Opinion No. 94-27 & 94-30

BEFORE THE NEVADA COMMISSION ON ETHICS

In the Matter of the Opinion Request Regarding GOVERNOR BOB MILLER

This Opinion is in response to both first and third-party requests filed with the Nevada Commission on Ethics (Commission) concerning the conduct of Governor Robert Miller. In his request filed with the Commission on July 7, 1994, Governor Miller asked the Commission to determine whether he had a conflict of interest in voting as a member of the state board of examiners on two contracts presented by the Nevada Commission on Tourism for advertising services with R&R Advertising. Mr. Billy Vassiliadis is a principal in R&R Advertising and is Governor Miller's friend and chief political advisor. A similar request was made by Mr. Robert Gagnier, Executive Director of the State of Nevada Employees Association (SNEA), in a letter filed with the Commission on July 8, 1994. Because the requests were identical in nature, they were merged into one opinion request.[1]

A full hearing on the requests was held on July 26, 1994 in Las Vegas, Nevada, at which time the Commission received documentary evidence regarding the subject matter of this Opinion and heard testimony from Governor Miller, Ms. Carol Zucker (Governor Miller's legal counsel), Mr. Thomas Tait (Executive Director of the Nevada Commission on Tourism), Ms. Connie Donohue (Comptroller for R&R Advertising), and Ms. Norah Ann McCoy (legal counsel to SNEA). Mr. Gagnier waived his right to be present at the hearing. Governor Miller waived his statutory right to confidentiality pursuant to NRS 281.511 (4) and the hearing was therefore open to the public. The Commission thereafter deliberated in executive session that same day. Based upon the foregoing, the Commission makes Findings of Fact and renders the Opinion that follows.

The Nevada Commission on Ethics takes jurisdiction in this matter pursuant to NRS 281.511.

FINDINGS OF FACT

1. Robert (Bob) Miller is the duly elected Governor of the State of Nevada pursuant to NRS 281.01 0 and 223.020(1).  As Governor, he is required to sit on the state board of examiners (BOE) pursuant to the Nevada Constitution, Article V, section 21, and NRS 353.010.  The BOE consists of the governor, the secretary of state, and the attorney general. NRS 353.010. The governor serves as chairman. NRS 353.030.

2. The BOE examines all claims against the state except salaries or compensation of officers fixed by law. Nev. Const. art 5, § 21. A majority of the BOE shall constitute a quorum and may discharge any of the duties specified by law. NRS 353.015. NRS 284.173(6) requires each proposed state contract with an independent contractor to be submitted to the BOE.  The contracts do not become effective without the approval of the BOE. Pursuant to NRS 284.173(8), for each contract submitted the BOE must consider: (a) whether sufficient authority exists to expend the money required by the contract; and (b) whether the service which is the subject of the contract could be provided by a state agency in a more cost-effective manner.

3. During the course of a year, the HOE approves approximately 300 contracts.

4. The Nevada Commission on Tourism (NCOT) was created in 1983 to promote tourism and travel in the state of Nevada. The NCOT is composed of the lieutenant governor, who is its chairman, and six members who are appointed by the governor. NRS 231.160 and 231.170. The executive director of the NCOT is also appointed by the governor. NRS 231.210.

5. During 1987 and 1988, Governor Miller served as chairman of the NCOT in his capacity then as lieutenant governor.

6. The NCOT is authorized to enter into contracts with any public or private entities as may be necessary to carry out its duties. NRS 231.230. NRS 284.173 authorizes the NCOT to engage the services of persons as independent contractors, subject to approval by the BOE.

7. The fund for the promotion of tourism was created as a special revenue fund through county and city lodging taxes. NRS 231.250. NRS 244.3352 provides that the board of county commissioners in each county shall impose a tax at the rate of one percent of the gross receipts from the rental of transient lodging in that county upon all persons in the business of providing lodging. NRS 244.3354 requires that three-eighths of the proceeds of the tax imposed pursuant to NRS 244.3352 and any applicable penalty or interest be paid to the department of taxation for deposit with the state treasurer for credit to the fund for the promotion of tourism.

8. Because the NCOT is not a general fund agency, it has the potential for having an unpredictable budget. Therefore, the duration of contracts awarded by the NCOT are for only one year's duration with the provision that if there are adequate funds in the second year of the contract, it would be carried for an additional year .The NCOT has twice needed to appear before the Nevada Legislature’s Interim Finance Committee (IFC) to request additional funds when the revenues generated by the room tax were insufficient to fund the agency' s promotional program.

9. Since the inception of the NCOT, contracts for the promotion of tourism in Nevada were put out to bid every two years in the odd-numbered years. The BOE would vote to approve the NCOT's award of a contract in odd-numbered years, and confirm the NCOT's authority to grant a second-year option of the contract contingent upon the availability of funds, in even-numbered years.

10. Each odd-numbered year, the executive director of the NCOT wrote a request for a proposal (RFP) that was sent to all advertising agencies within the state and to any agency outside of the state that had indicated interest in bidding on the contract. The NCOT executive's staff prepared the bid specifications for the contract. The RFP included a time frame for an initial response, at the conclusion of which each bidding agency was assigned .a test to perform. The field of entrants would be narrowed to those agencies which had successfully completed the test. At a subsequently scheduled public hearing, each agency would be allowed the opportunity to make a presentation of its project to the NCOT. III preparation for the hearings to be conducted on bids, all NCOT commissioners would be given a packet of information about the finalists and all the proceedings would be conducted in an open meeting. The NCOT would ultimately make the determination of the winning bidder. Because the basis of an advertising contract was agency creativity, the lowest bidder was not always granted the bid.

11. The bidding process utilized by the NCOT had been approved by both the State Purchasing Office and -the State Budget Office.

12. In early 1987, the NCOT put an advertising contract out to bid. One of the bidding agencies was R&R/Joyce-Martin Advertising (R&R Advertising). R&R Advertising employs approximately 100 people with offices in both Northern and Southern Nevada. Its chief executive officer is Mr. Billy Vassiliadis, whom Governor Miller has known as a friend and close political advisor for approximately eight years. The former owner of R&R Advertising was Mr. Sig Rogich, with whom Governor Miller has shared a lifelong friendship. Mr. Rogich had been involved in the Miller's first political campaign in 1975 when he ran for justice of the peace. When Mr. Rogich went to Washington, Mr. Vassiliadis assumed the day-to-day operations of R&R. Governor Miller first became associated with Mr. Vassiliadis through R&R Advertising and has subsequently met him during the course of various political campaigns.

13. On March 18, 1987, the NCOT designated R&R Advertising as a finalist for the NCOT advertising contract. In so voting, Governor Miller (then the lieutenant governor) and four other commissioners disclosed that one or more of the firms selected as finalists had done work for them or the companies with which they were associated.

14. On April 9, 1987, following presentations by the finalist agencies, the NCOT selected R&R Advertising, stipulating that the specific contract would be confirmed at the June 16, 1987 meeting. Governor Miller disclosed that he had had past business relationships with R&R and Joyce and Martin.

15. On June 16, 1987, the NCOT awarded R&R advertising a one-year contract to commence in 1988, renewable for a second year contingent on the availability of adequate funds. No expenditures would be authorized until start of the new fiscal year on July 1, 1988. Governor Miller voted in favor of the contract.

16. On June 24, 1987, the BOE authorized the contract and one-year renewal option.

17. On May 5, 1988, Governor Miller (then lieutenant governor) voted with the NCOT to approve R&R's exercise of its one-year contract renewal option for financial year 1989. Governor Miller and three other commissioners disclosed that they or their companies had done business with R&R Advertising or Joyce and Martin Advertising.

18. On May 26, 1988, the BOE authorized renewal of the contract in the amount of $1,140,000.00, effective July 1, 1988 through June 30, 1989.

19. On January 12, 1989, the NCOT directed the executive director to make a presentation to the IFC, one portion of which would be to request increased funding of the advertising agency contracts for the biennium in order to supplement advertising and public relations efforts.

20. On March 1, 1989, the BOE authorized a monetary increase to the R&R contract for the 1989 financial year to $1,300,000.00 contingent upon IFC approval. On March 23, 1989, the IFC unanimously approved the NCOT's request.

21. On April 6, 1989, the NCOT heard presentations from R&R Advertising and three other advertising agencies competing for the 1990 fiscal year advertising contract with the NCOT. On June 12, 1989, the NCOT awarded the 1990 contract to R&R Advertising, with option to renew for financial year 1991. Governor Miller was not present for the vote on this contract.

22. On June 27, 1989, the BOE authorized $1,500,000.00 for the contract with option to renew for one year, the contract to be effective from July 1, 1989, through June 6, 1990.

23. On May 2, 1990, the NCOT voted to exercise its one-year contract renewal option with R&R Advertising for financial year 1991. Governor Miller was absent at the time of the vote. On June 19, 1990, the BOE authorized renewal of the contract in the amount of $1,575,000.00, the contract to be effective July 1, 1990, through June 30, 1991.

24. In January 1990, Governor Miller took office as Governor of Nevada.

25. On April II, 1991, after hearing presentations from several advertising agencies, including R&R Advertising, the NCOT awarded R&R Advertising a $1,650,000.00 advertising contract for the financial year 1992. The contract would be effective July 1, 1991 through June 30, 1992. The NCOT confirmed the contract on May 20, 1991 with an option to renew for financial year 1993.

26. On July 19, 1991, while serving on the HOE, Governor Miller abstained from voting to authorize the NCOT/R&R Advertising contract.

27. In 1991, because the lodging tax revenue was 13.15 % over where it had been the previous year, the NCOT felt "very comfortable" about funding the second-year option. Therefore, on March 2, 1992, the NCOT exercised its one-year contract renewal option with R&R Advertising in the amount of $1,650,000.00, effective July 1, 1992 through June 30, 1993.

28. On May 12, 1992, Governor Miller voted with other HOE members to authorize the renewal of the R&R contract for $1,650,000.

29. In anticipation of the advertising contract for financial year 1994, the NCOT solicited 114 firms. Four of these responded, including R&R Advertising, and one subsequently withdrew. The prices quoted by the remaining two bidders were comparable or higher than R&R Advertising's bid.

30. On May 3, 1993, after reviewing the presentations of the three finalists, the NCOT again selected R&R Advertising, awarding it a new contract in the amount of $1,570,000.00 for financial year 1994, effective July 1, 1993, through June 30, 1994. The contract to provide advertising, marketing, public relations and research services was entered into on May 11, 1993. Paragraph 5 of the contract provided that the compensation payable by the NCOT to R&R Advertising for services performed on behalf of the state pursuant to the agreement may not exceed the sum of $1,570,000.00 without the written consent of the NCOT and prior approval by the HOE.

31. On June 30, 1993, as a member of the HOE, Governor Miller disclosed and abstained from voting to approve the contract “since he had done business with R&R Advertising in the past.”

32. In late 1993, Governor Miller contracted with R&R Advertising for purposes of his 1994 re-election campaign. The contract was paid entirely from campaign contributions. The governor was charged by R&R Advertising for the work the company did on his behalf. He did not receive any free services or any discounts on the services provided him. His contract was at a set rate. R&R Advertising used an industry-accepted standard when computing charges for their clients. Clients would also be billed for miscellaneous charges such as Federal Express and facsimile charges. Other charges included production charges, hourly rates for both in-house and outside artists, plus a management fee which would be paid on a monthly basis.  However, as the 1994 election drew closer, the campaign would be billed more frequently, possibly on a weekly basis. The costs of the special projects that R&R Advertising performed for Governor Miller over the years would amount to approximately $15,000. Governor Miller's campaign was not significant to R&R Revenues; revenue generated by campaign was small, probably less than two percent of gross-profit revenue generated, but in terms of activity, it was a large account.

33. Governor Miller's 1994 campaign was the only one in which R&R Advertising participated at that time. Governor Miller did not have any other accounts with R&R Advertising.

34. Governor Miller has no ownership or financial interest in R&R Advertising.

35. On March 11,1994, the NCOT directed its executive director to make a presentation to the IFC of the legislature, a portion of which was a request for increased funding for the advertising agency contracts for the biennium to mitigate telemarketing material shortages resulting from an unprecedented number of customer inquiries and to update NCOT's consumer/trade video. On May 9, 1994, the IFC unanimously approved the NCOT's requests.

36. On April 14, 1994, the NCOT and R&R Advertising amended the 1994 financial year contract to increase the compensation payable to R&R from $1,570,000.00 to $1, 705,000.00. The amendment to the contract recited in pertinent part as follows:

WHEREAS R&R has been charged with the development of the "Nevada Bonus Book" and it is determined that the most efficient approach is to contract for a total product concept including design, ad sales and publication and whereas the cost of publication was not included in the original contract; and

WHEREAS requests for information packets from R&R' s fulfillment provider are up 17 % and telemarketing calls are up an unprecedented 39% over last year, and [sic] increase in the contract amount is necessary.

NOW THEREFORE, based upon the foregoing premises, Paragraph 5 is hereby amended to increase the compensation payable to R&R by one hundred thirty five thousand dollars ($135,000).

This amendment is not effective until approved by the Nevada State Board of Examiners.

37. On May 9, 1994, the IFC voted to approve NCOT's requests for the expenditure of supplemental funds to enable it to go forward with the second-year option for the R&R Advertising contract.

38. On May, 16, 1994, without disclosing his association with R&R Advertising, Governor Miller voted to approve the aforementioned $135,000.00 amendment to the financial year 1994 NCOT /R&R Advertising contract.

39. On June 20, 1994, without disclosing his association with R&R Advertising, Governor Miller voted to authorize renewal of the NCOT /R&R Advertising contract for financial year 1995, which provided for the maximum payment of $1,925.000.00. The contract was effective from July 1, 1994, until June 30, 1995.

40. R&R Advertising's contracts with the state accounted for approximately five percent of the company's gross profit revenue on a yearly basis.

ANALYSIS AND OPINION

I. General Ethical Principles

Based upon the findings of fact, the Commission concludes that Governor Miller is a public officer as defined by NRS 281.4365(1) and is a member of the executive branch of government as defined in NRS 281.435.

The subject of this opinion is whether Governor Miller had a duty to disclose and to abstain from voting as a member of the Board of Examiners on amendments to or renewals of NCOT's contracts with R&R Advertising, a company whose chief executive officer is a personal friend of Governor Miller's and which acted as Governor Miller's advertising consultant during Governor Miller's 1994 campaign.

The Legislative Declaration and Findings which express the public policy of the Nevada Ethics in Government Law appear at NRS 281.421 and provide:

1. It is hereby declared to be the public policy of this state that:

(a) A public office is a public trust and shall be held for the sole benefit of the people.

(b) A public officer or employee must commit himself to avoid conflicts between his private interests and those of the general public whom he serves.

2. The legislature finds that:

(a) The increasing complexity of state and local government, more and more closely related to private life and enterprise, enlarges the potentiality for conflict of interests.

(b) To enhance the people's faith in the integrity and impartiality of public officers and employees, adequate guidelines are required to show the appropriate separation between the roles of persons who are both public servants and private citizens.

II. Disclosure

The applicable disclosure and voting provisions of the Ethics in Government Law are at NRS 281.501(2) and (3).[2] Regarding the issue of disclosure, NRS 281.501(3) requires public disclosure by a public officer or employee in any matter which would reasonably be affected by his commitment in a private capacity to the interest of others, or in which the officer has a pecuniary interest.

The Commission concludes that Governor Miller's friendship and business association with Billy Vassiliadis and R&R Advertising neither gave him a pecuniary interest of any type defined by law nor did it concern a commitment in a private capacity to the interests of others as defined by law that would require him to make full disclosure. Governor Miller did not receive campaign services at a discount; instead, he was billed in the same manner as any other R&R client. Governor Miller has no ownership or financial interest in R&R Advertising. Although Governor Miller respects and admires Mr. Vassiliadis --calling Mr. Vassiliadis "his closest political advisor" --there was no evidence in the record to suggest that Governor Miller's actions in regard to the NCOT/R&R Advertising contract amendment and renewal were reasonably affected by his relationship with Mr. Vassiliadis.

III.  Abstention

The second analysis pertinent to the question before the Commission is whether Governor Miller, while acting in his legislative[3] capacity as a member of the BOE, was required to abstain from voting on the NCOT/R&R Advertising contract amendment and renewal. NRS 281.501(2) provides that a member of the legislative branch of government is required to abstain from voting on a matter when his pecuniary interest, or his commitment in a private capacity to the interest of others would materially affect the independence of judgment of a reasonable person in his situation. We find that Governor Miller was not required to abstain from voting NCOT/R&R Advertising contract amendment and renewal.

Governor Miller had not participated in the approval of the NCOT/R&R Advertising contracts during odd-numbered years, when the actual awarding of the contracts occurred. Instead, during even-numbered years he voted as one of three BOE members only to authorize the NCOT to fund the contract for an additional year if there was sufficient revenue in the Room Tax Fund. The decision upon which Governor Miller voted was to spend more money to promote the state, not to choose the company that would handle the advertising account. Thus, factually Governor Miller's votes did not invoke the abstention requirement in NRS 281.501(2).

Even had the abstention requirement in NRS 281.501(2) been invoked, the Commission concludes that there was no evidence in the record regarding any pecuniary interest of or commitment to the interest of others by Governor Miller that would have materially affected the independence of judgment of a reasonable person in his situation. A pecuniary interest or a commitment to the interests of others by itself does not mean that one's judgment is no longer independent. The evidence must demonstrate that a reasonable person's independence of judgment would be materially affected by the specific circumstances of the case.

Governor Miller took steps to ensure that no conflict of interest existed between his membership on the BOE and his relationship with R&R Advertising. Governor Miller conferred twice with the Attorney General who assured him that he did not have a conflict of interest in the matter. Based upon her advice, he made the assumption that in even-numbered years it would be proper for him to approve amendments to or renewals of previously approved contracts entered into between R&R Advertising and the NCOT. In even-numbered years the BOE would be merely ratifying the previously approved NCOT/R&R Advertising contract and would not be voting on the substantive terms of the contract itself. Governor Miller assured that he would not be involved in the approval of the new contracts by abstaining on those BOE votes.

The evidence reflects that Governor Miller's 1994 re-election campaign was not significant to R&R Advertising revenues. Although in terms of activity, the account was large, the income generated by the campaign was small, approximately less than two percent of revenue generated. Moreover, at the time R&R Advertising had been hired by Governor Miller in late 1993, that agency had already been granted the NCOT contract. R&R Advertising has provided an advertising and marketing program to the NCOT since 1987. At no time during the contract process had Governor Miller intervened on behalf of R&R Advertising. The NCOT staff prepared the bid specifications for the contract, and the BOE had nothing to do with the preparation of the bid specifications.

Although Governor Miller had a relationship with R&R Advertising and the principals of that company, the evidence indicated that the 1994 campaign activities produced no economic benefit to Governor Miller that was conditioned in any way upon the ultimate approval of the NCOT contracts. Governor Miller's retention of R&R Advertising and Billy Vassiliadis as his campaign consultant would not affect what Governor Miller would do concerning the NCOT contracts in 1994. There was no evidence to demonstrate that in the absence of Governor Miller's personal and professional relationship with R&R Advertising, his votes would have been cast in a different manner.

Based upon the evidence and testimony heard in this case, the Commission cannot conclude that Governor Miller's decision-making process and manner in which he had voted on May 16, 1994 and June 20, 1994 had been affected by his friendship and business relationship with Mr. Vassiliadis and R&R Advertising. Furthermore, the Commission cannot conclude that a reasonable person's judgment voting merely upon the continuance or amendment of a preexisting contract would be unduly affected by his business dealings with one of the parties to the contract. The Commission concludes that Governor Miller's vote to allow the amendment or extension of the contract required little independent judgment other than to determine whether the revenues could justify NCOT's request. Either the revenue was there or it was not, and Governor Miller's independent judgment could have little effect over the fiscal facts.

Accordingly, because there was no duty on the part of Governor Miller to abstain, and Governor Miller's commitment in a private capacity to Billy Vassiliadis and R&R Advertising would not materially affect the independence of judgment of a reasonable person in his situation, Governor Miller was not prohibited from voting on amendments to and renewal of existing R&R Advertising contracts with the NCOT pursuant to NRS 281.501(2).

CONCLUSION

Based upon the record, the Commission sees no evidence of conflict, violation of the Code of Ethical Standards, or any inappropriate conduct in connection with Governor Miller's approval of a contract amendment and renewal concerning NCOT and R&R Advertising done while he was sitting in his legislative capacity as a member of the BOE. The Commission concludes that Governor Miller did not place himself in a position of conflict by participating in the matters referred to herein. Governor Miller did not have in his private capacity either a pecuniary interest or commitment to R&R Advertising or its chief executive officer, Billy Vassiliadis, that would have required him to disclose or abstain from voting on amendments to and renewal of existing R&R Advertising contracts with the Nevada Commission on Tourism pursuant to NRS 281.501(2) and (3).

DATED:  December 28, 1995.

NEVADA COMMISSION ON ETHICS

By:  /s/  William R. Morse, Vice Chairman