Opinion No. 92-17

BEFORE THE NEVADA COMMISSION ON ETHICS

In the Matter of the Request for Opinion of CARL G. LOONEY, Professor, University of Nevada, Reno; and JOSEPH N. CROWLEY, Ph.D., President, University of Nevada, Reno

This opinion is in response to an opinion request by Prof. Carl G. Looney to determine (i) whether funds donated to the University of Nevada, Reno Foundation (the "Foundation") were being used for purposes other than those for which the funds were solicited and (ii) whether such funds were used to provide supplemental income, automobiles and expense money. Prof. Looney's letter does not address a specific officer or employee of the University of Nevada, Reno ("UNR"). Professor Looney is an associate professor and director of graduate programs in the Computer Science Department at UNR. This opinion is also in response to an opinion request by Mr. Donald Klasic, Esq., General Counsel of the University of Nevada on behalf of Dr. Joseph N. Crowley, President of UNR, with respect to UNR officers and employees and whether any violation of NRS 281.481(4) has occurred. This Commission has no jurisdiction to render an opinion on the first issue raised by Professor Looney's letter.

The subject matter of this opinion, therefore, is whether President Crowley or other UNR officers or employees, complied with the Nevada Ethics in Government Law, NRS 281.481(4), which provides:

NRS 281.481(4)

A public officer or employee shall not accept any salary, retainer, augmentation, expense allowance or other compensation from any private source for the performance of his duties as a public officer or employee.[1]

Prof. Looney's request does not inquire of specific individuals who are officers or employees of UNR, but is limited to whether a type of activity has occurred and whether it violates NRS Chapter 281.481(4). President Crowley's request also inquires of officers and employees, not specific individuals. Because specific notice and other requirements of procedural due process apply to individuals who are the subject of a request for an opinion, the activities in question will be addressed generically.

The Commission met to hear testimony and receive other evidence in Reno, Nevada, on September 4, 1992. The Commission thereafter deliberated at its meetings on October 2, 1992, October 28, 1992, November 18, 1992, and by telephone conference on January 27, 1993. President Crowley was represented by Donald Klasic, General Counsel for the University of Nevada, Reno, Nevada.

Also present at the September 4, 1992 hearing was the Foundation represented by Michael Melarkey of Avansino, Melarkey, Knobel & McMullen of Reno, Nevada.

Statutory confidentiality of all proceedings was waived by President Crowley; accordingly all meetings of the Commission have been open to the public. President Crowley also waived preliminary proceedings applicable to third party requests (professor Looney's request) under NRS 281.511(2).

FINDINGS OF FACT

1. The Foundation was incorporated on May 7, 1981 under NRS Chapter 82 (formerly NRS 81.290 through 81.340), the private, not for profit corporation law of Nevada. The Foundation was not established by the Legislature or as a result of legislation, nor is it a Department or a part of any state institution. It performs no governmental function as such.

2. The Foundation is organized exclusively for charitable and educational purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code and is considered to be a "satellite" organization which supports another tax exempt organization, namely UNR. (Articles of Incorporation, Article III, pp 1-2.)

3. The object and purposes of the Foundation and the nature of the business to be conducted by it are as follows:

(a) To aid, support and assist the maintenance, promotion, growth, and improvement of UNR, its faculty, staff, students, and facilities, and to enhance and stimulate the quality of education at, and the standards and potentials of, UNR as an institution of higher learning (Articles of Incorporation, Article Ill, p.2);

(b) To receive, maintain, and administer a fund of real and personal property, derived from an sources whatsoever, and subject to the terms of any specific gift, grant, bequest, or devise and to the restrictions set forth below, to use, apply, and distribute the income from and the principal of such a fund exclusively to, for the benefit of, or to carry out the purposes of UNR or any organizations that are affiliated with UNR and are exempt from federal income taxation (Articles of Incorporation, Article Ill, p.2);

(c) To serve as an innovative, flexible, and efficient vehicle to facilitate the solicitation and management of gifts, grants, bequests, and devises for the benefit of UNR (Articles of Incorporation, Article Ill, p.2);

(d) To provide or make available funds for expenditure by the administration of UNR for general or specific administrative purposes, including without limitation defraying capital and ordinary expenses, financing professorships and graduate fellowships, sponsoring lectures, conferences, institutes, and symposia, assisting authors, artists, scholars, scientists, and other persons whose knowledge, talent, and skill contribute importantly to the welfare of humanity, and securing for UNR the benefit of the wisdom, experience, and abilities of distinguished persons who have excelled in their respective fields of endeavor (Articles of Incorporation, Article Ill, pp 2-3);

(e) To grant or provide scholarships, loans, or other assistance to individuals who have demonstrated academic promise or achievement, to encourage and furnish funds for research, public service, and teaching, and otherwise to assist in the development of enhanced and expanded educational opportunities for, and service to, the citizens of the State of Nevada and UNR (Articles of Incorporation, Article Ill, p.3); and

(t) To do and engage in all lawful activities that further or are consistent with the preceding objects and purposes of the Foundation (Articles of Incorporation, Article Ill, p. 3).

4. The members of the Board of Regents of the University of Nevada constitute the membership of the Foundation (Articles of Incorporation, Article VII, p.5). (These members are similar to stockholders in a for profit corporation.)

5. The affairs and management of the Foundation are under the control of the Board of Trustees (Articles of Incorporation, Article VIII, pp. 5-6). (This Board of Trustees is similar to a Board of Directors in a for profit corporation.) The Board of Trustees consists of at least thirteen trustees, each of whom is appointed by the members of the Foundation (Board of Regents[2]) from candidates nominated either by the members (Board of Regents) or the Board of Trustees, to serve for a term of three years (Articles of Incorporation, Article VIII, p.6).

6. The members of the Board of Regents are not on the Board of Trustees.

7. The President of UNR and such other persons as are described in the bylaws serve ex officio as members of the Board of Trustees, but are not entitled to vote with respect to any matter presented to the Board of Trustees (Articles of Incorporation, Article VIII, p.7).

8. The Board of Trustees has the power to make such bylaws as it may deem proper for the management of the affairs of the Foundation (Articles of Incorporation, Article IX, p.7).

9. The President of the Foundation is the UNR Vice President for Development. The Vice President/Secretary of the Foundation is the UNR Executive Director of Development and Alumni Relations. The Vice President/Treasurer of the Foundation is the UNR Director of Finance for Development (Bylaws of the Foundation, Article V, Section I, pp. 8-9).

10. Other officers of the Foundation are elected and appointed by the Board of Trustees (Bylaws, Article V, Section 3, p.9).

11. Current officers of the Foundation are: President -Paul Page (UNR Vice President for Development); Vice President/Secretary - Bernard Loposer (UNR Executive Director of Development and Alumni Relations); Vice President/Treasurer - Jenny Frayer (UNR Director of Finance for Development).

12. The Foundation receives at no cost administrative support and services from officers and employees of UNR. The Foundation also occupies offices in a UNR building at no cost.

13. The Foundation raises and receives funding for its activities in support of UNR principally from private donations.

14. Upon liquidation, dissolution, or winding up of the Foundation, the Board of Trustees is required to dispose of all the assets owned by the Foundation by transferring them to the Board of Regents in trust exclusively for the use and benefit of UNR (Articles of Incorporation, Article XV, p. 10).

15. During the following periods of time, the Foundation provided certain payments as allowances, salary supplements, perquisites or benefits directly to officers or employees of UNR:

(a) During fiscal year of 1986-1987, payments were made by the Foundation directly to three vice presidents and a director of UNR as "allowances" intended to reimburse expenses related to these positions. In addition, the Foundation funded payments for the lease of automobiles for the use of the President, the President's wife and a vice president.

(b) During fiscal year 1987-1988, payments were made by the Foundation directly to four vice presidents and a director of UNR as "allowances" intended to reimburse expenses related to these positions. Payments were also made directly to a dean's assistant as a "salary supplement" to increase the level of compensation. In addition, the Foundation funded payments for the lease of automobiles for the use of the President, the President's wife and five vice presidents.

(c) During fiscal year 1988-1989, payments were made by the Foundation directly to four vice presidents and a director of UNR as "allowances" intended to reimburse expenses related to these positions. Payments were also made directly to two deans and a dean's assistant as a "salary supplements" to increase the levels of compensation. In addition, the Foundation funded payments for the lease of automobiles for the use of the President, the President's wife and six vice presidents.

(d) During fiscal year 1989-1990, payments were made by the Foundation directly to four vice presidents and a director of UNR as "allowances" intended to reimburse expenses related to these positions. Payments were also made directly to one dean and a dean’s assistant as a "salary supplements" to increase the levels of compensation. In addition, the Foundation funded payments for the lease of automobiles for the use of the President, the President's wife, five vice presidents and one dean.

16. During the following periods of time, the Foundation provided funds directly to the Board of Regents for payment to officers and employees of UNR for certain allowances, salary supplements, perquisites and other benefits:

(a) During fiscal year 1990-1991, the Foundation provided funds to the Board of Regents for payments to four vice presidents of UNR and a dean's assistant as “allowances" intended to reimburse expenses related to these positions. Funds were also provided to the Board of Regents for payments to three deans as "salary supplements" to increase the levels of compensation. In addition, the Foundation provided funds to the Board of Regents for the lease of automobiles for the use of the President, the President's wife, four vice presidents and a dean.

(b) During fiscal year 1991-1992, the Foundation provided funds to the Board of Regents for payments to four vice presidents of "allowances" intended to reimburse expenses related to these positions. In addition, the Foundation provided funds to the Board of Regents for the lease of automobiles for the use of the President, the President's wife, an associate vice president and a dean.

17. After July 1, 1992, the Foundation did not provide any more funds to the Board of Regents for "allowances", "salary supplements" or "perquisites" for any UNR officer, employee or spouse.

OPINION

1. While the Foundation is considered to be a "public charity" for the specific and narrow purposes of the Internal Revenue Code, this does not mean the Foundation loses its private corporation status for other purposes, including those under state law. The Foundation appears to be a private corporation, not a public or governmental agency, under the laws of the state of Nevada.[3] This corporation, formed under the private, not for profit corporation laws of Nevada, does not appear to fit into any of the categories of a public entity. Even if the Foundation is considered to be a quasi-public entity or a private entity with a public purpose, however, the same conclusion applies for the reasons stated in this opinion.

2. While the Foundation may be supported by publicly funded employees of UNR who perform work for the Foundation, or may occupy office space at UNR rent free, or receive services from UNR without charge, those circumstances do not change a private, non-profit corporation into a public agency subject to statutes applicable to public government agencies.

3. There is obviously a close connection between the Foundation and UNR. The purposes of the Foundation as defined in its Articles of Incorporation are limited to the public purposes, programs, and activities of UNR. The members of the Board of Regents constitute the Membership of the Foundation, which is analogous to the shareholders of a for-profit corporation. The Regents, acting as members, elect the Board of Trustees. The Officers of the Foundation are officers or directors of UNR and are appointed by the Board of Trustees.

4. While the Foundation shares and supports the public purposes of UNR, is administered by officers and directors of UNR, and its members (shareholders) are the Regents of the University of Nevada, all characteristics which are public in nature, the Foundation in other respects is private in nature, based upon its creation and empowerment as a private, non-profit corporation. In short, while the circumstances of the relationship between the Foundation and UNR are public in character and purpose, the private characteristics of the Foundation nevertheless remain. Accordingly, it is not possible to conclude that Foundation funds which were paid directly to officers and employees of UNR were from a "public source."

5. The Foundation raises and receives funding for its activities in support of UNR principally from private donations. Once funds are paid or donated to and received by the Board of Regents, such funds become public property, or public funds, even when donated from private sources.

6. A salary, retainer, augmentation, expense allowance or other compensation which is paid by the Board of Regents to a public officer or employee is not accepted by the public officer or employee from any private source.

7. For the reasons stated above, the Commission concludes as follows:

(a) The allowances, salary supplements, perquisites or benefits paid by the Foundation directly to UNR officers or employees during fiscal years 1986-87, 1987-88, 1988-89, and 1989-90 described in Finding No. 15 were not in compliance with NRS 281.481(4). The failure to comply with NRS 281.481(4) was not willful, but was in the mistaken belief either that the Foundation was a public entity or that the approval of the Board of Regents, whether given explicitly or implicitly through Foundation (UNR) officers, was sufficient.

(b) The funds provided by the Foundation to the Board of Regents from which the Regents paid allowances, salary supplements, perquisites or benefits to UNR officers or employees during fiscal years 1990-91 and 1991-92 described in Finding No. 16 were in compliance with NRS 281.481(4).[4]

8. The public policy, which is the premise of NRS 281.481(4), is that the publicly elected Board of Regents is charged with responsibility for the mission, goals, policies and administration of the University of Nevada, its universities and community colleges. The execution of that responsibility requires the undivided and undiluted accountability of the officers and employees to the Board of Regents of the University. The jurisdiction to direct those officers and employees must be solely in the Board of Regents, just as must be the jurisdiction to pay, reward, and provide benefits to such officers and employees, whatever the original source of the funds to do so, whether public or private.[5]

9. Implicit in this principle is the notion that just as the Regents have the duty to define the duties and policies of UNR officers and employees, the Regents retain the power to (i) judge and enforce their performance of such duties and policies, and (ii) determine the appropriate compensation, rewards and benefits for such performance, as distinct from a private party.

This is based upon the practice that only the government normally should compensate employees for government work, so that third parties do not reward, compensate, control or influence a government or public employee's decision or service. Accordingly, it is usual for the law to forbid a supplement to a public employee's salary from private or outside sources. It is this same principle which restricts, prohibits or requires disclosure of the receipt of gifts, honoraria or other economic benefits from others when given or paid for activity related to public or government employment.[6]

DATED:  April 20, 1993.

NEVADA COMMISSION ON ETHICS

By:  /s/  THOMAS R. C. WILSON, Chairman