A585

ASSEMBLY, No. 585

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblymen LUSTBADER and BAGGER

An Act regulating transactions of certain State officials with the State, providing penalties therefor and amending and supplementing P.L.1971, c.182.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1971, c.182 (C.52:13D-13) is amended to read as follows:

2. As used in this act, and unless a different meaning clearly appears from the context, the following terms shall have the following meanings:

a. "State agency" means any of the principal departments in the Executive Branch of the State Government, and any division, board, bureau, office, commission or other instrumentality within or created by such department, the Legislature of the State and any office, board, bureau or commission within or created by the Legislative Branch, and, to the extent consistent with law, any interstate agency to which New Jersey is a party and any independent State authority, commission, instrumentality or agency. A county or municipality shall not be deemed an agency or instrumentality of the State.

b. "State officer or employee" means any person, other than a special State officer or employee (1) holding an office or employment in a State agency, excluding an interstate agency, other than a member of the Legislature or (2) appointed as a New Jersey member to an interstate agency.

c. "Member of the Legislature" means any person elected to serve in the General Assembly or the Senate.

d. "Head of a State agency" means (1) in the case of the Executive Branch of government, except with respect to interstate agencies, the department head or, if the agency is not assigned to a department, the Governor, and (2) in the case of the Legislative Branch, the chief presiding officer of each House of the Legislature.

e. "Special State officer or employee" means (1) any person holding an office or employment in a State agency, excluding an interstate agency, for which office or employment no compensation is authorized or provided by law, or no compensation other than a sum in reimbursement of expenses, whether payable per diem or per annum, is authorized or provided by law; (2) any person, not a member of the Legislature, holding a part-time elective or appointive office or employment in a State agency, excluding an interstate agency, or (3) any person appointed as a New Jersey member to an interstate agency the duties of which membership are not full-time.

f. "Person" means any natural person, association or corporation.

g. "Interest" means (1) the ownership or control of more than 10% of the profits or assets of a firm, association, or partnership, or more than 10% of the stock in a corporation for profit other than a professional service corporation organized under the "Professional Service Corporation Act," P.L.1969, c.232 (C.14A:17-1 et seq.); [or] (2) the ownership or control of more than 1% of the profits of a firm, association, or partnership, or more than 1% of the stock in any corporation, which is the holder of, or an applicant for, a casino license or in any holding or intermediary company with respect thereto, as defined by the "Casino Control Act," P.L.1977, c.110 (C.5:12-1 et seq.)[.]; or (3) applicable percentages of profits, assets or stock as set forth in (1) and (2) above constituting the beneficial interest of a member of the Legislature or a State officer or employee, in the principal or income of a trust, regardless of the identity of the trustee, restrictions on the disposal of the assets of the trust or limitations on communications with the trustee, and commonly referred to as a "blind trust" or "qualified trust." The provisions of this act governing the conduct of individuals are applicable to shareholders, associates or professional employees of a professional service corporation regardless of the extent or amount of their shareholder interest in such a corporation.

h. "Cause, proceeding, application or other matter" means a specific cause, proceeding or matter and does not mean or include determinations of general applicability or the preparation or review of legislation which is no longer pending before the Legislature or the Governor.

i. "Member of the immediate family" of any person means the person's spouse, child, parent or sibling residing in the same household.

(cf: P.L.1987, c.432, s.2)

2. (New section) The depositing of assets in a trust regardless of the identity of the trustee, restrictions on the disposal of the assets of the trust or limitations on communications with the trustee, commonly referred to as a "blind trust" or "qualified trust," or similar instrument, by a member of the Legislature, State officer or employee, where a beneficial interest is retained in the principal or income of the trust by a member, State officer or employee or spouse or minor or dependent child of the member, State officer or employee, shall not eliminate any of the restrictions imposed by this act, P.L.1971, c.182 (C.52:13D-12 et seq.) or any supplement thereto or discharge any responsibility for compliance with the provisions of these laws.

3. Section 4 of P.L.1971, c.182 (C.52:13D-15) is amended to read as follows:

4. No member of the Legislature or State officer or employee shall represent, appear for, or negotiate on behalf of, or agree to represent, appear for, or negotiate on behalf of, whether by himself or by or through any partnership, firm or corporation in which he has an interest or by any partner, officer or employee of any such partnership, firm or corporation any person or party other than the State in any negotiations for the acquisition or sale by the State or a State agency of any interest in real or tangible or intangible personal property, or in any proceedings relative to such acquisition or sale before a condemnation commission or court; provided, however, nothing contained in this section shall be deemed to prohibit any person from representing himself in [negotiations or] condemnation proceedings concerning his own interest in real property.

A member of the Legislature or a State officer or employee may participate in the sale to the State or a State agency of real property owned in whole or in part by him, upon prior approval of the Executive Commission on Ethical Standards or Joint Legislative Committee on Ethical Standards, as appropriate, if the following are found:

a. There is no undue influence by the member, State officer or employee;

b. A competitive process was available and will be utilized;

c. The member, State officer or employee is not directly involved in and in control of the negotiation process with the State or State agency;

d. The transaction is advantageous to the State or State agency;

e. There is an adequate review process in connection with the transaction;

f. The member, State officer or employee does not hold a position the specific duties or responsibilities of which would make approval of the transaction inappropriate.

(cf: P.L.1971, c.182, s.4)

4. Section 8 of P.L.1971, c.182 (C.52:13D-19) is amended to read as follows:

8. a. No member of the Legislature or State officer or employee, or special State officer or employee having any duties or responsibilities in connection with the purchase or acquisition of property or services by the State agency where he is employed or is an officer, shall knowingly himself, or by his partners or through any corporation which he controls or in which he owns or controls more than 1% of the stock, or by any other person for his use or benefit or on his account, undertake or execute, in whole or in part, any contract, lease, agreement, sale or purchase of the value of $25.00 or more, made, entered into, awarded or granted by any State agency, except as provided in subsection b. of this section. [No special State officer or employee having any duties or responsibilities in connection with the purchase or acquisition of property or services by the State agency where he is employed or an officer shall knowingly himself, by his partners or through any corporation which he controls or in which he owns or controls more than 1% of the stock, or by any other person for his use or benefit or on his account, undertake or execute, in whole or in part, any contract, agreement, sale or purchase of the value of $25.00 or more, made, entered into, awarded or granted by that State agency, except as provided in subsection b. of this section.] The restriction contained in this subsection shall apply to the contracts of interstate agencies to the extent consistent with law only if the contract, agreement, sale or purchase is undertaken or executed by a New Jersey member to that agency or by his partners or a corporation in which he owns or controls more than 1% of the stock.

b. The provisions of subsection a. of this section shall not apply to (a) purchases, contracts, agreements or sales which (1) are made or let after public notice and competitive bidding or which (2), pursuant to section 5 of chapter 48 of the laws of 1944 (C.52:34-10) or such other similar provisions contained in the public bidding laws or regulations applicable to other State agencies, may be made, negotiated or awarded without public advertising for bids, or (b) any contract of insurance entered into by the Director of the Division of Purchase and Property pursuant to section 10 of article 6 of chapter 112 of the laws of 1944 (C.52:27B-62), if such purchases, contracts or agreements, including change orders and amendments thereto, shall receive prior approval of the Joint Legislative Committee on Ethical Standards if a member of the Legislature or State officer or employee or special State officer or employee in the Legislative Branch has an interest therein, or the Executive Commission on Ethical Standards if a State officer or employee or special State officer or employee in the Executive Branch has an interest therein.

(cf: P.L.1987, c.432, s.5)

5. Section 10 of P.L.1971, c.182 (C.52:13D-21) is amended to read as follows:

10. (a) The Executive Commission on Ethical Standards created pursuant to P.L.1967, chapter 229 is continued and established in the Department of Law and Public Safety and shall constitute the first commission under this act.

(b) The commission shall be composed of seven members appointed by the Governor from among State officers and employees serving in the Executive Branch. Each member shall serve at the pleasure of the Governor during the term of office of the Governor appointing him and until his successor is appointed and qualified. The Governor shall designate one member to serve as chairman and one member to serve as vice-chairman of the commission.

(c) Each member of the said commission shall serve without compensation but shall be entitled to be reimbursed for all actual and necessary expenses incurred in the performance of his duties.

(d) The Attorney General shall act as legal adviser and counsel to the said commission. He shall upon request advise the commission in the rendering of advisory opinions by the commission, in the approval and review of codes of ethics adopted by State agencies in the Executive Branch and in the recommendation of revisions in codes of ethics or legislation relating to the conduct of State officers and employees in the Executive Branch.

(e) The said commission may, within the limits of funds appropriated or otherwise made available to it for the purpose, employ such other professional, technical, clerical or other assistants, excepting legal counsel, and incur such expenses as may be necessary for the performance of its duties.

(f) The said commission, in order to perform its duties pursuant to the provisions of this act, shall have the power to conduct investigations, hold hearings, compel the attendance of witnesses and the production before it of such books and papers as it may deem necessary, proper and relevant to the matter under investigation. The members of the said commission and the persons appointed by the commission for such purpose are hereby empowered to administer oaths and examine witnesses under oath.

(g) The said commission is authorized to render advisory opinions as to whether a given set of facts and circumstances would, in its opinion, constitute a violation of the provisions of this act or of a code of ethics promulgated pursuant to the provisions of this act.

(h) The said commission shall have jurisdiction to initiate, receive, hear and review complaints regarding violations, by any State officer or employee or special State officer or employee in the Executive Branch, of the provisions of this act or of any code of ethics promulgated pursuant to the provisions of this act. Any complaint regarding a violation of a code of ethics may be referred by the commission for disposition in accordance with subsection 12(d) of this act.

(i) Any State officer or employee or special State officer or employee found guilty by the commission of violating any provision of this act or of a code of ethics promulgated pursuant to the provisions of this act shall be fined not less than[$100.00] $500.00 nor more than[$500.00] $1,500.00, or not less than $500.00 nor more than $7,500.00 in the case of violations of sections 4 or 8 of this act (C.52:13D-15 or 52:13D-19), which penalty may be collected in a summary proceeding pursuant to the Penalty Enforcement Law (N.J.S.2A:58-1), and may be suspended from his office or employment by order of the commission for a period of not in excess of [1 year] 2 years. If the commission finds that the conduct of such officer or employee constitutes a willful and continuous disregard of the provisions of this act or of a code of ethics promulgated pursuant to the provisions of this act, it may order such person removed from his office or employment and may further bar such person from holding any public office or employment in this State in any capacity whatsoever for a period of not exceeding 5 years from the date on which he was found guilty by the commission.

(cf: P.L.1971, c.182, s.10)

6. Section 11 of P.L.1971, c.182 (C.52:13D-22) is amended to read as follows:

11. (a) The Joint Legislative Committee on Ethical Standards created pursuant to the provisions of P.L.1967, chapter 229, as continued and established pursuant to P.L.1971, c.182, is continued and established in the Legislative Branch of State Government with the addition of the public members as set forth in this section.

(b) The joint committee shall be composed of 12 members as follows: four members of the Senate appointed by the President thereof, no more than two of whom shall be of the same political party; four members of the General Assembly, appointed by the Speaker thereof, no more than two of whom shall be of the same political party; and four public members, one appointed by the President of the Senate, one appointed by the Speaker of the General Assembly, one appointed by the Minority Leader of the Senate and one appointed by the Minority Leader of the General Assembly. No public member shall be a lobbyist or legislative agent as defined by the "Legislative Activities Disclosure Act of 1971," P.L.1971, c.183 (C.52:13C-18 et seq.), a full-time State employee or an officer or director of any entity which is required to file a statement with the Election Law Enforcement Commission, and no former lobbyist or legislative agent shall be eligible to serve as a public member for one year following the cessation of all activity by that person as a legislative agent or lobbyist. The legislative members shall serve until the end of the two-year legislative term during which the members are appointed. The public members shall serve for terms of two years and until the appointment and qualification of their successors. The terms of the public members shall run from the second Tuesday in January of an even-numbered year to the second Tuesday in January of the next even-numbered year, regardless of the original date of appointment. Notwithstanding the terms of the public members as established in this section, the public members first appointed shall serve from their initial appointments, all of which shall be made not later than the 60th day following the effective date of this act, until the second Tuesday in January of the next even-numbered year. Vacancies in the membership of the joint committee shall be filled in the same manner as the original appointments, but for the unexpired term only. Public members of the joint committee shall serve without compensation, but shall be entitled to be reimbursed for all actual and necessary expenses incurred in the performance of their duties.

(c) The joint committee shall organize as soon as may be practicable after the appointment of its members, by the selection of a chairman and vice chairman from among its membership and the appointment of a secretary, who need not be a member of the joint committee.

(d) The Legislative Counsel in the Office of Legislative Services shall act as legal adviser to the joint committee. He shall, upon request, assist and advise the joint committee in the rendering of advisory opinions by the joint committee, in the approval and review of codes of ethics adopted by State agencies in the Legislative Branch, and in the recommendation of revisions in codes of ethics or legislation relating to the conduct of members of the Legislature or State officers and employees in the Legislative Branch.

(e) The joint committee may, within the limits of funds appropriated or otherwise available to it for the purpose, employ other professional, technical, clerical or other assistants, excepting legal counsel, and incur expenses as may be necessary to the performance of its duties.

(f) The joint committee shall have all the powers granted pursuant to chapter 13 of Title 52 of the Revised Statutes.

(g) The joint committee is authorized to render advisory opinions as to whether a given set of facts and circumstances would, in its opinion, constitute a violation of the provisions of this act, of a code of ethics promulgated pursuant to the provisions of this act or of any rule of either or both Houses which gives the joint committee jurisdiction and the authority to investigate a matter.

(h) The joint committee shall have jurisdiction to initiate, receive, hear and review complaints regarding violations of the provisions of this act or of a code of ethics promulgated pursuant to the provisions of this act. It shall further have such jurisdiction as to enforcement of the rules of either or both Houses of the Legislature governing the conduct of the members or employees thereof as those rules may confer upon the joint committee. A complaint regarding a violation of a code of ethics promulgated pursuant to the provisions of this act may be referred by the joint committee for disposition in accordance with subsection 12(d) of this act.

(i) Any State officer or employee or special State officer or employee in the Legislative Branch found guilty by the joint committee of violating any provisions of this act, of a code of ethics promulgated pursuant to the provisions of this act or of any rule of either or both Houses which gives the joint committee jurisdiction and the authority to investigate a matter shall be fined not less than $500.00 nor more than $1,500.00, or not less than $500.00 nor more than $7,500.00 in the case of violations of sections 4 or 8 of this act (C.52:13D-15 or 52:13D-19), which penalty may be collected in a summary proceeding pursuant to "the penalty enforcement law" (N.J.S.2A:58-1 et seq.), and may be reprimanded and ordered to pay restitution where appropriate and may be suspended from his office or employment by order of the joint committee for a period not in excess of [1 year] 2 years. If the joint committee finds that the conduct of such officer or employee constitutes a willful and continuous disregard of the provisions of this act, of a code of ethics promulgated pursuant to the provisions of this act or of any rule of either or both Houses which gives the joint committee jurisdiction and the authority to investigate a matter, it may order such person removed from his office or employment and may further bar such person from holding any public office or employment in this State in any capacity whatsoever for a period of not exceeding 5 years from the date on which he was found guilty by the joint committee.

(j) A member of the Legislature who shall be found guilty by the joint committee of violating the provisions of this act, of a code of ethics promulgated pursuant to the provisions of this act or of any rule of either or both Houses which gives the joint committee jurisdiction and the authority to investigate a matter shall be fined not less than $500.00 nor more than $1,500.00, or not less than $500.00 nor more than $7,500.00 in the case of violations of sections 4 or 8 of this act (C.52:13D-15 or 52:13D-19), which penalty may be collected in a summary proceeding pursuant to "the penalty enforcement law" (N.J.S.2A:58-1 et seq.), and shall be subject to such further action as may be determined by the House of which he is a member. In such cases the joint committee shall report its findings to the appropriate House and shall recommend to the House such further action as the joint committee deems appropriate, but it shall be the sole responsibility of the House to determine what further action, if any, shall be taken against such member.

(cf: P.L.1991, c.505)

7. This act shall take effect on the second Tuesday in January next following enactment and shall apply to transactions entered into after the effective date.

STATEMENT

There is confusion, conflict and redundancy in the law governing the transaction of business between legislators and State officers and employees, and the State.

The purpose of this bill is to articulate the terms and conditions under which legislators and State officers and employees may do business with the State in the sale of real estate, leasing of real estate and other financial transactions.

The bill makes clear that legislators and State officers and employees may not lease real property to the State of New Jersey unless there is an open, competitive and publicly advertised process. Presently, contracts for the sale of goods may be made between State officials and the State only where the contracts are publicly bid.

Further, the bill authorizes the sale of real property by State officials to the State or a State agency only where there has been prior approval of the Executive Commission on Ethical Standards or Joint Legislative Committee on Ethical Standards, as appropriate. This prior approval can only be granted if there is a finding there was no undue influence in the transaction; that a competitive process was employed; that the State official had no direct involvement in the transaction; that the transaction is advantageous to the State; that there is an adequate review process in connection with the transaction; and that the State official holds no particular position which would make the approval of the transaction inappropriate.

The bill dissolves the myth of the use of the "blind trust" or "qualified trust" as a vehicle to shield transactions between State officials and the State by declaring them of no effect in satisfying the requisites of the Conflicts of Interest Law.

Also, the bill increases the penalties for violations of the provisions of the Conflicts of Interest Law regarding the sale or lease of property, on the basis that there would or could be significant financial gain from such transactions.

Regulates real estate and contractual transactions by State officials with the State and eliminates the use of "blind trusts."