This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on December 6, 2002, basing its approval solely on the facts and circumstances stated herein.
 

May a city contract with an insurance company for insurance coverage when a city alderman previously had an interest in the company?

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) and (p)(i)(ii)(iii) state:
 

“(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.

(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) 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.”

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

In advisory opinion 02-099-E you stated that Constitutional Section 109 and Code Section 25-4-105(2) will absolutely prohibit the City from purchasing insurance from an insurance company in which an Alderman and/or his spouse serve as officers and which leases office space from the Alderman, until one year after the Alderman leaves office.

The Alderman in question has now removed his name and his spouse’s name as officers of the insurance company.  (See copy of resolution) He has also transferred his interest in the property, where the insurance company is located, to the insurance company.  (See copy of deed attached)

The Town now poses the question as follows: Do the above listed actions resolve the matter and thus the Town would now be able to purchase insurance from the Insurance Agency?  We need an expedited opinion prior to November 26, 2002, since the insurance for the Town must be purchased on that date.

In addition to the above facts, the Commission’s staff was also advised by the alderman’s  attorney that the alderman nor his spouse is now an officer, director, owner, partner, employee or stockholder with the insurance company.  In addition, the alderman and/or his spouse have no financial ties to the insurance company related to the transfer of his interest in the property to the insurance company, such as a note of indebtedness or loan agreement.

 
The requestor is advised and cautioned that this opinion does not provide any protection from  any civil or criminal liability to any public official of the city who has violated the conflict of interest laws prior to the issuance of this opinion and the Commission does not in any way waive its authority to take action if a violation of the conflict of interest laws should have occurred prior to the issuance of this opinion. [Emphasis added to bold text]

The Commission formally adopts Advisory Opinion No. 02-099-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.

As stated in the attached Advisory Opinion 02-099-E, Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibit a member of a governmental body, such as an alderman, from having an interest, direct or indirect, in any contract authorized by the governmental body of which he is a member during his term and for one year thereafter.

In Frazier v. State, 504 So. 2d 675, (Miss. 1987), the Mississippi Supreme Court set forth the following four elements necessary to apply the Constitutional Section 109 prohibition, and thereby the Code Section 25-4-105(2) prohibition:
 

1. Is there a governmental contract with the state, county, municipality or district?

2. Does the public officer have an interest, direct or indirect, in the contract?

3. Is the contract authorized by a law passed or order made by a board or public body of which the public officer is a member?

4. Was the authorizing law or order passed during the public officer’s term or within one year after the expiration (or termination) of such term?

Elements 1, 3 and 4, as set forth in Frazier, will be met if and when the city board authorizes the purchase of insurance coverage from the insurance company during the alderman’s term or within one year thereafter.

Therefore, the single question to be considered herein is whether the alderman will have an interest, direct or indirect, in an insurance contract purchased by the city from the insurance company at the time said contract is authorized by the city board.

 
In reliance upon the requestor’s facts and the supplemental facts provided by the alderman’s attorney that the alderman and his spouse have divested themselves of all their individual and joint interests, direct or indirect, in the insurance company, Constitutional Section 109 and Code Section 25-4-105(2) will not now prohibit the city board from authorizing a contract with the insurance company when such authorization occurs after the alderman’s and his spouse’s full divestiture of their interests in the insurance company.

Notwithstanding the above, 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 history of the alderman’s past interest in the insurance company is sufficient to result in a circumstance that will create suspicion among the public and reflect unfavorably upon the city should the alderman now participate in any decision of the city board to contract with the insurance company.

Therefore, the requestor is cautioned to advise the alderman that he should totally and completely recuse himself from any decision of the city board to contract with the insurance company so as to fully and completely comply with the public policy mandate set forth in Code Section 25-4-101.

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.
 

Scott Rankin
Executive Director