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Monday, November 20, 2017
Insider Trading: State Employee Writes RFP, then Works for Bidders
By News Release @ 8:34 PM :: 821 Views :: Ethics, Hawaii State Government

From State Ethics Comm, ADVISORY OPINION NO. 2017-5 November 20, 2017

The Hawai‘i State Ethics Commission (“Commission”) received a request from a state agency (“Agency”) for an advisory opinion as to whether the State Ethics Code, Hawai‘i Revised Statutes (“HRS”) Chapter 84, prohibits the Agency from contracting with certain entities for the sale of agency inventory. Based on the facts in this case, the Commission concludes as follows: if an employee of the Agency participates in matters relating to the sale of the inventory, and the employee subsequently leaves State employment and assists or represents a person or business in bidding on the same inventory, then HRS § 84-15(b) prohibits the Agency from selling the inventory to that person or business.

I. Facts

Having reviewed the information provided by the Agency, the Commission understands that the Agency originally decided to sell the inventory in 2012. An employee of the Agency worked on matters related to the proposed sale and prepared a Request for Proposals (“RFP”) in draft form (“Draft RFP”). The proposed sale was then deferred. The employee left his employment with the Agency in 2016 (hereinafter, the employee shall be referred to as the “Former Employee”).

The Former Employee terminated his state position with the Agency before the RFP in final form (“Final RFP”) was published and started working for a private company (“Company A”). After the Final RFP was published, the Former Employee began communicating with the Agency about the sale and was granted access to the Agency’s online RFP materials and data room. The Former Employee also participated in several inventory inspections and emailed the Agency a list of RFP-related questions. The questions were detailed in nature, and were seemingly based on the Former Employee’s prior knowledge of the inventory and the Draft RFP he had previously worked on during his employment with the Agency. However, there is no indication that the questions relied upon confidential information that the Former Employee could not have obtained from public documents.

The Former Employee then terminated his employment with Company A and began assisting and/or representing other prospective bidders in the inventory sale. The Former Employee also requested permission from the Agency to access the Agency’s online RFP materials and data room.

The Agency received several proposals in response to the Final RFP. The companies that submitted bids included a company that is affiliated or controlled by Company A, as well as another private company (“Company B”), which named the Former Employee as a consultant and as one of its key personnel in its bid proposal documents.

As the Commission has previously explained, such situations raise the appearance or danger of impropriety because the contracting entity would likely receive an unwarranted advantage over other potential bidders based on the former state employee’s special access to information or contacts within the former agency.  In addition, the former state employee could improperly benefit by trading on his or her “insider knowledge” to secure future employment or business opportunities after leaving the state. 

Based on the facts in this case, the Commission concludes that the Agency is prohibited by HRS § 84-15(b) from contracting with any person or business that was represented or assisted personally by the Former Employee on the matters related to the Final RFP and inventory sale….

read … ADVISORY OPINION NO. 2017-5

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