This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on February 18, 2005, basing its approval solely on the facts and circumstances stated herein.

 
May a municipality select as its depository a bank which employs the spouse of an alderman as a teller if the selection is made in accordance with law and the alderman fully recuses himself from the selection?

State law restricts the Mississippi Ethics Commission to interpreting and issuing opinions on Sections 25-4-101 through 25-4-119, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890.  Therefore, this opinion does not address the Mississippi laws outside the Commission’s jurisdiction nor the governmental entity’s internal rules and regulations.

The pertinent conflict of interest laws to be considered here are:

Constitutional Section 109 states:
 

“No public officer or member of the legislature shall be interested, directly or indirectly, in any contract with the state, or any district, county, city, or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member, during the term for which he shall have been chosen, or within one year after the expiration of such term.”

Code Section 25-4-101 states:
 

“The legislature declares that elective and public office and employment is a public trust and any effort to realize personal gain through official conduct, other than as provided by law, or as a natural consequence of the employment or position, is a violation of that trust.  Therefore, public servants shall endeavor to pursue a course of conduct which will not raise suspicion among the public that they are likely to be engaged in acts that are in violation of this trust and which will not reflect unfavorably upon the state and local governments.”

Code Section 25-4-103(c), (d), (f)(i)(ii), (g)(i)(ii)(iii)(iv)(v), (h), (k)(i)(ii)(iii)(iv), (l), (p)(i)(ii)(iii) and (q) states:
 

“(c) ‘Business’ means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, holding company,  self-employed individual, joint stock company, receivership, trust or other legal entity or undertaking organized for economic gain, a  nonprofit corporation or other such entity, association or organization receiving public funds.

(d) ‘Business with which he is associated’ means any business of which a public servant or his relative is an officer, director, owner, partner, employee or is a holder of more than ten percent (10%) of the fair market value or from which he or his relative derives more than One Thousand Dollars ($1,000.00) in annual income or over which such public servant or his relative exercises control.

(f) ‘Contract’ means:

(i) Any agreement to which the government is a party; or

(ii) Any agreement on behalf of the government which involves the payment of public funds.

(g) ‘Government’ means the state and all political entities thereof, both collectively and separately, including but not limited to:

(i) Counties;

(ii) Municipalities;

(iii) All school districts;

(iv) All courts; and

(v) Any department, agency, board, commission, institution, instrumentality, or legislative or administrative body of the state, counties or municipalities created by statute, ordinance or executive order including all units that expend public funds.

(h) ‘Governmental entity’ means the state, a county, a municipality or any other separate political subdivision authorized by law to exercise a part of the sovereign power of the state.

(k) ‘Material financial interest’ means a personal and pecuniary interest, direct or indirect, accruing to a public servant or spouse, either individually or in combination with each other.  Notwithstanding the foregoing, the following shall not be deemed to be a material financial interest with respect to a business with which a public servant may be associated:

(i) Ownership of any interest of less than ten percent (10%) in a business where the aggregate annual net income to the public servant therefrom is less than One Thousand Dollars ($1,000.00);

(ii) Ownership of any interest of less than two percent (2%) in a business where the aggregate annual net income to the public servant therefrom is less than Five Thousand Dollars ($5,000.00);

(iii) The income as an employee of a relative if neither the public servant or relative is an officer, director or partner in the business and any ownership interest would not be deemed material pursuant to subparagraph (i) or (ii) herein; or

(iv) The income of the spouse of a public servant when such spouse is a contractor, subcontractor or vendor with the governmental entity that employs the public servant and the public servant exercises no control, direct or indirect, over the contract between the spouse and such governmental entity.

(l) ‘Pecuniary benefit’ means benefit in the form of money, property, commercial interests or anything else the primary significance of which is economic gain.  Expenses associated with social occasions afforded public servants shall not be deemed a pecuniary benefit.

(p) ‘Public servant’ means:

(i) Any elected or appointed official of the government;

(ii) Any officer, director, commissioner, supervisor, chief,  head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the State of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or

(iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.

(q) ‘Relative’ means the spouse, child or parent.”

Code Section 25-4-105(1), (2), (3)(a) and (4)(a) states:
 

“(1) No public servant shall use his official position to obtain pecuniary benefit for himself other than that compensation provided for by law, or to obtain pecuniary benefit for any relative or any business with which he is associated.

(2) No public servant shall be interested, directly or indirectly, during the term for which he shall have been chosen, or within one (1) year after the expiration of such term, in any contract with the state, or any district, county, city or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member.

(3) No public servant shall:

(a) Be a contractor, subcontractor or vendor with the governmental entity of which he is a member, officer, employee or agent, other than in his contract of employment, or have a material financial interest in any business which is a contractor, subcontractor or vendor with the  governmental entity of which he is a member, officer, employee or agent.

(4) Notwithstanding the provisions of subsection (3) of this section, a public servant or his relative:

(a) May be an officer or stockholder of banks or savings and loan associations or other such financial institutions bidding for bonds, notes or other evidences of debt or for the privilege of keeping as depositories the public funds of a governmental entity thereof or the editor or employee of any newspaper in which legal notices are required to be published in respect to the publication of said legal notices.”

Pertinent facts and circumstances provided by the requestor, absent identifying data, are set forth as follows and considered a part of this opinion.
 

I am considering running for the City Alderman-at-Large position in the upcoming 2005 Municipal Election.  The City presently uses 2 depositories in the City, one of which employs my wife as an hourly teller.  Most likely, the City will continue to use the same 2 depositories when the new administration becomes sworn.

Please let me know what the Ethics Commission’s opinion is concerning any conflict that may exist or arise if I choose to run for the office of Alderman-at-Large and my wife continues employment at the depository.

To the extent that the attached Advisory Opinion No. 94-132-E is in conflict herewith, such opinion is hereby modified to conform hereto.

Based solely on the facts and circumstances presented by the requestor, the Commission’s opinion is as follows.

Section 109, Miss. Const. of 1890, and its statutory parallel, Section 25-4-105(2), Miss. Code of 1972, both quoted above, prohibit a member of a public board from being directly or indirectly interested in a contract authorized by that board during his or her term or for one year thereafter. Frazier v. State, ex rel. Pittman, 504 So.2d 675, 693 (Miss. 1987). A monetary benefit paid under contract to one spouse is also a benefit to the other spouse and gives the other spouse an indirect interest in that contract for purposes of Section 109 and Section 25-4-105(2). Smith v. Dorsey, 530 So.2d 5, 7 (Miss. 1988). Here the question is whether the requestor will have a sufficient indirect interest in the contract between the city and the bank to violate these sections due to his wife’s employment as an hourly teller with the bank.

It is the Commission’s understanding that the requestor’s wife’s employment and pay as an hourly teller are not directly dependent upon the bank’s deposits. From these facts it appears neither the requestor nor his wife will receive any personal monetary benefit regardless of whether the city continues to do business with the bank in issue. Therefore, the Commission finds as a matter of fact that the requestor will not be financially interested, directly or indirectly, in a depository contract between the city and the bank which employs his wife as an hourly teller. If the requestor is elected alderman and the city continues to contract with the bank employing his wife as an hourly teller, no violation of Constitutional Section 109 or Code Section 25-4-105(2) will occur.

The above finding is based on certain pronouncements by the State Supreme Court in Frazier, et al. vs. Pitman, et al., 504 So.2d 675 (Miss. 1987). The Court stated that while Constitutional Section 109 imposes a broad proscription, there is an “edge to [its] target.” Id. at 695. The Frazier Court further stated, “it would insult the common sense of the 1890 Constitutional Convention that they intended any interpretation of § 109 to trickle down to triviality.” Id. at 698.

However, if the facts were different, the outcome of this opinion would also be different. For instance, if the spouse’s income was tied to the bank’s income as is often the case with an officer of a bank or a director of a bank, then the requestor would certainly be interested in the contract between the city and the bank, resulting in a violation of Constitutional Section 109 and Code Section 25-4-105(2) should the contract be entered into during his term as an alderman or one year thereafter.

While no violation of Constitutional Section 109 or Code Section 25-4-105(2) will occur under these facts, a potential conflict still exists under Code Section 25-4-105(1), quoted above. Code Section 25-4-105(1) will prohibit an alderman from using his position to benefit a business with which he is associated. Pursuant to Code Section 25-4-103(d), the bank is a business with which the requestor is associated because his wife is its employee. Thus, the requestor, if elected alderman, would be unable to participate in any decision by the board to award a depository contract or to provide any other pecuniary benefit to the bank which employs his wife. He would be compelled to recuse himself from the matter to avoid violating Code Section 25-4-105(1).

A total and complete recusal requires that the public servant not only avoid debating, discussing or taking action on the subject matter during official meetings or deliberations, but also avoid discussing the subject matter with staff or any other person. This includes casual comments, as well as detailed discussions, made in person, by telephone or by any other means. An abstention is considered a vote with the majority and is not a recusal. Furthermore, the minutes of the meeting should state the recusing member left the room before the matter came before the public body and did not return until after the vote.

The issue presented by the requestor also must be viewed as it relates to Code Section 25-4-101, set forth above. This code section sets the tone for the conflict of interest laws as the Legislature’s “Declaration of Public Policy.” This public policy can be summarized as any circumstance having the potential of creating suspicion among the public and reflecting unfavorably upon the state or local government should be closely reviewed by public servants with the intent to reduce or eliminate any suspicion on the part of the public which detracts from the public’s trust in state or local government.

Certainly, a city subcontracting with a bank to hold city funds when an alderman’s spouse is employed in any capacity by the bank has the potential of creating suspicion among the public and reflecting unfavorably upon the city. Therefore, this is another reason that the requestor should totally and completely recuse himself from participating or voting on any matter concerning the city’s depository contract or the spouse’s employing bank holding city funds.

Code Section 25-4-105(3)(a), quoted above, also prohibits an alderman from having a material financial interest in a business which is a contractor with the municipality. However, the above cited Code Section 25-4-105(4)(a) provides for an exception to a violation of Code Section 25-4-105(3)(a) when the business is a bank and the contract is for serving as a depository of public funds. Also, the Code Section 25-4-105(4)(a) exception covers bidding for bonds, notes or other evidences of debt as well as for serving as a depository of public funds. Notwithstanding the above, the bank serving the city in other capacities such as  investment broker, paying agent, bond registrar, trustee or financial advisor would not come within the exceptions set forth in Code Section 25-4-105(4)(a). Therefore, Code Section 25-4-105(3)(a) would prohibit a bank employing an alderman’s spouse as a teller from contracting with the city in these other capacities if the spouse’s income from the bank results in a material financial interest. As set forth above in Code Section 25-4-103(k)(ii), a “material financial interest” would occur if the spouse receives $5,000.00, or more, in aggregate annual net income.
 

Scott Rankin
Executive Director