OFFICIAL ADVISORY OPINION NO. 05-120-E

January 6, 2006

This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on January 6, 2006, 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 the mayor as a teller if the selection is made in accordance with law and the mayor fully recuses himself from the selection?

Your opinion request to the Office of the Attorney General dated December 19, 2005, as referred by that Office to the Mississippi Ethics Commission on December 28, 2005, as your request involves the above issue that concern the Mississippi conflict of interest laws.

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(a), (c), (d), (f)(i)(ii), (g)(i)(ii)(iii)(iv)(v), (h), (k)(i)(ii)(iii)(iv), (l), (p)(i)(ii)(iii), (q) and (r) states:

“(a) ‘Authority’ means any component unit of a governmental entity.

(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.

(r) ‘Securities’ means stocks, bonds, notes, convertible debentures, warrants, evidences of debts or property or other such documents.”

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.

Having been elected as Mayor this year, I am writing in regards to Opinion ID: 05-012-E concerning an hourly employee of a bank. My question is as Mayor can my wife work in a bank, the city uses as a depository, as an hourly teller. She has been working the bank for 14 years. I would like your opinion on this matter as soon as possible. Thank you for your consideration.

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). The Commission has consistently applied Section 109 and Section 25-4-105(2) to mayors.

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.

This opinion is predicated upon the 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. Thus, if the city continues to contract with the bank employing the mayor’s wife as an hourly teller, no violation of Constitutional Section 109 or Code Section 25-4-105(2) will occur.

This 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 a mayor 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 a mayor 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. Therefore, the requestor will be prohibited from participating in any decision by the municipal governing authority 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. 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.

Code Section 25-4-105(3)(a), quoted above, also prohibits a mayor 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 a mayor’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 accrue if the spouse receives $5,000.00, or more, in aggregate annual net income.


Scott Rankin
Executive Director