This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on  October 7, 2005, basing its approval solely on the facts and circumstances stated herein.
 

May an individual whose law firm represents a hospital which does business with a hospital under the jurisdiction of a state board, serve on the board of trustees of the state board?

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 25-4-103(c), (d), (e), (g)(v), (h), (k)(i)(ii)(iii)(iv), (l) and (p)(i)(ii)(iii) 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.

(e) ‘Compensation’ mean money or thing of value received, or to be received, from any person for services rendered.

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

(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.”

Code Section 25-4-105(1), (2) and (3)(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.”

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 requesting an ethics opinion from the Commission.  I was appointed by Governor Barbour to a state board, the term beginning July 1, 2005.  After my appointment, but prior to being sworn in and attending the first Board meeting on July 21, I learned of a potential problem.

My law firm, in which I am a partner, represents a health systems company which includes a hospital and affiliated clinics.  I serve as General Counsel to the hospital and Secretary to its corporate entities.  Our firm is directly paid in excess of $5,000.00 per year in fees for our representation of the hospital.  There are no payments made directly to me by the hospital.

I am advised that the hospital has a contract with a state hospital.  The state hospital is a facility which is owned and operated within the jurisdiction of the state board.

The contract provides that the hospital provide professional hospital services for patients of the state hospital.  I understand, on occasion, the state hospital also treats patients of the hospital I serve as General Counsel.

The contract between the hospital and the state hospital provides in part as follows:
 

C. Availability of Funds.

It is expressly understood and agreed that the obligation of the State to proceed under this agreement is conditioned upon the appropriation of funds by the Mississippi State Legislature and the receipt of state and/or federal funds.  If the funds anticipated for the continuing fulfillment of this agreement are, at anytime, not forthcoming or sufficient, either through the failure of the federal government to provide funds or the State of Mississippi to appropriate funds, or the discontinuance or material alteration of the program under which funds were provided, of if funds are not otherwise available to the state, the state shall have the right upon ten (10) working days written notice to the hospital, to terminate this agreement without damage, penalty, cost or expenses to the state of any kind whatsoever.  The effective date of termination shall be specified in the notice of termination.

I. Compensation

The state hospital agrees to compensate Hospital the Medicaid per diem rate for services rendered patient with no third party coverage.  The state hospital will pay Hospital any balance owning not to exceed the Medicaid per diem rate for patients who have other limited third party coverage.  If patient has Medicaid only, Hospital will not bill patient for balance owed.  If patient has Medicare only, Hospital will bill patient for balance owed.  Payments will be made from itemized statements only.

The state hospital agrees to compensate Hospital at a rate of 66 2/3% of the billed outpatient services for those patients with no third party coverage.  The state hospital will pay Hospital 66 2/3% of any balance for out-patients who have limited third party coverage.  If patient has Medicaid only, Hospital will not bill patient for balance owed.  Payments will be made from itemized statements only.

Hospital will not be eligible for fringe benefits.  Hospital shall be paid by the state hospital for all services rendered hereunder according to the conditions set forth in Paragraph C (Availability of Funds).

I am advised that as of this date in 2005, the state hospital has paid the hospital approximately $30,000 in professional fees and has paid to the hospital affiliated clinics approximately $15,000.00.  The fees paid to the hospital by the state hospital in 2004 represented .009 percent of the hospital’s total collections.

As General Counsel/Secretary for the hospital, I have no decision making responsibilities as to the admission of any patient to the hospital nor in management decisions.

It was my belief, in serving on the state board, that I could recuse myself from any issue dealing with the hospital.

I also wanted to advise you that the hospital uses a law firm in another city, who advises the hospital on some specific medical issues.  If there was any legal issue that might arise between the hospital and the state hospital, that matter would be referred to the other law firm for their legal advice.  I have reviewed Official Advisory Opinion No. 04-046-E dated May 7, 2004 and Official Advisory Opinion No. 96-041-E dated April 5, 1996, along with Section 25-4-105(3)(a) and 25-4-103(k)(i)(ii) of the Mississippi Code of 1972, and based upon these opinions and state statute, it would appear that I could serve on the state board.

The specific question that I would ask of the Commission is as follows:
 

May an individual whose law firm represents a hospital which does business with a hospital under the jurisdiction of the state board, serve on the board of trustees of the state board.

According to the definition to have a “material financial interest” one must have a “personal and pecuniary interest” accruing to him.  Neither personal interest nor pecuniary interest is defined within the ethics law.  However, Blacks Law Dictionary defines pecuniary interest as:
 

“a direct interest related to money in an action or case as would for example, require a judge to disqualify himself from sitting on a case if he owned stock in corporate party.”

The above definition strongly suggests that ownership is a condition of pecuniary interest.  Neither my client nor his firm has any ownership in hospital A.

I do not know of any formal definition of personal interest, but the term seems to be what causes employment situations to be included in “material financial interest.”  In my opinion, an employee would have a personal interest in the business employing him because it is reasonable to say that his livelihood depends upon the business or company.  However, the same is not true of someone merely associated with an entity contracting with the specific business or company as there is no dependence upon the business for the public servant’s livelihood.

The “material financial interest” definition is unique in that it is a general definition with four subparts which create restrictions upon or exceptions to the general definition thereby effectively changing some material financial interests to less that material financial interests.  Note that all four subparts concern either ownership or employee situations.

The fact that none of the “material financial interest” subparts addresses any of the situations of a public servant being associated with an entity contracting with a business which in turn contracts with the public servant’s governmental entity demonstrates that such situations are not included within the “material financial interest” definition.  Otherwise, an addition subpart would be needed to deal with “de minimus” type situations.

Because of our firm’s relationship as an attorney/client with the hospital, no fees paid by the hospital to my firm come directly to me.  Therefore, I do not have a material financial interest in any business that is a contractor/subcontractor or vendor that is contracting with any entity under the purview of the Board of Trustees of the state board.  As the Board of Trustees has a vacancy, I would request a prompt response to my question as the next Board meeting will be held soon.

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

Section 25-4-105(3)(a), Miss. Code of 1972, quoted above, prohibits a public servant from having a material financial interest in a business which is a contractor, subcontractor or vendor with the governmental entity with which the public servant is associated. Members of the State Board in question are public servants of the state, as that term is defined in Section 25-4-103(p) above. Here there is a contract between the state hospital and the private hospital. Because it performs services under that contract, the private hospital is certainly a contractor to the state. See Moore, ex rel. City of Aberdeen v. Byars, 757 So.2d 243, 248 ( 15) (Miss. 2000).

The only question here is whether the requestor has a material financial interest in the private hospital. That question must be answered in the negative. As a partner in the law firm, the requestor almost assuredly has a material financial interest in the law firm. However, the requestor himself apparently receives no income directly from the private hospital. The legal fees are paid by the private hospital to the law firm. While the requestor presumably receives some portion of those fees pursuant to the firm’s partnership agreement, one cannot say “the aggregate annual net income to the public servant” amounts to $5,000.00 or more as required under Section 25-4-103(k)(ii) above. Therefore, the Commission finds the requestor does not have a material financial interest in the private hospital, and no violation of Section 25-4-105(3)(a) will result if that private hospital contracts with the state hospital as described herein.

However, these facts also implicate the provisions of Section 25-4-105(1), Miss. Code of 1972, quoted above. That subsection prohibits a public servant from taking any action in his or her official position which would confer any pecuniary benefit upon a “business with which he is associated,” as that term is defined in Section 25-4-103(d) above. As secretary to the private hospital corporation, the requestor is an officer of that business, and it is conclusively one with which he is associated. Consequently, the requestor must fully recuse himself from any action by the State Board which would financially benefit the private hospital.

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.

Furthermore, there are no facts to indicate the State Board of which the requestor is a member will authorize or fund the contract in question. Assuming these facts are accurate and complete, there is no need  to address Section 109, Miss. Const. of 1890, or its statutory parallel, Section 25-4-105(2), Miss. Code of 1972.
 

Scott Rankin
Executive Director