Opinion 03-138

January 29, 2004

Digest:         A full-time judge may not serve as a member of a Compliance and Audit Committee of a charitable organization that operates hospitals and other medical centers, where the duties of the committee include the responsibility of ensuring that the organization’s accounting procedures comply with the law.

Rule:            22 NYCRR 100.4(C)(3); Opinions 01-28 (Vol. XIX); 00-76 (Vol. XIX); 00-18 (Vol.XIX); 98-35 (Vol. XVI); 93-121 (Vol. XI); 92-91 (Vol. X); 92-85 (Vol. X).

Opinion: 

         A full-time judge inquires whether the judge may accept appointment to the Compliance and Audit Committee of a Catholic Health Services (CHS) organization which operates eight hospitals and other health-care centers in the area.

         The Compliance and Audit Committee, according to the committee’s charter, “shall be responsible for providing oversight assistance to the Board of Directors [of CHS] in fulfilling [the Board’s] responsibility relative to auditing, accounting and financial reporting processes, a reliable system of operations, financial and compliance controls, corporate compliance, and the quality and integrity of financial reports of CHS.” The Committee “shall . . . [e]nsure that CHS develops and maintains an effective compliance program that promotes prevention, detection and resolution of instances of conduct that do not conform to Federal and state law, and Federal, State and private payor healthcare program requirements, as well as CHS’s ethical and business practices.” The committee shall also provide “[j]udgments about the quality, not just the acceptability, of accounting principles and the clarity of the disclosure practices used or proposed to be used, and particularly the degree of aggressiveness or conservatism of accounting principles and underlying estimates.”

         Section 100.4(C)(3) of the Rules Governing Judicial Conduct provides that, subject to certain limitations, a judge may serve as a member, officer, director, or non-legal advisor of a religious or charitable organization not conducted for profit.

         In applying that provision, this Committee has stated that a judge may also be a director or non-legal advisor of a non-profit health center (Opinion 98-35 [Vol. XVI]), or a director of a day care center for the elderly (Opinion 92-85 [Vol. X]). Subject to certain conditions regarding disclosure and recusal, a judge may also be a director of a nursing home that is affiliated with the not-for-profit parent corporation of two hospitals (Opinion 00-18 [Vol. XIX]), or the treasurer of a religious-based not-for-profit home and infirmary for the aged (Opinion 01-28 [Vol. XIX]).

         In the present inquiry, the judge would be an advisor to the board of directors, not a director or officer. The judge would not be a non-legal advisor, however, but would be giving legal advice. The responsibilities of the Compliance and Audit Committee, explicitly set forth in its charter, include advising the board regarding compliance of the organization’s accounting and reporting procedures with federal and state law, including federal and state requirements relating to health-care providers. Moreover, the general duty of the committee to judge the “acceptability” of accounting principles and financial-reporting practices entails passing on their legality, albeit in an accounting context.

         In Opinion 00-76 (Vol. XIX), this Committee stated that a judge may not serve on the legislative subcommittee of the Board of Directors of a non-profit hospital, even where the review of legislation is solely for discussion within the hospital, as the judge would essentially be serving as a legal advisor to the hospital. Opinion 92-91 (Vol. X), which stated that a part-time judge may serve on a hospital’s ethics committee to advise on the ethical implications of policies, procedures and treatment decisions, is distinguishable as that involved purely ethical, not legal advice. (But see, Opinion 01-08 [Vol. XIX]).

         This Committee is mindful of its Opinion 93-121 (Vol. XI), which stated that a full-time judge may serve on the legislative committee of a child resource center, the interests of which involve the protection of children and youth. But, service on such a committee in that instance did not entail the giving of legal advice, but merely participation in considering legislative issues affecting an organization devoted to the improvement of the law, the legal system and the administration of justice. Here, because service on the Compliance and Audit Committee entails being a legal advisor, not merely a non-legal advisor, such participation is not permitted.