July 2, 2015

Ms. Kate Reynolds
Executive Director
Executive Ethics Board
PO Box 40149
Olympia, WA 98504-0149
Dear Ms. Reynolds:
Thank you for inviting me to provide you and the Executive Ethics Board with information to support the
Board’s consideration of a formal advisory opinion regarding my compliance with the ethics rules on
post-state employment. Because such an opinion could help authoritatively address some of the
concerns that have been raised, I appreciate the Board’s willingness to consider this.
In the several pages that follow, I have provided the specific information you asked for, and have also
summarized the analysis that has guided my actions in this matter over the past two years. I hope this is
helpful.
A. Information Requested by the Board
1. The contracts at issue
The issues here involve two Department of Commerce grant contracts, one with the Snohomish Public
Utility District No. 1 (the PUD) and one with Puget Sound Energy (PSE). The grant contract with the PUD
provides up to $7.3 million to help support a $16+ million energy storage program. Under the PUD
grant, payments are made by Commerce when the PUD achieves certain performance milestones. The
start date for that contract is July 8, 2014 and the end date is scheduled for December 31, 2016. The
scope of work includes four main elements: the MESA 1 lithium-ion battery system at the Hardeson
substation, the MESA-2 UET flow battery system at the Everett substation, controls integration and
optimization at the PUD’s operations center in Everett, and a use case analysis project. The PUD’s
subcontractors must be approved by Commerce. 1Energy Systems is an approved subcontractor to the
PUD on this grant.
The second grant contract, with PSE, provides up to $3.8 million to support an energy storage project at
the Glacier substation, a project with a total cost of more than $7.6 million. The start date for this
contract is also July 8, 2014 and the end date is also scheduled for December 31, 2016. 1Energy Systems
is a subcontractor to PSE under this grant.
2. My job duties at Commerce regarding the contracts and companies
The Department of Commerce operates over 100 programs, employs approximately 300 people, and has
an annual capital and operating budget of roughly $1 billion. Most Commerce programs involve
providing grants and loans to public and private entities to have them implement public policy
objectives. I served as the Deputy Director of Commerce from August 31, 2009 until September 6, 2013.
During my employment at Commerce, I supervised policy development across the agency, including
energy policy. I also oversaw the Department’s budget, finance, information technology, and
accounting functions during my last two years.

1

 As one of the lead economic development officials for the state, I interacted with a wide variety of
companies on economic development and energy policy. The energy office, which reported to me,
staffed the development of the state energy strategy in 2012, which was led by a 26 member advisory
committee, including Kimberly Harris, the CEO of PSE and Steve Klein, the General Manager of the PUD.
I also interacted with PSE over a regulatory matter relating to greenhouse gas emissions from one of
their natural gas plants and with the PUD in relation to federal permits necessary for their tidal energy
project. At an energy conference sponsored by the state energy office in the fall of 2012, I moderated a
panel on energy storage that featured Steve Klein from the PUD as well as Tom Melling from 1Energy
Systems.
At the beginning of the Inslee administration in February 2013, at the request of the new Commerce
Director, Brian Bonlender, I assisted in writing a policy memo with the Governor’s executive policy office
that ultimately formed the basis for the Clean Energy Fund (CEF). The drafting of the legislative
language and lobbying for the CEF was led by the Governor’s executive policy office. The Legislature
approved the CEF in June of 2013.
In March 2013, Commerce Director Bonlender announced his new management team and that I would
be leaving the agency in September. From March 2013 until early September 2013 when I left state
service, I functioned as a senior individual contributor. In May 2013, my successor Richard Locke was
hired and given oversight responsibility for the state energy office. In my role as an individual
contributor, I advised Mr. Locke in his new role, including sharing lessons I had learned from grant
programs that the energy office had administered under the federal stimulus program and how those
lessons could apply to the Clean Energy Fund.
When I left state service in early September 2013, the selection process that led to the grant contracts
at issue had not yet been established. The committee to evaluate the proposals was selected in October
2013 and the proposals were submitted by applicants in December 2013. Commerce and that selection
committee made grant decisions in March 2014 and executed contracts with PSE and the PUD in July
2014, more than ten months after I left state service.
3. Role immediately after leaving state service
In late June of 2013, while serving as a senior individual contributor at Commerce, I was approached by
Dave Kaplan, the CEO of 1Energy Systems, about joining the company. Among my proposed duties
would be to assist 1Energy System’s utility customers in applying for CEF grants. I reviewed the state
ethics rules and consulted with Sandra Adix, the Assistant Attorney General assigned to Commerce.
After consulting with Ms. Adix and reviewing the statute and relevant advisory opinions from the
Executive Ethics Board, I concluded that my proposed role at 1Energy was permitted under state law
and I accepted the employment offer.
In the ten weeks between my first conversation with Dave Kaplan and the time I left state service, I did
not take any action that a reasonable person would conclude was for the benefit of 1Energy. Moreover
I did not take any action with the specific purpose of benefiting 1Energy. Indeed, during that time, the
scope of my official duties gave me no authority to act on matters that might benefit 1Energy.
After leaving state service, I immediately joined 1Energy Systems as Vice President of Business
Development and Public Policy. 1Energy provides design and integration services and software for
utilities that want to deploy battery-based energy storage systems. I began representing 1Energy at
national conferences on energy storage and working to cultivate utility customers inside and outside of
Washington.
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 Among my responsibilities at 1Energy was helping the PUD prepare its grant application to Commerce
for a CEF grant. The PUD itself was the grant applicant and is required to fund over half the cost of the
storage project with other PUD resources. 1Energy was identified as a key subcontractor to the PUD on
the proposed work program. However, it is worth noting that the PUD did not guarantee 1Energy the
work under the grants, and for some of the work 1Energy ultimately had to vigorously compete for the
business from the PUD after Commerce had awarded the grant to the PUD.
Regarding the second contract, the PSE grant, I helped develop 1Energy’s pricing and proposal materials
for PSE to include in their application to Commerce.
Because there would be no role for me in delivering the proposed work under either the PUD or PSE
grant proposals, I was not individually listed on either of those proposals.
4. My current role at 1Energy
My job at 1Energy continues to involve leading efforts to develop new business with utilities around the
country and advocating for public policy that will support the development of the energy storage
industry. I do not have any responsibilities for delivering work under the subcontracts with the PUD or
PSE.
5. My reimbursement and compensation structure
At 1Energy, I am paid a base salary and a bonus that is tied to the company’s net revenues. The bonus
compensation structure excluded a certain threshold of net revenues in my first year based on 1Energy’s
existing pipeline of business, including projects with the PUD. To the extent that Commerce grants are a
source of funding for the utilities’ contracts with 1Energy and 1Energy earns net revenue on those
contracts and those net revenues influence my bonus (for example are above the minimum threshold),
then I may benefit from the contracts at issue.
I also own stock in 1Energy and – in the general sense that 1Energy’s performance under those contracts
may make the company’s stock more valuable – it is possible I may benefit from 1Energy’s subcontracts
with the utilities that are funded in part by the Commerce grants from the state.
6. Other information that would be important or helpful for the Board to consider
Having carefully thought about these issues before leaving state service and reviewed them since, I
would like to share with the Board my analysis of the facts, in view of the relevant law and advisory
opinions. I have also attached a time line and a 2013 e-mail to 1Energy CEO David Kaplan and EVP Tom
Melling summarizing my conversation with Sandra Adix about my compliance with state ethics rules.
B. Analysis of Ethics Statute
From the beginning, I have believed that a primary purpose of publishing the state’s ethics laws and
advisory materials is to allow a conscientious state employee to study and understand the ethical
constraints and take deliberate steps to comply with them. To this end, I have taken care to read and
apply the statutes and guidance.
The question presented here is whether I violated the post-state employment restrictions of RCW
42.52.080 by accepting employment at 1Energy and then providing support to the proposals by the PUD
and PSE for Clean Energy Fund grants that were subsequently awarded by Commerce.

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 1. Negotiation or Administration of State Contracts
The first part of that statute, RCW 42.52.080(1), addresses a situation where, during state employment,
a person has worked on negotiation or administration of a contract with the outside employer. It
prohibits the person from accepting employment from the employer if all three of the following
conditions exist:
(a) during the two years before leaving state employment, the person worked on behalf of the
state agency in negotiating or administering one or more contracts with the outside employer
and was in a position to make discretionary decisions affecting such negotiations or such
administration;
(b) the contract or contracts have a total value of more than ten thousand dollars; and
(c) the duties for the outside employer include fulfilling or implementing the provisions of such a
contract or contracts or supervising or controlling the fulfillment or implementation of such
contract or contracts.
My analysis was that this section plainly does not apply to the facts of my employment because the
contracts in question were not negotiated or administered for more than six months after I left
Commerce, the contracts were not directly with 1Energy, and I have had no role in fulfilling the
provisions of those contracts.
2. Post-Employment Compensation
The second part of the law, RCW 42.52.080(2), restricts a person from receiving certain postemployment compensation. The terms of that section are very precise:
“No person who has served as a state officer or state employee may, within a period of two
years following the termination of state employment, have a direct or indirect beneficial interest
in a contract or grant that was expressly authorized or funded by specific legislative or
executive action in which the former state officer or state employee participated.”
RCW 42.52.080(2) (emphasis added.)
A plain reading of this statute supports my position for two reasons.
(a) The statute applies only to “expressly authorized or funded” contracts and grants, not to
general policy work.
To have violated RCW 42.52.080(2), I must have participated in “executive action” that “authorized or
funded” the “contract or grant.” Under RCW 42.52.010(6), “’[c]ontract’ or ‘grant’ means an agreement
between two or more persons that creates an obligation to do or not to do a particular thing.”
(emphasis added) Thus, the statute applies to participation in the authorization or funding of contracts
or grants “to do particular thing[s],” not to participation in general policy work or initiatives.
Furthermore, use of the words “expressly authorized or funded by specific … executive action”
demonstrates this section is intentionally limited to situations involving authorization or funding of a
particular contract or grant. It is clear that the contracts and grants in question here were not expressly
authorized or funded until more than ten months after I left state service.
Although some may argue for ignoring the statute’s specific words in favor of a much broader
interpretation of this section, doing so would have the profound effect of precluding every senior
Department of Commerce employee from being employed by any actual or potential grant recipient or
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 subcontractor. In my case, if the words “expressly” and “specific” were discarded, one could then argue
that all CEF grants are being funded by executive actions in which I participated by drafting the policy
memo on options for the Clean Energy Fund. Beyond that, since I had oversight of all of Commerce’s
budget, finance, and contract administration, this interpretation would then support an argument that I
participated in executive actions that proposed funding for every one of the Commerce budget items,
totaling $1 billion per year and including the Public Works Trust Fund, the Housing Trust Fund, and
scores of other programs for local governments, non-profits, and businesses. Such a loose reading
would then block my employment with every local government in the state, the entire affordable
housing sector, economic development agencies, and a host of non-profits, not to mention all of the
companies and agencies that subcontract to or benefit from these many grants from Commerce. The
statute does not say this and that result cannot have been its intent.
(b) The statute does not apply to subcontractors.
RCW 42.52.080(2) applies to contracts or grants made by the Department of Commerce with specific
entities. It should not be interpreted to apply to subcontrators, or subcontrators of subcontractors, etc.
If that were the case, taking post-government employment would be a perilous task, researching
whether an employer, through some tenuous multi-tiered subcontractor relationship, might create an
indirect beneficial interest. To be effective, ethic laws must promote reasonable reliability and
transparency, without endless uncertainty.
3. Attempt to Influence
The third and fourth sections of RCW 42.52.080 address the potential for employment offers that might
improperly influence the conduct of public officials in their state duties. RCW 42.52.080(3) prohibits a
state employee from accepting an offer of employment:
“…if the officer or employee knows or has reason to believe that the offer of employment or
compensation was intended, in whole or in part, directly or indirectly, to influence the officer or
employee or as compensation or reward for the performance or nonperformance of a duty by
the officer or employee during the course of state employment.”
Similarly, RCW 42.52.080(4) prohibits a state employee from accepting an offer of employment:
“…if the circumstances would lead a reasonable person to believe the offer has been made, or
compensation given, for the purpose of influencing the performance or nonperformance of
duties by the officer or employee during the course of state employment.”
In other words, these sections apply when either the employee knows that an outside job offer is meant
to influence performance of his official duties or when circumstances would lead a reasonable person to
that belief.
Because there was a ten-week period between late June 2013 when I was approached by 1Energy
regarding employment and September 6, 2013 when I left state service, this provision must be
considered. There are, however, no facts to indicate that I violated these provisions. The offer of
employment at 1Energy from Dave Kaplan was never related to any official action I could take in the ten
weeks after its communication nor was it offered as a direct “reward” for my involvement in the CEF
policy memo drafting. By the time the initial offer of employment was made, oversight for the state
energy office, which had responsibility for the CEF, had already been turned over to my successor Rick
Locke. I had no direct reports during that time period and functioned only as an advisor to Locke to
orient him to his new duties. I shared lessons learned from the prior clean energy grant programs and
5

 advised on timelines to achieve program objectives, but I left before any of the key decisions were made
about the form of the grant application, who would serve on the selection committee, how the
committee would score the grant proposals, and most importantly, the actual reviewing and scoring of
the proposals.
From these facts, it did not appear to me, nor do I think a reasonable person could conclude, that the
offer to work for 1Energy was meant to influence my work at Commerce. I trust that the facts will lead
the Board to the same conclusion.
4. Assisting With Transactions
Finally, section RCW 42.52.080(5) prohibits a former state employee from assisting another person “…in
any transaction involving the state in which the former state officer or state employee at any time
participated during state employment.”
The scope of this section is limited by the detailed statutory definition of “transaction involving the
state” found in RCW 42.52.010 (21). The phrase is meant to include “a proceeding, application,
submission, request for a ruling or other determination, contract, claim, case, or other similar matter” in
which the state is a party or has an interest. The question in this section is whether any of my actions
during state employment related to the Clean Energy Fund constituted participation in a “proceeding,
application, submission, request for a ruling or determination, contract, claim, case, or other similar
matter” that would be the subject of state action.
First, although “proceeding” is not defined in this statute, Merriam-Webster defines the term as “the
process of appearing before a court of law so a decision can be made about an argument or claim: a
legal action.” This definition makes sense in the context of RCW 42.52 as the state wants to avoid state
employees representing the state and then going to work for the state’s adversary in a legal action. It
does not apply to my situation.
Second, at the time I left Commerce there was no “application” or “submission” from either the PUD or
PSE in the possession of Commerce. The CEF applications were not submitted until three months after I
left state service. Similarly, there was no “contract” until ten months after I left state service.
It is also informative to note that “transaction involving the state” expressly does not include the
“[p]reparation, consideration, or enactment of legislation, including appropriation of moneys in a
budget . . . .” RCW 42.52.010 (21)(b). In this instance, I was involved in policy work that supported the
preparation of legislation and I had broad budget responsibility at Commerce when the CEF was
proposed and these activities are explicitly excluded as “transactions involving the state”.
5. Conclusion
Advisory Opinion 01-01, states that “[g}enerally, the post-state employment provisions are transactional
in nature and prohibit former state employee[s] and their employers from improperly benefiting from
grant or contracting decisions made while state employees.”
The key fact in establishing my adherence to RCW 42.52.080 is that the “grant or contracting decisions”
were made more than half a year after I left state service. I had no participation as a state employee in
writing the request for proposals, choosing the selection committee, setting the evaluation criteria,
scoring the proposals, or making the final grant decisions.

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 C. “Appearance of Conflict?”
This review of my actions in view of the state ethics laws convinces me that I have honored the letter
and the intent of the law. However, some may ask if I created an “appearance” of conflict by leaving my
role as a senior Commerce official and then joining a company where my duties included assisting that
company’s customers apply for grants from the agency I had recently left. In a different set of
circumstances, the Ethics Board in Advisory Opinion 00-07 discouraged an employee from leaving state
service and immediately becoming a contractor for the same work because it created an “appearance of
conflict” even though it was not expressly prohibited by RCW 42.52.080. While my circumstances are
very different, the broader issue of whether my actions created an appearance of conflict deserve
comment.
First, I firmly believe the state’s interests are served when someone in my former role at Commerce
leaves to work on behalf of one of the thousands of organizations that contract with Commerce. I
might, for instance, have become a finance director of a city that applied for and won a Public Works
Trust Fund grant to repair a leaking sewage system. I might have joined a non-profit housing association
that won a Housing Trust Fund grant to build low-income housing. I might have gone to work for a port
district that won grants to advance local economic development. Commerce has many worthy policy
goals and operates many competitive grant processes to advance them including the CEF. In my case, I
chose to enter the clean energy field after leaving state service and part of my job has been to support
the applications of in-state utilities for the CEF. In any of these examples of potential post-Commerce
employment, the key test for the appearance of a conflict is whether Commerce ran fair and open
competitions for their grant funds that elicit the best possible proposals, judged on their merits.
Here, every indication is that the competition for the CEF grants was fair and open and that my prior
relationship with Commerce could not and did not “stack the deck” for one applicant or change the
evaluation and scoring of the proposals. Indeed, the selection committee was comprised almost entirely
of individuals who did not work at Commerce and who did not know me. I was not even listed in the
proposal since it is not my job to deliver projects once under contract. Moreover, 1Energy was not the
prime applicant for the grant funds, the utilities were. It was their staff who led the proposal
preparation and negotiated the contracts with Commerce. Ultimately, it was utilities who developed
and championed these projects and paid for more than half the project costs with their own resources.
As you will note in the attached e-mail to my then-prospective employers at 1Energy, I closed with a
sentence that it was important that I remain sensitive to appearances with Commerce and my former
staff. To that end, I eschewed any contact with Commerce staff during the first three months after
joining 1Energy. I would occasionally see them at events and avoided talking about the PUD’s or PSE’s
proposals. I have done my best to navigate the transition from public service to the private sector and
hope the Executive Ethics Board will conclude that I have honored the letter as well as the spirit of the
law.
Sincerely,

Attachment 1: Timeline

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 April 2009
August 31, 2009
March 2010
August 29, 2011
2013
Jan
Feb
Mar

May 21
Jun
Late June
July 9 2013
July 10, 2013
July 19, 2013
July
August
Sept 6, 2013
Sept
Oct
Dec

2014
Mar
Jul
Oct
Jan

Rogers Weed named Director of Commerce (then Community, Trade, and
Economic Development) by Gov. Gregoire.
Daniel Malarkey joins Commerce as Deputy Director
Malarkey assigned oversight of policy including state energy office
In addition to policy, Malarkey given oversight of agency budgeting, finance
and administration including IT.
Brian Bonlender named new Commerce Director; Weed leaves Commerce
Malarkey drafts policy memo on clean energy options for capital budget
informed by earlier policy work done by the state energy office.
Bonlender and Malarkey agree he will help hire replacement & leave
Commerce by Sept 2013. New management team announced and Malarkey
becomes individual contributor.
Rick Locke hired to replace Malarkey.
Clean Energy Fund of $40 million is included in the Legislatures of capital
budget for 2013-15; includes $15M for smart grid grants
1Energy CEO David Kaplan contacts Malarkey about joining company
Malarkey has conversation with Commerce AAG Sandra Adix regarding
compliance with RCW 42.52 if Malarkey joins 1Energy.
E-mail to Kaplan and Melling re compliance with RCW 42.52 and employment
at 1Energy Systems
Malarkey and 1Energy sign employment agreement and set start date in
September.
Weed joins 1Energy’s Board of Advisors
Malarkey takes medical leave from Commerce during portions of August and
treats lower back problems
Malarkey ends state service
Malarkey starts at 1Energy
Commerce selects expert review panel for Clean Energy Fund grants
SNOPUD and PSE submit proposals to Commerce. 1Energy included in both
proposals.
Avista and Energy Northwest submit proposals that don't include 1Energy.
Commerce makes grant awards contingent on reaching grant contract terms.
Weed joins 1Energy fulltime
Commerce announces awards and signs contracts with SNOPUD, Avista, and
PSE. Energy Northwest does not win a grant.
1Energy enters into contract with PUD for projects proposed under CEF
MESA 1a energy storage systems energized

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 Attachment 2: 2013 Email
Compliance with RCW 42.52 Ethics in Public Service Inbox Era .

Daniel Malarkey moms in 
to David Tom -

Dave and Tom-

I spoke yesterday with Sandra Adix. the Assistant Attorney General who represents the
Department of Commerce. regarding my joining 1Energy and compliance with RCW 42.52DSU
on employment after public service.

She did not thli?llf that myjoinihg 1Energy would present a compliance problem for the following
reasons:

1. 1Energy would not be the applicant for the Clean Energy Fund grant. Shohomish PUD and
potentially other utilities would be the applicant. 1Energy would be a vendor to the uility and
no more than half of the total project cost would be paid by the state grant. She thought

that any bene?cial interest of mine in the contract was so attenuated by these facts as to not
present a problem- 

2. The capital budget proviso for the Clean Energy Fund establishes that the grant selection
must be done by a group of quali?ed experts who would be selected well after I leave state
service. It is would be hard to argue I had undue in?uence over the Key decision-melting
process.

3. The Ethics Board has issued advisory opinions that allowed post?state employment in
several instances where the connection to a state grant or contract was more direct than in my
potential situation with 1Energy. Opinions SS-ll. and Eli - Il1 at 
Dbihiohs Eli?htm appear to bolster the position that my employment at
1Energy would not represent a violation of state ethics laws.

 

Sandra made clear that she can only provide legal advice to the Department. not me as
a former employee. nor 1Energy. However. in this instance. the Department does have
an interest in not having a former employee violate the state ethics law.

I do not thinlt it necessary or advisable at this point to request a formal opinion from the Ethics
Board.

So I'd consider this issue checited off the list and that we can turn to the other open issues in
my offer of employment. Should we reach an agreement. I will nonetheless heed to be
sensitive to appearances and the spirit of the ethics law in any of my interactions with
Commerce staff.