OPINION NO. 80-23
A member of the House of Delegates (the Delegate) has requested an opinion from the Commission as to whether a partnership interest in a law firm is reportable on Schedule E of the financial disclosure statement required by Title 4 of Maryland Public Ethics Law (Md. Code Ann., Art. 40A, the Law). If such interest is reportable, the Delegate further inquired as to whether the requirements of Schedule E can be met by disclosure of income received by the firm from the State, rather than disclosure of his total compensation from the firm as set forth in §4-103(e)(3) of the Law.
The Delegate indicates that his primary employment is as an attorney, practicing in partnership with one other attorney. He states that the firm is not incorporated or otherwise organized as a professional association, but operates strictly as a partnership in which he and his partner each hold an ownership interest. The Delegate indicated that this firm does business with the State, as his partner has served as a representative of the Maryland Automobile Insurance Fund (MAIF) both prior to formation of the partnership and on a continuing basis. The Delegate's partner handles all of this MAIF work, the total value of which exceeds $5,000 on a calendar year basis.
Sections 4-101 and 4-102 of the Law require officials, including members of the General Assembly, to submit financial disclosure statements containing information set forth in §4-103 of the Law. (See §§1-201 (v) and (cc) for the definition of "official.") Section 4-103 requires reporting:
1) of interests in business entities (other than corporations) doing business with the State (subsection (c), Schedule C of the Financial Disclosure Statement);
2) of all offices, directorships and salaried employment with a corporation or other business entity doing business with the State (subsection (e), Schedule E of the Financial Disclosure Statement); and
3) of the name and address of each business entity wholly or partially owned and from which income is received (subsection (h), Schedule H of the Financial Disclosure Statement).
"Doing business with the State" is defined in §1-201(d) of the
Law as, in part,
being a party to any one or any combination of sales, purchases, leases, or contracts to, from, or with the State, or any agency thereof, involving consideration of $5,000 or more on cumulative basis during the *reporting period]...
Section 1-201(c) of the Law defines a business entity to be "any
entity, regardless of form." We believe a partnership such as the
Delegate's firm must be viewed as a business entity under this
definition.1 Further, in implementing near identical reporting
requirements under the prior law (see footnote 1), the Financial
Disclosure Advisory Board determined that law partnerships, in
particular, were business entities, and that agreements by the State
to pay such firms legal fees in excess of the statutory amount (then
$10,000 rather than $5,000) for legal representation of a State agency
constituted doing business with the State.2
As the Delegate's firm apparently has a contract with a State agency (MAIF)3 which involves $5,000 or more, it is thus an unincorporated business entity doing business with the State. He would thus be required to complete Schedule C of the Financial Disclosure Statement providing information concerning interests in nonincorporated entities doing business with the State as required by §4-103(c) of the Law. As a partnership owner of the firm he must also complete Schedule H of the Statement, disclosing the name and address of a business entity owned by him in accordance with §4-103(h) of the Law. The Delegate has in fact included such disclosures on his submitted form. He must also provide the information required on Schedule E of the Statement, if his interest in the firm is viewed as that of an officer or director or as salaried employment in accordance with the filing requirements of §4-103(e) of the Law.
We believe that the terms "office", "directorship" and "salaried employment" in §4-103(e) must be read as they are normally and practically used in business affairs, and as they are used in the context of other Maryland Laws regulating business activities. In this context, a partnership interest in a business entity is that of a co-owner of the entity. See Md. Code Ann., Corp. & Ass'ns., §9-101(f). This interest is distinguishable from that of an office or directorship. Further, the terms officer and director have specific meanings in the context of business entities. A director is an individual who has management responsibility over a corporation's business affairs. Md. Code Ann., Corp. & Ass'ns., §2-401(a). An officer is an individual responsible for executing the duties assigned by a corporation's bylaws, and by resolution of the corporation's board of directors. Md. Code Ann., Corp. & Ass'ns., §2-414. A partnership interest is also distinguishable from salaried employment. A partner is not a salaried employee for business purposes because he is not subject to the control of a superior. See Kay v. Gitomer, 253 Md. 32, 251 A.2d 853 (1969).
Applying these concepts, we conclude that the type of ownership interest held by the Delegate as a partner in a law firm does not constitute an office, directorship or salaried employment required to be disclosed by §4-103(e) of the Law. We recognize that some law firms otherwise functionally similar to the Delegate's partnership are for various reasons incorporating and organizing themselves as professional associations, where firm members are more likely to hold positions as officers or directors or to be salaried employees of the firm. Individuals serving in such capacities would be required to disclose the information required by §4-103(e) of the law. We realize that this could result in a somewhat anomalous situation as these persons would probably be fulfilling the same functions and serving in the same relationship to the State as the Delegate's firm. However, we believe that where the language of the Law is clear, our responsibility is to apply the Law according to its terms. Consideration of the possible inconsistency resulting from application of §4-103(e) as it is written is a matter for the Legislature.
As we have determined that the Delegate need not report on Schedule E, it is not necessary to address the question raised in the second part of his request.
Herbert J. Belgrad, Chairman
Jervis S. Finney
Reverend John Wesley Holland
Barbara M. Steckel
Date: November 20, 1980
1 This view is consistent with definitions under the predecessor financial disclosure law, which was substantially similar to the Law (Md. Code Ann., Art. 33, sections 29-1 et seq., repealed Maryland Session Laws, 1979, Ch. 513). Section 29-2 of the prior law defined a business entity to include a "corporation, general or limited partnership, sole proprietorship, joint venture, unincorporated association, real estate investment trust or other business trust." As there is no evidence of an intention to substantially narrow coverage of the Law in its re-enactment, the broader language of §1-201(c) should be read as including at least those specific entities set forth in §29-2.
2 Opinion No. 4, Financial Disclosure Advisory Board. The firm in that case was a professional association; however, the Opinion noted that the result would have been the same even if the firm had been a partnership.
3 See Attorney General Opinion at 61 OAG 567 (1976) in which the Attorney General concluded that MAIF is a State Agency.