This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on March 2, 2001, basing its approval solely on the facts and circumstances stated herein.

May a city continue to contract with a bank if an individual serving on the bank's advisory board is elected to the city's board of aldermen?

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)(ii), (h), (k)(i)(ii), (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.

(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:

(ii) Municipalities.

(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).

(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), (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 would like to know if I can run for alderman in the City. I am an advisory member for the Bank. I am paid $100.00 quarterly. I receive approximately $3,060.00 from stock dividends yearly.

I would appreciate an answer as soon as possible.

In addition to the above facts, the requestor provided the following information from the Bank's Statement of Purpose and Function:

[Bank Advisory Committee] appointees, hereafter referred to as Advisors, shall have neither policy making nor credit approval authority, shall not have access to confidential bank customer information, and shall have NO LIABILITY for the decisions and/or actions of the Management or Board of Directors of Bank.

In addition to the above facts, the requestor also advised that his stock ownership in the Bank is less than 1% and that the Bank is currently one of two banks serving as the City's depositories.

The Commission formally adopts Advisory Opinion No. 00-107-E in response to this request and by attachment incorporates it into this opinion.

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

Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibit a board member of a governmental entity from having an interest in a bank serving as the governmental entity's depository or contracting with the governmental entity for any other purpose. A governmental entity's board member's service as an advisory board member of a bank qualifies as such a prohibited interest.

Notwithstanding the above, the Mississippi Supreme Court, in Frazier v. State, 504 So.2d 675 (Miss. 1987), indicated that some prohibited interests may be "de minimis non curat lex."⁽¹⁾

It is a question of fact as to whether a bank advisory board member's service on an advisory board, without decision making authority on the bank's behalf, and any associated or other financial interest in or compensation from the bank is a "de minimis" interest.

The Supreme Court has set no specific thresholds to use in determining when a governmental entity's board member has a "de minimis" interest. Therefore, a court of competent jurisdiction must ultimately determine whether a public servant has a "de minimis" interest.

The Constitutional Section 109 and Code Section 25-4-105(2) prohibitions would apply when the city's board of aldermen authorizes a contract with the bank after the bank advisory board member becomes a member of the city's board of aldermen. As stated above, the prohibitions would apply not only during the requestor's term, if elected, but for one year thereafter.

Also, Code Section 25-4-105(3)(a), cited above, would prohibit the requestor as an alderman from having a material financial interest in the bank as defined in Code Section 25-4-103(k)(i)(ii), cited above, if the bank is contracting with the city.

The facts presented by the requestor indicate that the prohibition imposed by Code Section 25-4-105(3)(a) would not apply in this instance. The reason being that the requestor's ownership interest in the bank is less than two percent (2%) with an aggregate annual net income of less than Five Thousand Dollars ($5,000.00) accruing to the requestor from the bank.

The requestor is advised that the exception set forth in Code Section 25-4-105(4)(a), cited above, will not apply to the prohibition imposed by Code Section 25-4-105(3)(a) should the requestor's ownership interest in an income from the bank later result in a material financial interest in the bank. The reason that the Code Section 25-4-105(4)(a) exception does not apply is because a bank advisory board member does not come within the statutory exception of "officer" or "stockholder."

Notwithstanding the prohibitions imposed by Constitutional Section 109 and Code Section 25-4-105(2) and (3)(a) set forth above, the requestor must also be aware of Code Section 25-4-105(1) and Code Section 25-4-101, both cited above.

Code Section 25-4-105(1) prohibits an alderman from using his official position with the city to provide a pecuniary benefit to a bank with which he is associated.

A board member of a governmental entity can avoid violating Code Section 25-4-105(1) by properly recusing himself from any action coming before the governmental entity's board that would provide a pecuniary benefit to the board member, his relative or a business with which he is associated.

A proper recusal is not an abstention. An abstention is a vote with the majority of the governing entity's board 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 board member's vote, the authorization by his board would nonetheless result in a contract in which the board member had a prohibited interest.

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, an alderman serving as an advisory board member of one of the city's depositories has the potential of creating suspicion among the public and reflecting unfavorably upon the city and the board of aldermen. Therefore, such a circumstance should be avoided to fully comply with the public policy mandate set forth in Code Section 25-4-101.
 

Ronald E. Crowe

Executive Director

1. The term de minimis non curat lex means the law cares not for small things.