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 7, 2000, basing its approval solely on the facts and circumstances stated herein.
 

May an insurance company and a bank contract with a county when the insurance company and the bank are owned by a corporation that employs a justice court judge serving the county?

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:

Code Section 25-4-103(a), (c), (d), (e), (f)(i)(ii), (g)(i)(iv), (h), (i), (k)(i)(ii), (p)(i)(ii)(ii) 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.

(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:

(i) Counties; and

(iv) All courts.
 
(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).

(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(3)(a), (4)(a)(d) and (6) states:
 

“(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.

(d) May be a contractor, subcontractor or vendor with any 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, subcontractor or vendor with any  authority of the governmental entity of which he is a member, officer, employee or agent: (i) 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; or (ii) where the contractual relationship involves the further research, development, testing, promotion or merchandising of an intellectual property created by the public servant.

(6) Any contract made in violation of this section may be declared void by the governing body of the contracting or selling authority of the governmental subdivision or a court of competent jurisdiction and the contractor or subcontractor shall retain or receive only the reasonable value, with no increment for profit or commission, of the property or the services furnished prior to the date of receiving notice that the contract has been voided.”

Pertinent facts and circumstances in the form of the requestor’s letter, absent identifying data, are attached hereto and considered a part of this opinion.

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

Code Section 25-4-105(3)(a), cited above, prohibits a public servant, including a justice court judge, from having a material financial interest in a business that is a contractor, subcontractor or vendor with the public servant’s governmental entity, in this instance the county.

Code Section 25-4-103(k)(ii), cited above, provides that a public servant has a material financial interest in a business when his or her ownership interest is less than two percent (2%) but the public servant’s aggregate annual net income is Five Thousand Dollars ($5,000.00) or more.

As set forth in the requestor’s facts, the justice court judge does have a material financial interest in the corporation doing business with the county through the bank and the insurance company which it owns.

Regarding a bank, Code Section 25-4-105(4)(a), cited above, provides an exception to a violation of Code Section 25-4-105(3)(a) if the bank is bidding for bonds, notes or other evidences of debt or for the privilege of keeping as depositories the public funds of a governmental entity.

Therefore, if the contracts the county has with the bank are limited solely to the bank purchasing bonds, notes or other evidences of debt from the county or to the bank serving as the county depository, then the bank may contract with the county for these limited purposes and not violate Code Section 25-4-105(3)(a) even though the justice court judge is employed by the corporation which owns the bank.

In regard to the insurance agency, Code Section 25-4-105(4)(d), cited above, provides the only exception that could possibly be applicable to this instance.  This exception is where such goods or services being provided by the insurance agency are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.

The above exception set forth in Code Section 25-4-105(4)(d) is not limited to a geographical area such as a county or city. It is clear, that the insurance coverage provided to the county by the insurance agency owned by the corporation employing the justice court judge could reasonably be provided by insurance agencies located in surrounding counties. Therefore, the above exception set forth in Code Section 25-4-105(4)(d) is not applicable in this particular instance and the insurance agency owned by the corporation employing the justice court judge is prohibited by Code Section 25-4-105(3)(a) from contracting with the county.

The requestor is also advised to review the above cited Code Section 25-4-105(6).  Code Section 25-4-105(6) provides that any contract made in violation of this section may be declared void by the governing body of the contracting or selling authority of the governmental subdivision or a court of competent jurisdiction and the contractor or subcontractor shall retain or receive only the reasonable value, with no increment for profit or commission, of the property or the services furnished prior to the date of receiving notice that the contract has been voided.

An advisory opinion is not the proper process to determine whether or not a violation of the state conflict of interest laws has already occurred.   An investigation is the only method whereby a determination can be made as to whether probable cause exists to believe that the justice court judge and/or the corporation’s contracts with the county have violated the state conflict of interest laws.
 
 

Ronald E. Crowe
Executive Director