This Advisory Opinion concerns the following issues 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.

ISSUE 1. May a business owned by a former employee of a community hospital contract with the community hospital?

ISSUE 2. May a business owned by an employee of a community hospital contract with the community hospital?

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), (f)(i)(ii), (g)(v), (h), (i), (k)(i)(ii) 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.

(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).

(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(2), (3)(a)(e) and (4)(d) states:

"(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.

(e) Perform any service for any compensation for any person or business after termination of his office or employment in relation to any case, decision, proceeding or application with respect to which he was directly concerned or in which he personally participated during the period of his service or employment.

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

(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."

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.

ISSUE 1. Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibit a member of a governmental body or board, such as a community hospital's board of trustees, from having an interest in a contract authorized by the member's governmental body or board during the member's term or for one year thereafter. [Emphasis added to bold text]

The position held by requestor prior to his resignation was director of pharmaceutical services.

The position of director of pharmaceutical services is clearly not a position that would be included in the prohibition imposed by either Constitutional Section 109 or Code Section 25-4-105(2).

Therefore, the requestor's business would not be prohibited by Constitutional Section 109 and Code Section 25-4-105(2) from contracting with the community hospital within one year of his resignation as the director of pharmaceutical services.

Notwithstanding the above, the requestor is advised to remain keenly aware of the above cited Code Section 25-4-105(3)(e).

Code Section 25-4-105(3)(e) is the only Ethics in Government law that specifically prohibits the actions of former public servants who were not members of a governmental body or board. [Emphasis added]

Code Section 25-4-105(3)(e) prohibits a former public servant from being compensated by a business after the former public servant leaves his public employment if the former public servant is compensated for performing services related to "any case, decision, proceeding or application with respect to which he was directly concerned or in which he personally participated" during the former public servant's public employment.

Although the terms "any case, decision, proceeding or application" do not specifically include the word "contract," the terms are sufficiently broad to include a contract in the Code Section 25-4-105(3)(e) prohibition.

Therefore, Code Section 25-4-105(3)(e) would prohibit the requestor from being compensated through his business in regard to any of its contracts with the community hospital that the requestor was directly concerned with or in which he personally participated as the community hospital's director of pharmaceutical services.

Certainly, it is reasonable to believe that Code Section 25-4-105(3)(e) would not be violated by the requestor when the contracts between his business and the community hospital came into existence after his resignation as the community hospital's director of pharmaceutical services, especially considering that the community hospital stopped contracting with his business during his employment as its director of pharmaceutical services.

ISSUE 2. Code Section 25-4-105(3)(a), cited above, prohibits a public servant, including an employee of a community hospital, from having a material financial interest in a business that is a contractor, subcontractor or vendor with the public servant's governmental entity.

The only exception to the prohibition imposed by Code Section 25-4-105(3)(a) that would apply under the facts presented by the requestor is set forth in the above cited Code Section 25-4-105(4)(d). Specifically, the applicable exception set forth in Code Section 25-4-105(4)(d) is "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."

This Commission has consistently held that the geographical boundary of a governmental entity is not sufficient by itself to set in motion the above exception. In most if not all areas of the state, goods and services are reasonably available in a neighboring city, county or district.

Therefore, the two businesses that the requestor describes in his letter as "our closest competition" certainly could be considered by the community hospital as reasonably available commercial sources.

Also, ISSUE 2 presented by the requestor 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, a community hospital contracting with a business owned in whole or in part by one of its employees is a circumstance having the potential of creating suspicion among the public and reflecting unfavorably upon the community hospital. Therefore, a community hospital must whenever possible avoid such a circumstance so as to fully and completely comply with the public policy mandate set forth in Code Section 25-4-101.
 

Ronald E. Crowe

Executive Director