This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on February 14, 2003, basing its approval solely on the facts and circumstances stated herein.
 

May a state employee be part owner in an outsourcing business and that business market services to the state?

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), (f)(i)(ii), (g)(v), (h), (i), (k)(i)(ii) and (p)(i)(ii)(iii) 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.

(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(1), (3)(a) and (4)(b) 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.

(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:

(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 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.”

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

This letter is to request an opinion from the ethics commission as it relates to a part-time business that others and I are forming in the state.  I am a state employee with the a state agency and will continue employment with the state while operating this business.  This is an outsourcing service oriented business.  This letter is to provide a list of services that will be offered to make sure that there will not be a conflict of interest or an ethics violation.

Listed are the services provided: Event planning, schedule meetings seminars, workshops and conferences; Word processing; Grant/proposal writing and solicitations; Graphics/digital design; Technical writing - which includes manuals, brochures and articles on various issues; Certification Training Programs - bring certified training programs to the state in different career areas; Research in various subject areas; Human Resources - development of manuals, providing training on various subjects related to employees; Desk Top Publishing - development of newsletters.

What I need clarified is if any of these components related to energy in which the state agency does not perform, such as certification in air quality control, was brought to the state through our business, would that be a conflict of interest. This service will not be marketed to the state agency.

I am aware that no state equipment and supplies can be used.  The business name has not been finalized.  I look forward to hearing from you soon.

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

This opinion is written with the understanding that the requestor’s outsourcing business will not be marketed to the requestor’s employing agency.  The requestor is advised that the conflict of interest laws are much more restrictive when a state employee’s business seeks to be a contractor, subcontractor or vendor with the state employee’s own state agency employer. [Emphasis added to bold text]

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

Therefore, Code Section 25-4-105(3)(a) will prohibit the requestor from having a material financial interest in the outsourcing business, as a part owner, if it enters into a contract to provide services to any agencies, departments or commissions of the state.

 
A material financial interest is defined in the above cited Code Section 25-4-103(k)(i)(ii). Specifically, the requestor having an ownership of 10% or more, or having an ownership interest of between 10% and 2% and an aggregate annual net income of $1,000.00, will result in the requestor having a material financial interest in the outsourcing business.

If the requestor will have a material financial interest in the outsourcing business, then the only applicable exception to a violation of Code Section 25-4-105(3)(a) in the circumstance presented by the requestor is set forth in the above cited Code Section 25-4-105(4)(b).  Specifically, this applicable exception would be where a state agency, other than the requestor’s employing state agency, lets a contract to the requestor’s outsourcing business as the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received by the state agency for the proposed services.

As the requestor has stated in her request letter, no state equipment or supplies can be used by the requestor’s outsourcing business.

If the requestor’s outsourcing business should use state equipment or supplies, the requestor would be in violation of the above cited Code Section 25-4-105(1).

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

The outsourcing business will be a business with which the requestor is associated under the definition set forth in the above cited Code Section 25-4-103(d).

The requestor is advised that the conflict of interest laws do not overrule specific state agency policies and procedures which might be more restrictive than the conflict of interest laws.  Therefore, the requestor should inquire of the state agency to ensure there are no policies or procedures prohibiting the state employee from being part owner in an outsourcing business and that business market services to the state.
 
 
 

Scott Rankin
Executive Director