Executive Search Firm Contract - DOC by vub33762


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									 JOHN D. SPENCER                                                                          CITY HALL
     MAYOR                                                                       YONKERS, NEW YORK 10701-3883

  PHILIP A. ZISMAN                                                                         Ph: 914-377-7000
INSPECTOR GENERAL                                                                          Fax: 914-377-6990

                                            DEPARTMENT OF
                                          INSPECTOR GENERAL
                                            CITY OF YONKERS

                                                                        July 13, 1998

                                            ETHICS OPINION

     TO:             YONKERS BOARD OF ETHICS;
                     OF EDUCATION;




             Ellis Cousens, the President of the Yonkers Board of Education, has
     requested that the Inspector General render an ethics opinion concerning an
     alleged conflict of interest1. It is alleged that Mr. Cousens has a prohibited
     conflict of interest because of his personal dealings with the executive search
              The Inspector General has jurisdiction over, and is empowered to make factual findings
     concerning questions of conflicts of interest within Yonkers municipal government, including the
     Board of Education, pursuant to Yonkers City Charter Section C7-2. Ethics opinions of the
     Inspector General are reported to the City’s Ethics Board and to the party requesting the opinion.

              Initially, the Yonkers Council of Parent Teacher Associations (“PTA”), through its
     President Mary Hertwig, requested that the Yonkers Board of Ethics render an opinion on this
     subject. The Ethics Board, through its Chairman Thomas F. McCarthy, declined to review the
     matter on the grounds that the Yonkers Code of Ethics does not apply to the Board of Education.
     (A copy of the correspondence concerning the jurisdiction of the Ethics Board is included as part
     of the appendix.) Although not cited in the correspondence between the Ethics Board and the
     PTA, New York State General Municipal Law Section 806 makes it clear that the City’s Code of
     Ethics does not apply to the Board of Education because the Board is required to adopt its own
     code of ethics and, indeed, has done so. See infra, p. 6. The City’s Ethics Board only oversees
     the City’s Code of Ethics, and plays no role in interpreting the Board of Education’s ethics policy.

firm of Heidrick and Struggles (hereinafter “H & S”) that the Board retained to
conduct a search for a new superintendent of the Yonkers Public Schools.

       For the reasons set forth herein, I find that there is no prohibited conflict of
interest; and therefore, Mr. Cousens’ dealings with H & S, as outlined below,
were not improper.


       In October or November of 1997, the Trustees of the Yonkers Board of
Education (“Trustees” or “Board”) decided to seek a replacement for the
superintendent of the Yonkers Public Schools.3 The Board agreed to retain an
executive search firm to aid in the selection process. At that time, then Board
Vice President Ellis Cousens, a former vice president for finance for Readers
Digest Corporation, was working with a number of search firms in seeking
personal employment. Mr. Cousens spoke about his personal involvement with
search firms with the Trustees,4 and volunteered to research which firm would be
most appropriate to conduct the superintendent search. Based on Mr. Cousens’
representations, the Board agreed that Mr. Cousens should conduct the
necessary research and make a recommendation as to which firm to retain.

        The practice within the executive search industry is that these firms do not
represent individuals seeking employment. Instead, their clients are the
employers, usually large corporations in both the private and nonprofit sectors,
seeking to fill executive positions. Generally, the search firm works with the
employer to create a profile of the ideal person for the position to be filled. Then
the firm identifies potential candidates and submits a list of the top candidates to
their client to be considered for interviews, which the clients conduct. Ultimate
hiring decisions are made by the client, not the search firm. Search firms

         The facts as set forth herein are based on a review of all relevant documents that are
referenced in the body of this opinion and included in the appendix, and interviews that I
conducted with: the nine present and former Yonkers Board of Education Trustees -- Robert
Beane, Ellis Cousens, Rafael Diaz, Bernadette Dunne, Robert Ferrito, Dominick Iannacone,
Elaine Tsu, Stanley Tvert, and Thomas Weibrecht; Dr. Janet Greenwood of H & S; and Mary
Hertwig, President of the Yonkers Council of Parent Teacher Associations.
           Because of the controversy surrounding the decision to replace the incumbent
superintendent who was under contract until the year 2000, all discussions regarding this subject
were conducted either in executive session where no minutes were kept, or informally between
various Trustees. Thus, the date that the Board decided to replace the superintendent, and some
of the other dates noted herein, are only approximations. Furthermore, because of the informal
manner in which Board Members communicated on this subject, it is not clear as to how well
informed all of the individual Trustees were on all of the facts concerning the efforts to replace the
         Trustees Beane and Iannacone denied any recollection of Mr. Cousens telling them that
he was personally working with search firms when he first agreed to research which firm the
Board should hire. The other seven Trustees, however, did remember that Mr. Cousens told
them that he was working with such firms.

maintain large databases of resumes of executives who serve as both resources
to help identify potential candidates for future searches and as candidates
themselves who will be considered for an appropriate position.

       As a result of his research, Mr. Cousens recommended that the Board
retain H & S. H & S is one of the largest executive search firms in the world. It
has 47 offices worldwide and has conducted executive searches for a broad
spectrum of clients in both the private and public sectors. According to Mr.
Cousens, there was a consensus in the executive search industry that Dr. Janet
Greenwood of H & S was the best person to conduct such a search. H & S and
Dr. Greenwood have conducted searches for some of the most prominent
positions in education in the nation. Their placements include New York City
Public Schools’ Chancellor Rudy Crew and New York State Commissioner of
Education Richard P. Mills, as well as superintendents in the Atlanta, Los
Angeles and Seattle Public Schools.

       Mr. Cousens did not know and had no prior involvement with Ms.
Greenwood before he contacted her on behalf of the Board, and had not
previously worked with H & S in his own personal search for new employment.
Mr. Cousens stated that he told the Board that he had submitted his resume to H
& S before the Board contracted with the firm.

      By resolution, in December of 1997, the Board of Education authorized the
President of the Board to execute a contract with H & S. Thereafter, then Board
President Elaine Tsu did not sign the contract. On advice of the Board’s legal
counsel (memorandum attached to the appendix), Mr. Cousens, as Vice
President of the Board, signed the contract on February 25, 1998.5 (resolution
and contract attached to the appendix)

        After the Board retained H & S, Mr. Cousens served as the Board’s
contact person to the firm. On March 23, 1998, Kaytonia Goode, assistant to Dr.
Greenwood, faxed to Mr. Cousens a draft copy of the superintendent’s position
specifications. The cover letter of the fax, in addition to communicating
information relevant to the search, also made reference to the fact that the firm
had received Mr. Cousens’ resume and had passed it on to two of the firm’s New
York partners for their review. Mr. Cousens provided a copy of the fax cover
letter to all Trustees. Thereafter, a copy of the fax was leaked to Cablevision
Channel 12. On April 21, 1998, Channel 12 News broadcast a story that raised
the question as to whether Mr. Cousens’ personal dealings with H & S created a

          Although there is a factual dispute, which is not relevant to the issues presented here,
as to whether Ms. Tsu actually refused to sign the contract after being authorized by the Board to
do so, clearly Mr. Cousens’ was authorized to sign the contract. See letter of Lawrence Thomas,
Esq. to Ellis E. Cousens dated April 20, 1998 (appendix); Second Class Cities Law Section 55;
People ex rel. Lighton v. McGuire, 31 Misc. 324 (mayor’s contractual powers are solely ministerial
and subject to a court order to compel performance); 1975, Op. Atty. Gen. (inf.)329.

conflict of interest or the appearance of such a conflict. (A copy of the March 23,
1998 fax and fax cover letter is included in the Appendix.)

        According to Dr. Greenwood, she asked Mr. Cousens to send her his
resume when H & S was first being considered for the superintendent’s search.
Dr. Greenwood stated that it is her standard practice to request that the chairman
of a client’s search committee provide a resume to be added to the firm’s data
basis for future reference. Dr. Greenwood was aware that Mr. Cousens was a
former Readers Digest executive seeking employment, but she never considered
him to be a potential candidate for any search that she was conducting. Instead,
she considered him to be a “source” who, because of his background, might be
able to recommend other qualified persons to the firm. She did forward his
resume to the firm’s financial partners in the New York area, but she stated that
Mr. Cousens never asked her to have the firm consider him for searches they
were conducting. Dr. Greenwood stated that Mr. Cousens told her that he was
actively working with a competitor of H & S in his own personal search. She also
stated unequivocally that her firm made no efforts on behalf of Mr. Cousens
because of the receipt of the Yonkers superintendent search. Dr. Greenwood
believed that the firm had not considered Mr. Cousens’ resume for any search
the firm was conducting. Mr. Cousens, however, has stated that another H & S
partner contacted him about being considered for a financial position in a private
company in New York City, but that nothing had materialized from this inquiry.

       There is a disagreement among the Trustees as to whether Mr. Cousens
revealed to the Board that he had sent his resume to H & S before he distributed
the March 23, 1998 fax cover letter that referenced that fact. Mr. Cousens
asserts that he expressly told the other Trustees, at a meeting held in executive
session when H & S was first being considered for the search, that he had
submitted his resume to H & S at its request, and that he had specifically
declined an offer that Dr. Greenwood made to him to be considered for a position
at the University of Michigan.6 Mr. Cousens stated that none of the Trustees
objected to his involvement with H & S. Trustees Diaz, Ferrito, Tvert and
Weibrecht have stated that that they were aware that Mr. Cousens was having
personal dealings with H & S early in the process. Trustees Beane, Dunne,
Iannacone and Tsu have stated that they were unaware of Mr. Cousens’
personal involvement with H & S until receiving the fax cover letter. Mr.
Iannacone recalls a conversation that he had with Mr. Cousens concerning the
Michigan position, but believes that it occurred after he received the March 23
fax. Mr. Cousens believes it occurred much earlier. All Trustees deny leaking
the March 23 fax cover letter to News 12, but believe that one of the other
Trustees is responsible for the leak.

          Dr. Greenwood stated that she discussed the Michigan position with Mr. Cousens but
that she never actually offered to propose him as a candidate.


       State Law Provisions

       Article 18 of the New York State General Municipal Law (“GML”) contains
the provisions of law, which relate to conflicts of interest of municipal officers and
employees, including members of school boards. (GML, Section 800[4],[5]). GML
Section 801, provides that no school board trustee shall have an “interest” in any
contract with the school board when that trustee has the power or duty to (a)
negotiate, prepare, authorize or approve the contract or approve payments
thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or
employee who has any such powers or duties. Clearly, under these provisions of
the GML, if Mr. Cousens were to be found to have an “interest” in the Board’s
contract with H & S, because of his authority as a trustee over this contract, such
an interest would be prohibited under GML Section 801, and that contract would
be void and unenforceable. GML Section 804.

       The threshold question, therefore, is whether Mr. Cousens has an
“interest” in the Board’s contract with H & S because of his personal dealings
with the firm. GML Section 800[3] provides that a trustee has an “interest” in any
contract with the Board if he or she receives a direct or indirect pecuniary or
material benefit as a result of that contract. In other words, a trustee would have
an interest in a contract if he or she accrues a benefit from that contract.

        The facts as set forth above, make clear that Mr. Cousens did not have a
prohibited “interest” in the Board’s contract with H & S. First, there are no
allegations and no facts to support a finding that Mr. Cousens received any direct
or indirect monetary benefit from the contract. Second, there is no support for
finding that Mr. Cousens received some other material benefit from the firm
because of the contract. The facts simply do not support a conclusion that H &
S’s receipt and possible consideration of Mr. Cousens resume for other executive
searches, unrelated to the Yonkers’ superintendent search, was a benefit
bestowed on Mr. Cousens because of H & S’s contract with the Board.

        Furthermore, in evaluating whether an alleged “interest” may create an
impermissible conflict under the General Municipal Law, legal precedents
recognize that when there is no direct or indirect monetary benefit from a
contract, allegations that municipal officers have unlawful interests in contracts
are often too speculative or attenuated to justify a finding of a prohibited conflict
of interest. See e.g., Parker v. Town of Gardiner Planning Board, 184 A.D.2d
937 (3d Dept. 1992)(Planning Board chairperson’s financial relationship to
developer’s principal did not require him to abstain from discussing or voting on
developer’s application for approval of subdivision); 1996 Opns. St. Comp. No.
96-6 (Town supervisor who placed insurance through the same insurance
agency through which the town’s insurance is placed did not have an “interest” in
the town’s insurance contracts); 1981 Opns. St. Comp. No. 81-403 (City water

maintenance supervisor who lends money to the owners of a plumbing supply
company does not have an “interest” in contracts between the municipality and
the company).

        These cases make clear that the mere fact that a municipal official may
have certain connections to and dealings with a company does not create a
conflict of interest. Thus, to find a conflict of interest based on the facts of this
case would appear to be contrary to some of the principles underlying the States’
ethics laws which were intended to proscribe only substantial conflicts of interest
and to make more certain the circumstances giving rise to conflicts of interest on
the part of local officials in order to “protect innocent public officers from
unwarranted assaults on their integrity.” 1996 Opns. St. Comp. No. 96-9, p. 17,
(citing Laws of l964, ch 946, section 1);Hancox v. Bress, 602 N.Y.S.2d
986,989(N.Y. Sup. 1993) Thus, it is clear that Mr. Cousens does not have a
disqualifying “interest” under the General Municipal Law.

      That Mr. Cousens did not have an “interest” in the H & S contract with the
Board of Education does not, however, end the inquiry. Additionally, it must be
determined whether 1) the Board of Education’s code of ethics establish any
independent ethical violations, and 2) whether the facts as presented herein, may
have created an appearance of impropriety.

        Board of Education’s Ethics provisions

        General Municipal Law, Section 806 requires each school district to adopt
a “code of ethics setting forth for the guidance of its officers and employees the
standards of conduct reasonably expected of them.” The Board of Education has
adopted such standards in Sections 1-15 (Conflict of Interest); 3-8.1 (Gifts to
District Employees); and 4-3.6 (Code of Ethics) of the Yonkers Board of
Education Policy Manual. (A copy of the Board’s ethics provisions is included in
the appendix.) As a threshold matter, it appears that the provisions that make up
the Board’s code of ethics are not as comprehensive as GML Section 806
requires; and therefore, it is recommended that the Board review these
provisions and make any additions and changes necessary to bring its code of
ethics into compliance with GML Section 806. 7

       Irrespective of the Board’s need to review its ethics provisions for
conformance with GML 806, it does not appear that Mr. Cousens’ dealings with H
& S violated the Boards’ present ethical provisions. In Conflict of Interest section
1-15 of the Policy Manual, Board Members are required to “make disclosure of

           Specifically, Section 806 requires that local codes of ethics must include standards for:
disclosure by officials and employees of their interest in the legislation before the governing body;
investments by officers and employees that conflict with their official duties; private employment
by officials that conflicts with their official duties; future employment; and disclosure of
information. The local ethics code may also include any other standards that the governing body
deems advisable. (A copy of Section 806 is included in the appendix)

any direct or indirect interest” in a contract with the Board of Education. For the
reasons stated above, Mr. Cousens did not have an “interest” in the H & S
contract; and therefore, he could not have violated Section 1-15 of the Board’s
Policy Manual.

        The only other section of the Board’s ethical provisions that arguably
applies is section 3-8.1 -- Gifts to District Employees. This provision states, in
part, that “[n]o employee is to receive any commission, expense paid trips, or
anything of value from individuals or companies soliciting and/or doing business
with the school district.” While it could be argued that H & S’s consideration of
Mr. Cousens as a candidate in its executive searches is something “of value” that
would be prohibited under this section, I do not believe that is the proper
interpretation of this provision as it relates to the facts of this case.

        First, as a general rule, gifts normally encompass the giving of something
with a pecuniary value. Because search firms work for the employer and not the
individual seeking employment and do not make the ultimate decision as to
employment, it is not clear that they have the ability to bestow a tangible benefit
with a monetary value on a job seeker. Thus, considering an individual as a
candidate in an executive search does not fall within the definition of what is
typically considered a gift.

         Second, in general, ethics laws that prohibit gifts to municipal officials and
employees are designed to prevent the giving of gifts that could reasonable be
expected to influence the official or employee in the performance of his or her
official duties or was intended as a reward for an official action. See e.g., Public
Officers Law Section 73[5] (gifts to State employees). Clearly, there is no
evidence that the limited actions that H & S has undertaken on Mr. Cousens’
behalf were intended to influence or reward him for his official actions.

      Although I find that H & S has not given a gift to Mr. Cousens in this case,
the Board may want to reevaluate this provision of its Policy Manual to give more
guidance on exactly what may encompass a prohibited gift under this policy.

       The Appearance of Impropriety

       Even when there has not been a violation of either State or local ethical
provisions, courts, on occasion, have sometimes found ethical violations based
on the finding of an appearance of impropriety. See, e.g., Zagoreos v. Conklin,
109 AD2d 281 (1985); Matter of Tuxedo Conservation and Taxpayers Assn. V.
Town Bd. of Town of Tuxedo, 69 AD2d 320. These cases are founded on the
principal that it is important that the public be assured that municipal officials
make decisions based on their best judgment of the public interest, without any
suggestion of self-interest or partiality. Anything less would undermine the
proceedings and integrity of government. Zagoreos, supra, at 286. As a general
rule, when there has been no violation of State or local ethics laws, and the

official has disclosed his relationship in the matter being considered, there can be
no appearance of impropriety.

       Whether there may have been an appearance of impropriety herein turns
on whether Mr. Cousens disclosed his personal involvement with H & S to the
Board. Upon review of the facts, I find that Mr. Cousens did adequately reveal
his personal involvement with H & S so as not to create the appearance of any

       First, a majority of the Trustees, including Mr. Cousens, unequivocally
stated that Mr. Cousens expressly told the Board that he had submitted his
resume to H & S prior to the Board entering into a contract with the firm. This
alone is enough to find adequate disclosure to avoid an appearance of

       Second, there is a discrepancy in the accounts of the four Trustees who
stated that Mr. Cousens did not disclose his involvement with H & S. Mr. Beane
and Mr. Iannacone stated that at no time did Mr. Cousens ever inform them that
he was personally working with any executive search firms. Ms. Tsu and Ms.
Dunne, however, both agreed with the other trustees that Mr. Cousens told the
Board of his personal involvement with such firms when he agreed to research
appropriate firms to conduct the superintendent search. Also, even though Mr.
Iannacone stated that he had no knowledge of Mr. Cousens’ involvement with H
& S, he did recall speaking with Mr. Cousens about H & S wanting to consider
him for a position at the University of Michigan. Although it is not clear when this
conversation occurred, it appears that there was a dialogue between Mr.
Cousens and Mr. Iannacone that supports a finding that Mr. Cousens disclosed
his involvement with H & S to Mr. Iannacone. I find that these subtle factual
discrepancies tend to undermine the claim that Mr. Cousens did not disclose his
involvement with H & S.

        Third, Mr. Cousens’ actions were consistent with a finding that he had
disclosed his involvement with H & S to the Board. If he had not made such
disclosure to the Board because he wanted to conceal this information, it would
have been inconsistent for him to have distributed to the other Trustees the
March 23, 1998 fax cover letter which references his personal involvement with H
& S. Indeed, there is nothing in the facts that supports a claim that Mr. Cousens
ever tried to conceal his personal involvement with the firm, rather his actions are
consistent with a finding that he did make the necessary disclosure.

       The above factors, and my general weighing of the creditability of the
Trustees that I interviewed, support the finding that Mr. Cousens disclosed his
involvement with H & S to the Board so as to avoid an appearance of
impropriety. Nonetheless, to avoid a reoccurrence of factual disputes over
whether a Trustee disclosed a potential conflict of interest, it is recommended

that the Board adopt a policy and procedure for requiring all such future
disclosures to be made in writing.


        An evaluation of State and Local Ethics Laws in relation to the facts as set
forth herein, reveals that Board of Education President Ellis Cousens did not
have a prohibited conflict of interest in the Board’s contract with H & S, nor was
there an appearance of impropriety because Mr. Cousens disclosed to the Board
his relationship to H & S concerning his own personal search for employment. In
light of the findings herein, it is recommended that the Board review its ethical
provisions to bring them into compliance with GML Section 806; that the Board
reexamine its definition of a gift under Section 3-8.1 of its Policy Manual to give
better guidance as to what constitutes a gift; and that the Board adopt a policy
and procedure for requiring that all disclosures of potential future conflicts of
interests be made in writing.


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