language in these statutes has been construed in
numerous Board advisory opinions and enforcement cases.
Finally, Respondent claims for the first time that the Chairman of CB 10 authorized his illegal votes in
February and March of 1997 by permitting Mr. Capetanakis to vote at the April 1996 CB meeting on a
resolution to send the developer a letter expressing CB 10's opposition to a multiplex theatre being built
on the UA Lots. [Fna2] This argument was never made to OATH and is, nonetheless, unavailing. The
April 1996 vote was not even alleged in the Petition. Respondent has previously conceded that in April
1996, he did not even have a financial interest in the UA Lots and was thus not required to recuse
himself from voting under the Charter. See Respondent's Response to the Initial Notice of Determination
of Probable Cause at page 2 ("Mr. Capetanakis did not have an ownership interest at the time of the
April, 1996 vote."). Furthermore, no community board chair or, indeed, any other public servant, except
the Board, may authorize an action otherwise prohibited by conflicts of interest law. See Charter §
2603(c) ("The Board shall render advisory opinions with respect to all matters covered by this
chapter."). See also Charter § 2603(e) (waivers can be granted by the Board).
Civil Penalty
The Report recommends a fine in the amount of $4,000. Following the issuance of the Report,
Respondent asserted that he had not been heard on the question of the appropriate penalty. The Board
accordingly requested and received from the parties written submissions on the appropriate penalty, if
any. Having reviewed those submissions, the Board has determined that the recommended amount of the
fine is appropriate for the violations of Charter §§ 2604(b)(1)(b) and 2604(b)(3).
Conclusion
The Board finds that Respondent violated Charter §§ 2604(b)(1)(b) and 2604(b)(3), but not §
2604(b)(2), and that the penalty for these violations shall be $4,000.
WHEREFORE, IT IS HEREBY ORDERED, pursuant to Charter § 2606(b), that Respondent be
assessed a civil penalty of $4,000 to be paid to the Conflicts of Interest Board within 30 days of service
of this Order.
Respondent has the right to appeal this Order to the Supreme Court of the State of New York.
The Conflicts of Interest Board
Benito Romano
Acting Chair
Jane W. Parver
Bruce A. Green
Members of the Board
FNa1. We note that the Report's description of a statutory ownership interest was correct as applied to
the facts in this matter but must be clarified. The Report describes the definition of "ownership interest"
in Charter § 2601(16) as "an investment in a firm of $25,000 or more, or ownership of 5% or more of
the firm." (Report at pp. 6-7.) Effective January 1, 1998 (after the events in this matter took place),
pursuant to Charter Section 2603(a), the amount set forth in Section 2601(16) was adjusted from
$29,000 to $32,000, having been increased in 1994 from $25,000 to $29,000. See Rules of the Conflicts
of Interest Board § 1-11, Vol. 12, Title 53, Rules of the City of New York. The definition of ownership
interest also includes managerial control of a firm.
Fna2 The Chairman stated: "There is no conflict. There is no vote on the floor concerning any direct
monetary benefit to any member." See Respondent's comments dated March 22, 2001, at page 11.
ATTACHMENT
In the Matter of
CONFLICTS OF INTEREST BOARD,
Petitioner,
-againstBASIL CAPETANAKIS,
Respondent.
REPORT AND RECOMMENDATION
PRESENT: JOHN B. SPOONER
Administrative Law Judge
TO: BENITO ROMANO
Acting Chair
APPEARANCES: PETER M. NADLER, ESQ.
Attorney for Petitioner
CHARLES G. FIORE, ESQ.
Attorney for Respondent
This case involves an allegation that respondent Basil Capetanakis, a member of Brooklyn Community
Board 10 ("CB 10"), violated sections 2604(b)(1)(b), (b)(3), and (b)(2) of the City conflicts of interest
law by voting on a plan concerning a property in which he had a financial interest.
On September 22, 2000, petitioner filed a motion for summary judgment and respondent filed a motion
to dismiss. Both sides then filed responses to these motions and, after a conference on October 19, 2000,
the matter was submitted upon stipulated facts and written memoranda.
FACTUAL BACKGROUND
This action arises from votes made at a local CB 10 meeting by respondent, a seventy-year-old retired
real estate broker. The alleged conflict arises from Mr. Capetanakis's interest in five vacant lots at the
corner of Bay Ridge and Narrows Avenues in Bay Ridge, Brooklyn. According to respondent, he and
his family members have had an interest in these lots since approximately 1987. In 1995, respondent's
interest was reduced, after a foreclosure, to a one and one-third (1.3%) percent, class B, non-voting
interest in the corporation which owns the lots, with respondent's brother James and his sister Harriet
Dannevig each receiving the same interest.
The property in question has a history of unconsummated development ventures. In the late 1980's, the
prior owner sought to build condominiums there, with respondent acting as the developer's "selling
agent." Soon after this, respondent invested $250,000 in the company owning the lots. After the 1995
foreclosure, the new owner proposed leasing to the United Artists Theaters Company, for construction
of a multiplex theater. The proposal met with public opposition by the community. At a CB 10 meeting
held in April 1995, shortly after the proposal was revealed, not one person spoke in favor of the
proposal. At another meeting, respondent stated that he knew "something good would be happening very
soon" with the lots. Later, in an interview with a local paper, respondent said that he had loaned money
to one of the principals of the owner, but refused to disclose the principal by name (Pet. Ex. 6).
Shortly after the community board rejected the proposed UA theater complex, the developer began
considering a new plan to build residential or assisted living residential housing at the site, one of the
uses which had been proposed by some of the community leaders. While this plan initially met with
support from the community, some controversy emerged as to whether the developer should be granted
a zoning variance to allow the building to be higher than the current zoning allowed.
The use of the lots for a senior assisted living facility was discussed at CB 10's meeting of February 18,
1997. The minutes (Pet. Ex. 7) reflect that a motion was made "to vote to support the land use as
residential or residential/assisted living." Prior to the vote, the chair asked respondent whether he wished
to recuse himself. Respondent said, "[n]o, it is only eliminating the use," to which the chair replied "that
it is up to the individual to recuse himself, unless someone can prove a direct financial interest in this
project as an equal to [the developer]." Respondent replied, "absolutely not" and did not recuse himself,
but instead voted "Yes." The motion then carried 23 to 6 with one abstention.
At the same meeting, another motion was made to "table any vote of confidence or support regarding
the development of the proposed UA Theater site until the zoning application is certified by the City
Planning Commission and presented to CB 10 for review and vote" (Pet. Ex. 7 at pp. 7-8). Respondent
voted against this motion, which was defeated by a vote of 23-12. These two votes by respondent are
alleged by petitioner to have violated the City charter regarding conflicts of interest laws.
Following the February 18 meeting, on February 21, 1997, the community board sent a letter (Pet. Ex.
8) to the Chairman of the City Planning Commission, Joseph B. Rose, supporting the developer's plan.
The letter stated,
At the duly publicized meeting conducted by Community Board Ten on the evening of Tuesday,
February 18, 1997, the Community Board voted to support the developer's concept of residential or
residential/assisted living ... related to the vacant land on [the UA lots.]
According to Commission Counsel David Karnovsky (see Karnovsky Affirmation, p. 2), this letter
"appears intended as an expression of support for the project, in order to encourage the advancement of
a formal proposal through the ULURP process." In a letter (Pet. Ex. 9) dated January 19, 1998, the
developer wrote to the Mayor's Community Assistance Office and characterized the vote and letter from
CB 10 as having "approved" the proposal for a residential assisted living facility.
At a CB 10 meeting on March 17, 1997, respondent voted against a proposal to send a letter to the City
Planning Commissioner requesting that his office reassess the present multiplex movie theater use (see
Pet. Ex. 11 at pp. 4-5). This vote, too, is alleged by petitioner to violate the Charter.
In order to construct a facility of the proposed size, the developer was required to obtain a special
permit from the City Planning Commission. On June 14, 1999, the permit application was reviewed by
CB 10 and approved (see Pet. Ex. 10). Respondent recused himself from this vote.
According to petitioner, the value of the UA lots increased significantly between February 1997 and
October 1997. A March 1997 appraisal (Pet. Ex. 13) commissioned by respondent indicates that on
February 17, 1997, the value of the UA lots was appraised at $1.725 million. According to a deed (Pet.
Ex. 14) for the parcels, commemorating a sale of October 10, 1997, the property sold for $3 million at
this time, an apparent increase in value of $1.3 million.
In a supplemental submission, respondent's counsel challenged petitioner's contention that the value of
the UA lots increased. At respondent's instance, another appraiser opined that the CB 10 vote in
February 1997 did not change the subject property's zoning and therefore "could not have had any effect
on the fair market value" of the property. He also challenged the March 1997 appraisal as "seriously
flawed" in that it undervalued the factors of the property's size and location. He opined that the value of
the property increased "due to an improvement in the Bay Ridge real estate market," which he estimated
climbed by 30% from the beginning of 1997 to the middle of 1998.
According to an affidavit from respondent's son, Charles Capetanakis, the October 1997 transaction was
a "related party transaction," since one individual, Arnold Rosenshein, was a shareholder in both the
company identified as the seller and also in the company taking ownership. According to Charles
Capetanakis, the price set was not solely a reflection of the property's value but instead a price which
would "maximize the tax benefits stemming from the transfer," as well as a price that would reflect
various amounts that the seller had paid for real estate taxes, water, sewer charges, legal fees,
architectural fees, environmental and engineering fees, and consulting fees.
In its supplemental submission, petitioner rejected respondent's arguments as irrelevant, since the
Charter provision prohibits voting where a matter "may" result in economic gain, whether the gain
actually occurs or not. In addition, petitioner attacked Charles Capetanakis's hearsay statement as biased
and unreliable.
ANALYSIS
In this case, petitioner seeks a finding that respondent's participation in the votes at the February 18,
1997, and the March 17, 1997, CB 10 meetings constituted violations of three different Charter
provisions: (1) section 2604(b)(1)(b), concerning public servants taking action where they have an
interest; (2) section 2604(b)(3), concerning public servants attempt to use their position for financial
gain; and (3) section 2604(b)(2), concerning public servants having interests in conflict with their duties.
Although the same actions are being asserted as the predicate for each of the three violations, the three
sections prohibit different conduct and each must be analyzed separately.
Violation of section 2604(b)(1)(b)
The first alleged violation concerns that portion of the Charter specifically addressing interests by
public servants generally. Included in this provision is an exception for community board members
directly applicable to the facts of this case:
A public servant who has an interest in a firm which is not prohibited by subdivision a of this section,
shall not take any action as a public servant particularly affecting that interest, except that ... (b) in the
case of an appointed community board member, such action shall not be prohibited, but no member may
vote on any matter before the community or borough board which may result in a personal and direct
economic gain to the member or any person with whom the member is associated ...
N.Y.C. Charter § 2604 (b)(1)(b) (Lenz & Riecker CD-ROM 2000). Obviously, a threshold issue for
section 2604(b)(1) generally is to ascertain whether respondent possessed an interest in the UA lots
within the meaning of the conflicts law. Section 2601(12) defines "interest" as an "ownership interest,"
which is defined in turn by section 2601(16) as an investment in a firm of $25,000 or more, or
ownership of 5% or more of the firm. It was undisputed that respondent's interest in the UA lots did not
meet this definition of "interest."
Nonetheless, petitioner insists that section 2604(b) (1) (b) was intended to prohibit voting by
community board members not merely on matters affecting an "interest" as defined by the provision, but
also on any matters where a vote might result in any "personal and direct economic gain." As explained
in petitioner's papers, this construction of the provision is consistent with past opinions of the Board. In
Advisory Opinion 93-2 (Jan. 18, 1993), concerning the conflict created by a community board member
who was also a member of a school board, the Board held that the intent of section 2604 (b)(1)(b) "was
to insure that actions taken by a community board are not tainted by questions of self-interest or divided
loyalty on the part of any member." Similarly, in Advisory Opinion 93-3 (Jan. 18, 1993), the Board
concluded that an unpaid director of a local development corporation could vote on a matter affecting
the corporation, "unless the facts and circumstances demonstrate that the vote would result in a personal
and direct economic gain to the member or to a person associated with the member."
In reaching this conclusion, the Board relied upon the legislative history of the provision. In its report,
the Charter Revision Commission wrote that section 2604(b)(1)(b), in order to foster diverse
membership on the community boards, did not prohibit community board members from having
interests in firms affected by community board actions. The Commission noted that the section
"prohibits community board members from voting on any matter before the community board which
may result in a personal and direct economic gain." Report of the New York City Charter Revision
Commission, Vol II (12/86-11/88) at 170. As the agency imparted with authority to construe and enforce
the conflicts law, the Board's interpretation of its enabling statute should be deferred to, so long as the
interpretation has a rational basis. Holtzman v. Oliensis, 240 A.D.2d 254, 659 N.Y.S.2d 732 (1st Dep't
1997), aff'd, 91 N.Y.2d 488, 673 N.Y.S.2d 23 (1998); Appelbaum v. Deutsch, 66 N.Y.2d 975, 977, 499
N.Y.S.2d 373, 374 (1985); Department of Buildings v. Owner, Occupant and Mortgagee of 27 Osgood
Avenue, Staten Island, New York, OATH Index No. 1705/99, report and recommendation at 22-23 (Jan.
18, 2000).
It is true that the provision is subject to at least one alternate interpretation. The opening sentence of
section 2604 (b) prohibits a public servant from taking action which might affect an ownership interest,
as defined elsewhere in the conflicts law. Subsection (b) then removes from this general prohibition
most votes by community board members. The sole exception for community board members is where a
vote results "in a personal and direct economic gain." [FN1]
Based upon the sequence of phrases, it would appear logical that section 2604(b)(1)(b) was intended to
create a relatively high standard for public servants generally, where those public servants possessed a
certain threshold quantity of ownership interest in firms affected by their actions. This standard is
without regard to whether or not the action by the public servant may or may not result in any financial
gain. Subsection (b) of the provision then relaxes the prohibition for community board members, stating
that a member who possesses an ownership interest in a firm may still vote on most matters affecting
that interest. An exception is then made for votes by the community board member "which may result in
a personal and direct economic gain to the member or any person with whom the member is associated."
The manner in which this final exception is framed in the more general language of section 2604 (b)(1)
suggests that it, too, was intended to apply only to community board members with an "interest" as
defined by the conflicts law. Indeed, it is somewhat surprising that the Board would interpret the latter
exception to create a higher standard for community board members, preventing them from voting on
any matters which might result in any "direct economic gain," no matter how small, whereas the
provision would not prohibit activities by other public servants, so long as their "interest" fell below the
statutory threshold. [FN2]
Despite the logical appeal of this reading of section 2604(b)(1)(b), I must nonetheless conclude that the
Board's interpretation is more in harmony with other portions of the conflicts of interest law, particularly
with section 2604(b)(3). It does not seem coincidental that the language of section 2604(b)(1)(b)
prohibiting a vote resulting in "personal and direct economic gain" is similar to section 2604(b)(3),
prohibiting use of a public servant's position for "financial gain" or other "personal advantage." In fact, it
seems likely that the final portion of section 2604(b)(1)(b) was intended to make it clear that section
2604(b)(3) continued to apply to community board members, even though the more general portion of
section 2604(b)(1) might not.
Thus, because the legislative history of section 2604(b)(1)(b) suggests that the provision was intended
to be a general prohibition against community board members voting on any matters which may result in
a "personal and direct economic gain," and because the Board's similar interpretation has a rational basis
consistent with section 2604(b)(3), this construction of the law must prevail.
As accurately argued by petitioner, under this construction of the provision, it is enough to establish a
violation that, at the time of the Board vote, there was a possibility that the vote might result in an
"economic gain" to respondent. In this case, the three votes at issue concerned Board votes on the legal
land use for the UA lots. The votes on February 18 concerned whether "to support the land use [of the
UA lots] as residential or residential/assisted living" and whether to table a similar motion. The vote on
March 17 concerned sending a letter to City Planning in support of reassessment of the use for the
property. Because any of these votes could have facilitated a change in use for the lots, a change which
might have increased the value of the lots, the votes were prohibited by section 2604 (b) (1) (b) in that
they might have resulted in a "personal and direct economic gain" to respondent and to those associated
with respondent. Therefore, respondent should have recused himself from all three votes.
Respondent argues that, because none of the three votes in question concerned Uniform Land Use
Review Procedure (ULURP) applications, the votes were therefore "gratuitous" and "non-binding."
Respondent therefore contends that recusal was not required for these votes. However, as pointed out by
petitioner's counsel, this argument is wrong for three reasons. First, the ULURP votes are no more
binding or determinative than any actions by the community board, which can make recommendations
only to City Planning and lacks final decision-making authority on any of the issues which come before
it. See Affirmation of David Karnovsky, General Counsel to the City Planning Commission. Second, the
fact that respondent recused himself from another non- ULURP vote indicates that not even he
recognizes such a distinction. Third and most importantly, section 2604(b)(1)(b) states "any" matter,
without further qualification, suggesting that the prohibition extends to any vote which might result in
financial gain for a member or for the member's family.
Although it may have some effect upon the appropriate penalty, the factual issue of exactly how much
the value of the property did or did not increase is irrelevant to the violation under section 2604(b)(1)(b).
It is enough to establish a violation that the votes might have resulted in economic gain. It is notable that
respondent does not dispute that the investors, which included respondent, were engaged in a profitmaking venture, and that the reason for the land use change was to permit a redevelopment of the lots
which would satisfy the investors' desire for profits. Because the facts surrounding the redevelopment of
the lots indicate that the change in use might have resulted in an economic gain, there can be little doubt
that respondent's three votes on the change of use matters before the Board violated section
2604(b)(1)(b) of the Charter.
Violation of Section 2604(b)(3)
The second violation alleged refers to the section of the conflicts law prohibiting public employees from
using their position for gain. City Charter section 2604(b)(3) provides:
“No public servant shall use or attempt to use his or her position as a public servant to obtain any
financial gain, contract, license, privilege or other private or personal advantage, direct or indirect, for
the public servant or any person or firm associated with the public servant.” N.Y.C. Charter §
2604(b)(3) (Lenz & Riecker CD-ROM 2000). The Board has held that this provision prohibits a public
employee from writing a book for compensation, the subject matter of which is related to his official
duties and where he might reasonably have been assigned to do similar writing as part of his City job.
Advisory Opinion No. 99-5 (Nov. 8, 1999). In another opinion, the Board concluded that it would be a
violation of Chapter 68 for a public servant to teach a course for compensation about the workings of his
agency. Advisory Opinion No. 99-4 (Nov. 8, 1999).
In applying this provision to the facts of respondent's case, petitioner argues that respondent's voting on
the matters concerning the UA lots constituted a use of his position for an advantage for himself and his
siblings. This raises a factual dispute as to whether there was a change in the value of the UA lots after
respondent's votes and whether, even assuming a change occurred, respondent realized any financial
gain. It is uncontroverted that an appraisal, prepared in March 1997 at respondent's request, valued the
property at $1.725 million for purposes of estimating respondent's interest (see Pet. Ex. 13). In a sales
transaction which occurred in December 1997, the sales price was $3 million (see Pet. Ex. 14). There
can be no dispute that the significant difference between these two evaluations of the lots' worth created
an appearance of a substantial financial gain. In his papers, respondent challenges the validity of both
valuations, of the initial appraisal as understated due to various flawed assumptions and of the $3
million as overstated due to the close relationship between the seller and the buyer, with one individual
having an interest in both.
In truth, the actual value of the lots before and after the votes is largely irrelevant, as pointed out by
petitioner, because it is no more essential in order to establish a (b)(3) violation than it is to establish a
(b)(1)(b) violation. Even if there was no financial gain, respondent still violated section 2604(b)(3) if he
made an "attempt" to obtain such a gain. The issue is more dependent on appearances than of ultimate
facts, for, if respondent's vote seemed like it might result in a gain when the vote was made, it was
improper whether such a gain was actually realized or not. Because CB 10's approval of the change in
land use could have increased the value of the UA lots, making a more profitable development more
likely, respondent's voting on the matters concerning these lots constituted violations of section
2604(b)(3).
There is also little question that respondent "should have known" that his three votes upon the
development matters concerning the UA lots would result in a conflict of interest. In Holtzman v.
Oliensis, 91 N.Y.2d 488, 673 N.Y.S.2d 23 (1998), the Court of Appeals upheld a Board finding that the
former Comptroller of New York City "should have known" of her office's dealings with a bidder on
City bond underwriting and was therefore in violation of section 2604 (b) (3). See City Charter §
2604(a)(6) ("For the purposes of subdivisions a and b of section twenty-six hundred six, a public servant
shall be deemed to know of a business dealing with the city if such public servant should have known of
such business dealing with the city.").
Thus, it does not matter whether respondent himself believed at the time that the vote might have an
effect upon his financial interest. In this regard, respondent's counsel argues in his papers that
respondent's intentions were free of any self-interest in that he was acting out of a sense of "duty to the
community ... to fight against the proposed multiplex theaters." Respondent's affirmation in opposition,
para. 4. It is difficult to believe that respondent did not expect some profit on his investment in this real
estate and did not possess at least some awareness that a change in use for the property might enhance
that investment. However, even if he was oblivious to such a possibility, this does not excuse his voting
on a matter where such a possibility of profit existed and in so doing creating the impression that he was
using his position as a community board member for personal gain.
For these reasons, respondent's actions must be held to be in violation of section 2604(b)(3).
Violation of Section 2604(b)(2)
The final violation alleged refers to the section prohibiting public servants from having outside business
interests in conflict with their public duties. City Charter section 2604(b)(2) provides:
“No public servant shall engage in any business, transaction or private employment, or have any
financial or other private interest, direct or indirect, which is in conflict with the proper discharge of his
or her official duties.”
N.Y.C. Charter § 2604(b)(2) (Lenz & Riecker CD-ROM 2000). Unlike the allegations for the other two
violations, the underlying theory of petitioner's alleged violation of section 2604(b)(2) concerns not
respondent's votes but rather simply having the interest in the UA lots. In his brief, petitioner's attorney
argues that respondent violated section 2604(b)(2) by having an "interest in the UA Lots, that is in
conflict with the proper discharge of his ... duties." Petitioner's memorandum in support of summary
judgment at 11.
Finding a section 2604(b)(2) violation based upon the facts here is problematic. First, that respondent
does not possess an "interest" in the UA lots under the statutory definitions of sections 2601(12) and
(16), as pointed out above. While such an "interest" is not required in either sections 2604(b)(1)(b) or
2604(b)(3), it is apparently required for all section 2604(b)(2) violations where the conflict is created by
a financial investment as it is in respondent's case. Second, upholding a violation for respondent, or any
other community board member, would be in contravention of section 2604(b)(1)(b), which expressly
permits community board members to possess such financial interests: "in the case of an appointed
community board member, such action [affecting an interest in a firm] shall not be prohibited." The sole
qualification of this section is that community board members must refrain from voting on matters
which might result in economic gain. Hence, I do not believe that a community board member, reading
section 2604(b)(2), would assume that it applied to his investments, in light of the conflicting language
of section 2604(b)(1)(b).
The Board's decisions interpreting section 2604(b)(2) confirm the difficulty of applying a remedy under
this provision to a community board member such as respondent. Thus, the Board has held that under
this section, an elected official could not engage in fundraising activities which might be perceived as
"coercive," Advisory Opinion No. 93-15 (May 20, 1993), or which might create the appearance "that the
elected official is pressuring others to provide financial support to a not-for-profit organization."
Advisory Opinion No. 98-14 (Dec. 31, 1998). This section has also been interpreted to prohibit public
servants from working on outside activities at times when they are required to be doing their jobs.
Advisory Opinion No. 98-12 (Dec. 31, 1998). In Advisory Opinion No. 96-8 (Aug. 26, 1996), cited in
the Board's memorandum of law, the Board concluded that a community board chair was obliged to step
down as chair whenever a meeting involved discussions or votes on matters involving firms in which he
possessed an "interest." What is notable in the first two cases is that the conflict created by the outside
activity could most readily be avoided by the public servant forgoing the outside activity. In the last
case, involving a community board chair with an interest such as that possessed by respondent, the
conflict was removed when the chair temporarily resigned his position.
These opinions thus suggest that a section 2604(b)(2) violation involving a financial interest on the part
of a community board member may be avoided by either divestment of the interest or resignation from
the community board. However, if these dual alternatives were applied to the facts of respondent's case,
he would not be permitted to serve as a community board member so long as he had an ownership
interest in the UA lots or any other real estate which might come before the Board. This would defy the
entire purpose of section 2604(b)(1)(b), which, according to the Board's own opinions, was intended to
assure the diversity of the community boards by including local businessmen who might have interests
which would disqualify them from other public positions. See Advisory Opinion 93-3 (Jan. 18, 1993)
("[M]embers of community boards are selected to reflect the interests of the community, including the
local business community, and ... any standards erected to preserve the integrity of decision-making
should not deprive community boards of this desired diversity."). Moreover, adopting a separate analysis
of section 2604(b)(2) for community board members, whereby they are held to be in violation only
where they vote (and hence violate section 2604(b)(1)(b)) makes little sense and would render section
2604(b)(2) as applied identical to section 2604(b)(1)(b), neither a logical nor a necessary result.
For these reasons, I conclude that the drafters of the law intended section 2604(b)(1)(b) to govern the
business interests of community board members. I therefore find no violation of section 2604(b)(2) in
the facts of this case.
FINDINGS AND CONCLUSIONS
1. The first cause of action should be sustained in that respondent's votes at the February 18, 1997
meeting of Brooklyn community board 10 in support of a residential land use for the UA lots and against
a motion to table a vote of support for the zoning application on the UA lots was in violation of sections
2604(b)(1)(b) and 2604(b)(3) of the City Charter.
2. The second cause of action should be sustained in that respondent's vote at the March 17, 1997
meeting of Brooklyn community board 10 against sending a letter to the City Planning Commission to
reassess the use for the UA lots was in violation of sections 2604(b)(1)(b) and 2604(b)(3) of the City
Charter.
3. Respondent's actions did not violate section 2604(b)(2) of the City Charter.
RECOMMENDATION
In determining an appropriate penalty in this case, there are several factors which warrant attention. I
believe some consideration must be given to the recommendation of the Board enforcement staff, which,
in this case, has requested a fine of $10,000 for the two violations which occurred here. [FN3] A
$10,000 fine is comparable to fines in recent cases involving public employees who violated the conflict
laws. In Conflicts of Interest Board v. Hoover, COIB Case No. 99-200 (Oct. 24, 2000), a deputy
commissioner, who misused his office by renting apartments to subordinates and by directing
subordinates to do work on the deputy commissioner's private consulting job, was fined $8,500. In
Conflicts of Interest Board v. Fedora, COIB Case No. 96-404 (May 22, 1998), a former engineer was
fined $3,000 for working as a private consultant on a project he had managed as a City employee. Since
both of these cases involved employees who demonstrated their repentance by fully acknowledging the
impropriety of their actions, respondent's penalty in the instant case should be commensurately higher.
In addition, there can also be little dispute that the value of the UA lots appeared to have increased by
over a million dollars after the CB 10 votes were taken, an amount arguing for a substantial fine. Despite
the efforts by respondent to attack the accuracy of the pre-vote appraisal and also the post-vote sales
figure, the evidence here was overwhelming that there was an increase in the value of the lots between
February 1997 and the end of the year. An appraisal commissioned by respondent himself in February
1997 valued the lots at $1.725 million and a sales transaction took place in October 1997 with a sales
price of $3 million. Even assuming that neither figure was a precise evaluation of the property's fair
market value, as argued by respondent, the two evaluations are sufficient to establish a rise in the
property's overall worth. While the evidence does not suggest that this change in value was solely or
even marginally attributable to any of the votes made by CB 10, the fact remains that these votes could
have been perceived by the public as having been made with a goal of reaping substantial financial
benefits from the development of the lots. The large sums of money at issue here make the appearances
of impropriety all the more troubling.
This being said, there is one significant mitigating factor which should be taken into account when
fashioning an appropriate penalty here. It would appear that the reason that respondent declined to
recuse himself in the February 18, 1997 vote was that he interpreted section 2604(b)(1)(b) in the same
literal way mentioned above, that is, that the prohibition on voting by community board members only
applied where the member possessed an "interest" as defined by the conflicts rules. According to the
meeting minutes, upon being asked by the chair whether he would recuse himself, respondent replied,
"No, it is only eliminating the use." The chair then noted that it was up to the member to recuse himself
"unless someone can prove a direct financial interest." One member then stated that respondent had
previously told him that his financial interest was equal to that of the developer, which respondent
denied and again declined to recuse himself from the vote. See Pet. Ex. 7 at p. 9.
From these discussions, it would appear that respondent was interpreting section 2604(b)(1)(b) as only
applying where a community board member possessed an "interest" as defined in sections 2601(12) and
(16), defining "interest" as an investment in a firm of $25,000 or more, or ownership of 5% or more of
the firm. As pointed out above, this is a rational way to construe the language of this provision, given its
syntactical structure and the positioning of the final clause involving prohibiting votes resulting in "a
personal and direct economic gain." The fact that there is logical support for respondent's construction of
the conflicts law suggests that respondent was making a good faith effort to avoid violating section
2604(b)(1)(b). His error lay in failing to seek an advisory opinion from the Board clarifying this
ambiguous language in section 2604(b)(1)(b) and, more significantly, ignoring the conflict under section
2604(b)(3) of using his position for financial gain. For this reason, his violations would not appear to be
deserving of the maximum penalty of $10,000 per violation, or even $10,000 for both violations.
There are several other mitigating factors here. First, respondent's vote alone would not have changed
the outcome, since for all three votes respondent voted in a comfortable majority (23-6 and 23-12 for the
two February 18 votes and 23-10 for the March 17 meeting). Second, respondent's service on CB 10 was
voluntary and uncompensated, making an extremely high monetary fine seem inappropriate. Third,
respondent recused himself on subsequent votes involving the UA lots. Finally, as pointed out
repeatedly in respondent's papers, none of the votes by CB10 resulted in any actual change in the use for
the UA lots and, like all community board resolutions, were advisory in nature.
On the other hand, the circumstances surrounding respondent's failure to recuse himself on the three
votes does not have the multiple mitigating factors recognized in past cases where the fine has been
nominal. In Matter of Quennell, COIB Case No. 97-60 (June 17, 1997), a member of the Art
Commission with an ownership interest in an architectural firm failed to recuse himself on a vote
approving a project being done by his firm. Taking into account the member's admission of error, his
cooperation, the fact that his vote did not effect the otherwise unanimous vote at the hearing, the fact
that the vote in question was one of twenty-four on the agenda which was approved en masse, and his
record of recusal on all other aspects of the project, the Board levied only a $100 fine. In this case,
respondent has still not admitted that his votes were in violation of the conflicts law. Nor were the three
votes part of a larger agenda, such that respondent might have failed to realize that recusal was
warranted. Cf. Conflicts of Interest Board v. Former Assistant District Attorney, OATH Index No.
538/98 (Nov. 13, 1997) (reduced penalty recommended due to employee's loss of "her job, her income,
her reputation, and quite possibly her profession.").
The penalty must also reflect the fact that, as noted in the Board's papers, the conflict presented by
respondent's real estate interest in the UA lots was so obvious that it received both media attention and
comment from his colleagues on CB 10. In a 1995 newspaper article, it was reported that respondent's
financial stake in the UA lots was well known by one-third of the community board members, who
produced "knowing laughter" when respondent answered a complaint about the lots' cleanliness and
predicted that "something good would be happening very soon." See Pet. Ex. 6. The fact that
respondent's financial interest in the lots was known to the other members of CB 10 was further
underscored by the fact that, prior to the February 18, 1997 vote, the chair asked respondent if he wanted
to recuse himself from voting on the matter concerning the UA lots. Obviously, the chair's question was
informed by the chair's awareness of respondent's economic interest in the property and the need for
recusal from certain votes directly affecting that interest. Despite the heightened sensitivity which
should have been instilled by this conflict which his colleagues on the community board were so
concerned about, respondent chose to believe that no conflict existed and disregard the matter,
interpreting section 2604(b)(1)(b) in a way most convenient for him and ignoring the fact that his votes
could be perceived as using his office for financial gain, as prohibited by section 2604(b)(3).
Respondent's behavior thus persuades me that, even assuming that the violation of section 2604(b)(1)(b)
may have been based upon a good faith reading of the conflicts rules, the conflict created by his
financial interest in the lots was obvious, that respondent should have been well aware that other rules,
besides section 2604(b)(1)(b), were applicable, and that recusal from both votes was necessary in order
to avoid any appearance of improper use of his public office.
For all of these reasons, I recommend a penalty of a $4,000 fine for the violations which occurred here.
I believe that this fine takes into account both respondent's good faith efforts to understand and comply
with section 2604(b)(1)(b), and the appearance problems which his votes created under section
2604(b)(3).
John B. Spooner
Administrative Law Judge
February 27, 2001
FN1. For this reason, respondent's counsel argues that the Board's broad construction of the prohibition
for community board members would prevent members from voting on any matters which might affect
any utility or publicly traded corporation in which they held stock, a higher standard than the standard
applied to public servants generally. See Fiore Affirmation in Opposition, para. 7.
FN2. Another opinion provides limited support for this interpretation. In Advisory Opinion 91-3 (May 7,
1991), the Board considered whether a community board member could participate in discussions on
and vote on matters in which the member had an economic interest. After quoting section 2604(b)(1)(b),
the Board held that the member could participate in discussions but that it would be a violation for a
board member to vote on a matter "in which the member, or anyone with whom the member is
associated, has a personal and direct economic interest." The quoted language suggests that section
2604(b)(1)(b) should apply only where a community board member possesses an "interest" pursuant to
section 2604(b)(1).
FN3. The petition requests a fine of $10,000 "as to each of the two Causes of Action for a total of
$20,000." Petition at para. A. In its memorandum of law, counsel for petitioner requests simply "that the
fine be set at $10,000." Memorandum of law in support of summary judgment, p. 12.