This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on September 1, 2000, basing its approval solely on the facts and circumstances stated herein.

May a legislator be employed by and receive compensation from a 501-C-3 not-for-profit corporation when said compensation is paid from a federal grant that comes directly to the corporation from the United States Department of Education?

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(b), (c), (d), (e), (f)(i)(ii), (g)(v), (h), (i), (k)(i)(ii), (l), (m), (o) and (p)(i)(ii)(iii) states:

"(b) 'Benefit' means any gain or advantage to the beneficiary, including any gain or advantage to a third person pursuant to the desire or consent of the beneficiary.

(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.

(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) 'Governmental' 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.

(i) 'Income' means money or thing of value received, or to be received, from any source derived, including but not limited to, any salary, wage, advance, payment, dividend, interest, rent, forgiveness of debt, fee, royalty, commission or any combination thereof.

(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).

(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.

(m) 'Person' means any individual, firm, business, corporation, association, partnership, union or other legal entity, and where appropriate a governmental entity.

(o) 'Public funds' means money belonging to the government.

(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), (3)(a)(d) and (4)(b)(c) 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.

(d) Perform any service for any compensation during his term of office or employment by which he attempts to influence a decision of the authority of the governmental entity of which he is a member.

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

(b) May be a contractor or vendor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which is a contractor or vendor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.

(c) May be a subcontractor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which is a subcontractor with any authority of the governmental entity of which he is a member, officer, employee or agent where the primary contract is let to the lowest and best bidder after competitive bidding or where such goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws."
 
 

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

Please respond with an official opinion on the following question:

May a member of the Mississippi Legislature be employed by and receive compensation from a 501-C-3 Not-For-Profit Organization, when said compensation comes from a direct-to-the-organization grant from the United States Department of Education? In the scenario mentioned here, the federal grant comes directly to the organization and is in no way subject to any state allocation, appropriation or other state funding mechanism. The compensation to the employee is fully funded by the Federal grant and no state funds are in question.

Your expeditious reply to the question above is greatly appreciated. Thank you for your service to the people of the great state of Mississippi.

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

The requestor is not as such prohibited from being employed by a 501-3-C not­for-profit corporation because he is a legislator when the requestor's compensation is to be funded entirely with federal funds received directly from the United States Department of Education.

This finding is based on the Commission's understanding that the requestor's employment contract is funded entirely with federal funds received directly from the Federal Government and not from federal or other funds appropriated by the State Legislature or received through a contractor relationship with the state or one of its agencies.

Although the requestor's letter does not indicate that the 501-3-C not­for-profit corporation in question receives funding through the State Legislative appropriation process, it is not uncommon for a 501-3-C not­for-profit corporation that is eligible to receive federal funding to also be eligible to receive federal or state funding through state agencies by way of the State Legislative appropriation process. Therefore, as a precaution the following discussion is provided.

Notwithstanding the above, a legislator must remain aware of the prohibitions imposed by the above cited Constitutional Section 109 and Code Section 25-4-105(2) should a not­for-profit corporation employing the legislator be a recipient of funds from a grant or contract authorized by the State Legislative appropriation process.

Constitutional Section 109 and Code Section 25-4-105(2) absolutely prohibit a legislator from being interested, directly or indirectly, in any contract authorized by the Legislature, including authorization by funding, during the legislator's term or for one year thereafter.⁽¹⁾

Funding received by way of the State Legislative appropriation process, even if a modest amount compared to a local grantee's overall funding, that directly or indirectly fund a legislator's contract violates Constitutional Section 109 and Code Section 25-4-105(2).

Also, funding provided through the State Legislative appropriation process to a local grantee that is of such a sufficient amount that the local grantee's existence, and thereby the existence of all its contracts including a legislator's contract, would be in jeopardy if it did not continue to receive such funding violates Constitutional Section 109 and Code Section 25-4-105(2). The reasoning being the legislator's contract is obviously dependent on the local grantee's continued operation made possible by the State Legislative funding; even though, the state approved funds could not have been used to directly fund the legislator's contract.

A legislator being compensated by a not­for-profit corporation from federal funds flowing directly from the Federal Government to the not­for-profit corporation that is also receiving limited funding by way of the State Legislative appropriation process could not avoid a violation of Constitutional Section 109 and Code Section 25-4-105(2) unless all of the following circumstances existed. The State Legislative appropriated funds cannot be legally commingled with the federal funds; the local grantee maintains detailed accounting records of all its funds; and, the payments to the legislator are not only from funds not appropriated by the Legislature, but, also from funds that may not be supplanted by the State Legislative appropriated funds.

Also, Code Section 25-4-105(3)(a), cited above, must be considered and applied if a not­for-profit corporation employing and compensating a legislator is a recipient of funds from a grant or contract authorized by the State Legislative appropriation process.

Code Section 25-4-105(3)(a) prohibits a public servant of the state, including a legislator, from having a material financial interest in a business that is a contractor, subcontractor or vendor with the state.

A not­for-profit corporation that receives funding from a state agency/institution is a business by way of the definition of "business" set forth in the above cited Code Section 25-4-103(c).

Specifically, Code Section 25-4-103(c) states: "'Business' means . . . a nonprofit corporation or other such entity, association or organization receiving public funds. Code Section 25-4-103(o) states: "'Public funds' means money belonging to the government."

The applicable definition of "material financial interest" to be applied herein is found in the above cited Code Section 25-4-103(k)(ii). Code Section 25-4-103(k)(ii) provides that a personal and pecuniary interest, direct or indirect, accruing to a public servant who has an ownership of any interest of less than two percent (2%) in a business but an aggregate annual net income therefrom of Five Thousand Dollars ($5,000.00), or more, has a material financial interest in the business.

Therefore, Code Section 25-4-105(3)(a) would prohibit a legislator from having an employment contract if the contract is with a not-for-profit corporation; if the not-for-profit corporation has a grant or contract with a state agency/institution; and, if the contract results in an aggregate annual net income of Five Thousand Dollars ($5,000.00), or more, to the legislator.

Code Section 25-4-105(4)(b)(c), cited above, provides limited exceptions to the Code Section 25-4-105(3)(a) violation discussed above, when the contract is with a state agency/institution that is not a part of the State Legislative authority.

Code Section 25-4-105(4)(b) applies when the not-for-profit corporation is the direct contractor with a governmental authority. The applicable exceptions are "where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws."

Code Section 25-4-105(4)(c) applies when the not-for-profit corporation is a subcontractor with a governmental authority. The applicable exception is "where the primary contract is let to the lowest and best bidder after competitive bidding or where such goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws."

Notwithstanding the above, a legislator who is contracting with a not­for-profit corporation that receives State Legislative appropriated funds that do not result in payments under contracts in which the legislator would be interested, directly or indirectly, still must remain keenly aware of the above cited Code Section 25-4-105(1) and (3)(d).

Code Section 25-4-105(1) prohibits a public servant, including a legislator, from using his position to obtain a pecuniary benefit for himself, a relative or a business with which he is associated.

Code Section 25-4-105(3)(d) prohibits a public servant, including a legislator, from performing any service for any compensation during his term of office or employment by which he attempts to influence a decision of the authority of the governmental entity of which he is a member.

To absolutely avoid a violation of Code Section 25-4-105(1) and (3)(d), a legislator should totally and completely recuse himself from any and all matters coming before the Legislature, or its committees, that concern the entity receiving the State Legislative appropriated funds and the state agency program providing the funding to the entity.

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.

Clearly, the state public policy set forth in Code Section 25-4-101 will require a legislator, who is employed by a not­for-profit corporation that receives State Legislative appropriated funds that do not result in payments under contracts in which the legislator would be interested, directly or indirectly, to totally and completely recuse himself from all State Legislative considerations concerning the entity receiving the State Legislative appropriated funds and the state agency program providing the funding to the entity.

An abstention is a vote with the majority of the governing entity's body and therefore does not qualify as a recusal.

A total and complete recusal requires that the public servant not only avoid debating, discussing or taking action on the subject matter during the official meeting, but also avoid discussing the subject matter with other board members, staff or any other person prior to and after the official meeting. This includes casual comments, as well as detailed discussions, made in person, by telephone or by any other means.

Also to properly recuse oneself from a matter, the public servant must leave the room or area where such discussions, considerations and/or actions take place. The minutes of the governing entity's board should state the public servant left the meeting by showing him or her absent for that matter.

The requestor is advised that a recusal or an abstention will not prevent a violation of Constitutional Section 109 and Code Section 25-4-105(2) or (3)(a). Even without a legislator's vote, the authorization by the Legislature nonetheless results in a contract in which the legislator has a prohibited interest. [Emphasis added to bold text]
 
 
 
 
 
 
 
 

Ronald E. Crowe

Executive Director

1. An appropriation bill funding programs that allow payments under contracts in which legislators are interested are "laws authorizing the contracts." See Frazier v. State, 504 So. 2d 675 (1987) and Cassibry v. State, So. 2d 1360 (1981).