The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5490 May 14, 1979 FINANCIAL INSTITUTIONS BUREAU: Financial disclosure by employees BANKS AND BANKING: Financial disclosure by employees of Financial Institutions Bureau CONSTITUTIONAL LAW: Right to privacy PUBLIC OFFICERS AND EMPLOYEES: Disclosure of personal financial information A requirement by the Financial Institutions Bureau that the Commissioner, the Deputy Commissioner, examiners, and employees who significantly or directly participate in the regulation or auditing of any institution regulated by the Bureau divulge details of personal financial indebtedness does not violate the right to privacy where such a requirement is limited to relevant financial information. Any disclosure requirement required of persons other than the Commissioner, Deputy Commissioner, Bureau examiners, or any employees who significantly or directly participate in the regulation or auditing of any business, industry, or institution is unconstitutional. Richard J. Francis Commissioner Financial Institutions Bureau Department of Commerce 3rd Floor Law Building Lansing, Michigan You have requested my opinion on whether a requirement that certain employees of the Financial Institutions Bureau disclose details of personal financial indebtedness violates their right to privacy. The Bureau's interest in disclosure of financial indebtedness arises from the Commissioner's responsibility to enforce Sec. 15(3) of the Michigan Banking Code, 1969 PA 319, MCLA 487.315(3); MSA 23.710(15)(3), which states: 'Neither the commissioner nor any deputy commissioner or examiner shall borrow money, directly or indirectly, from any institution, except for a mortgage loan upon the mortgagor's own home or upon installment debt transferred to an institution in the regular course of business by a seller of consumer goods. The above sentence shall not apply to loans made prior to their respective terms of office. If the commissioner, any deputy commissioner or examiner of the bureau, borrows from it or becomes indebted to any institution subject to the provisions of this act or any national banking association, he shall make a written report to the bureau, or to the governor in the case of the commissioner, stating the date and amount of such loan or indebtedness, the security therefor and the purpose for which the proceeds have been or are to be used.' Further, the rules of Civil Service, Sec. 1.5(f), prohibit state classified employees from having a substantial interest in any business which the employee significantly and directly participates in the regulation or auditing thereof. Civil Service Rule 1.6(a) provides: 'The following employees shall disclose to their Appointing Authority all personal or financial interests and the interests of members of their immediate families, in any business or entity with which they have direct contact while performing official duties as a state classified employee: '1. Employees who have authority to purchase or award contracts. '2. Employees who as a part of their official duties recommend the purchase or award of contracts. '3. Employees who have substantial regulatory or enforcement responsibilities. '4. Employees who inspect or approve work performed by businesses or persons who are not state employees. '5. Employees who audit the financial records of businesses or individuals. '6. Supervisors of the above state employees.' 1969 PA 319, Sec. 15(3), supra, is similar to 1969 PA 319 Sec. 15(1), supra, which prohibits the Commissioner, any Deputy Commissioner, or any examiner from being a shareholder in a bank. OAG 1977-1978, No. 5293, p ___ (March 30, 1978), stated that the purpose of 1969 PA 319, Sec. 15(1), supra, is to provide 'an absolute assurance of objectivity in government regulation of banking. Thus, only by totally divorcing the regulators from any financial interest in banking is it possible to assure that no appearance of conflicting interest exists. . . .' A similar purpose is sought in the prohibition found in 1969 PA 319, Sec. 15(3), supra, against indebtedness by certain Bureau employees to banks subject to the Bureau's regulation. The right of an individual to be free from compulsory disclosure of private financial information was recognized by the Michigan Supreme Court in Advisory Opinion Re Constitutionality of 1975 PA 227, 396 Mich 465; 242 NW2d 3 (1976). (1) In discussing the question of whether compulsory disclosure of financial data unreasonably interferes with an individual's right to privacy, the Supreme Court stated: 'The right to privacy includes certain activities which are fundamental to our concept of ordered liberty. Rights of this magnitude can only be abridged by governmental action where there exists a 'compelling state interest'. Roe, supra, 152, 155. Kropf v Sterling Heights, 391 Mich 139, 157-158; 215 NW2d 179 (1974). 'It is argued by those seeking to uphold the constitutionality of these provisions that disclosure of specified governmental official's financial affairs is necessary to further a legitimate and compelling state interest. We agree. Disclosure assists in preserving the integrity of the political process. It is legitimate for the Legislature to provide a means for effectively investigating possible conflicts of interest. Disclosure requirements promote integrity, fairness, and public confidence in government as well as providing the citizens with information concerning an office-holder's integrity and fitness for office.' 396 Mich 465, at 505-506; 242 NW2d 3, at 19 (1976) The fact that a constitutionally protected right is involved dictates that the Bureau demonstrate a compelling interest outweighing the possible infringement. It is significant that in Advisory Opinion Re Constitutionality of 1975 PA 227, supra, the court found such an interest based on the goal of promoting 'integrity, fairness, and public confidence in government'. Similarly, it is essential to the preservation of a sound banking system that individuals entrusted with examining, making recommendations, and passing upon the financial soundness of banking institutions be free from bias or prejudice resulting from any obligation they may have to the institution. Any examination or action taken by an individual indebted to the affected institution may be subject to suspicion. Thus, it is my opinion that the Legislature may prohibit a state officer from incurring an indebtedness which may impact upon the performance of his or her official duties and the Financial Institutions Bureau may require that Bureau examiners disclose relevant details of the financial transactions. The Federal courts have similarly recognized the propriety of requiring financial disclosure in certain circumstance. In Plante, et al v Gonzales, et al, 575 F2d 1119 (CA 5, 1978), the United States Court of Appeals reviewed the financial disclosure provisions of a Florida state law affecting candidates for public office. While recognizing that 'financial privacy is a matter of serious concern, deserving strong protection', the court nonetheless found the disclosure requirement to be constitutional, adopting the lower court's reasoning that such disclosure deters corruption and conflicting interests, promotes full confidence in government, and assists in detecting and prosecuting violators. 575 F2d at 1136. Disclosure requirements imposed upon non-elected public officials have similarly been found not to violate the constitutional rights to privacy. In O'Brien v DiGrazia, 544 F2d 543 (CA 1, 1976), the court upheld the constitutionality of a financial disclosure requirement imposed upon policemen by order of the local police department. It is significant that the court relied upon the fact that such financial information would be held confidential in finding the requirement permissible. 1969 PA 319, supra, Sec. 29, similarly requires that information received by the Commissioner in the course of his official duties be deemed confidential. Courts in other jurisdictions have also concluded that disclosure requirements of public employees and members of their immediate families do not violate any right to privacy. See Stein v Howlett, 52 Ill 2d 570; 289 NE2d 409 (1972); Fritz v Gorton, 83 Wash 2d 275; 517 P2d 911 (1974), appeal dismissed for lack of a substantial federal question, 417 US 902; 94 S Ct 2596; 41 L Ed 2d 208 (1974); Illinois State Employees Association v Walker, 57 Ill 2d 512; 315 NE2d 9 (1974), cert den 419 US 1058; 95 S Ct 642; 42 L Ed 2d 656 (1974); and Montgomery County v Walsh, 274 Md 489; 336 A2d 97 (1975), appeal dismissed for lack of substantial federal question, 424 US 901: 96 S Ct 1091; 47 L Ed 2d 306 (1976). Thus, employees of the Financial Institutions Bureau who participate in regulation or audit of financial institutions must disclose relevant financial information. Civil Service Rule 1.6, supra. Despite the existence of a compelling state interest which outweighs the infringement upon an employee's right to privacy, further analysis must be applied in determining whether the intrusion may be excessive. In Advisory Opinion Re Constitutionality of 1975 PA 227, supra, at p 506, the court stated: 'Having determined that the state is possessed of a compelling interest in seeking disclosure of finacial affairs, we must establish whether the means employed are sufficiently narrow. Even when motivated by a compelling reason, the bridgment of such rights must be accomplished by the least intrusive method.' This necessity to exercise care in requiring disclosure of personal financial information has also been recognized by the United States Supreme Court. In California Bankers Association v Schultz, 416 US 21; 94 S Ct. 1494; 39 L Ed 2d 812 (1974), Justices Powell and Blackmun, in a concurring opinion, expressed concern with certain financial disclosure requirements, stating that financial transactions may reveal much about a person's activities, associations, and beliefs. 416 US at 79; 94 S Ct. at 1526; 39 L Ed 2d at 850; Buckley v Valeo, 424 US 1, at 66; 96 S Ct 612, at 657; 46 L Ed 2d 659, at 714 (1976). In examining the breadth of the Bureau disclosure requirement against the Bureau's need to secure information, it is my opinion that any disclosure requirement required of persons other than the Commissioner, Deputy Commissioner, Bureau examiners, or any employees who significantly or directly participate in the regulation or auditing of any business, industry, or institution is unconstitutional. This conclusion is in accordance with the holding of the Michigan Supreme Court in Advisory Opinion Re Constitutionality of 1975 PA 227, supra, at p 508, wherein the court held that, to the extent financial disclosure is required of minor officials whose '. . . sphere of influence is geographically limited or whose functions are routine and ministerial . . .', the disclosure requirement is overbroad and unconstitutional. Furthermore, any demand for information which is unnecessary to determine whether an individual is in conflict of interest or in violation of 1969 PA 319, Sec. 15, supra, or Civil Service Rule 1.6, supra, such as disclosures of indebtedness to lenders not regulated by the Bureau [except for national banks, as provided in 1969 PA 319, supra, Sec. 15(3)] is also overbroad and therefore not permissible. Accordingly, it is my opinion that a requirement by the Financial Institutions Bureau that the Commissioner, the Deputy Commissioners, examiners, and employees who significantly or directly participate in the regulation or auditing of any institution regulated by the Bureau divulge details of personal financial indebtedness does not violate the right to privacy where such a requirement is limited to relevant financial information. Frank J. Kelley Attorney General (1)