This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on June 4, 2004, basing its approval solely on the facts and circumstances stated herein.
 

May a community college use as its depository a bank in which one of the members of the community college’s board of trustees serves as a member of the bank’s advisory board or board of directors?

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

(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) ‘Government’ 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).

(o) ‘Public funds’ means money belonging to the government.

(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.

(r) ‘Securities’ means stocks, bonds, notes, convertible debentures, warrants, evidences of debts or property or other such documents.”

Code Section 25-4-105(2), (3)(a) and (4)(a) 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.

(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 am writing this letter on behalf of the Board of Trustees of a Community College.

It is my understanding that four of the five Trustees of the Board of Trustees of the Community College serve either on an Advisory Board or on the Board of Directors of various banks in the City.  These Board members receive compensation from the bank on whose Board they sit.

Does Section 25-4-105(4)(a) of the Mississippi Code of 1972, Annotated, allow the Community College to contract with one or more of these banking institutions (which has a member of the Board of Trustees serving on its Board of Directors) as depositors of the public funds of the Community College after seeking bids as required by law?

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, absolutely prohibit a member of a governmental body, including a community college trustee, 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.

Therefore, Constitutional Section 109 and Code Section 25-4-105(2) do prohibit a community college from using a bank as its depository or from contracting in any other way with a bank when a member of the community college’s board of trustees is also a member of the bank’s advisory board or board of directors.

However, this Commission has held in the past that an interest resulting from an advisory board membership may be “de minimis non curat lex.”

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 courts have not set specific thresholds for 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.

Notwithstanding the above, it is this Commission’s long held position that a public board member serving as a member of the board of  directors of a bank would not qualify under the rule of “de minimis non curat lex.” The fiduciary and trust obligations a member of the board of directors of a bank owes the bank results in his or her interests being tantamount to the bank’s interest.

The requestor is cautioned to advise the community college trustees that a recusal or an abstention will not prevent a violation of Constitutional Section 109 and Code Section 25-4-105(2). Even without a board member’s vote, the authorization by the member’s board, nonetheless, results in a contract in which the board member has a prohibited interest.¹   Also, the requestor is cautioned to advise the community college trustees that a “no vote” will not prevent a violation of Constitutional Section 109 and Code Section 25-4-105(2).²

In regard to how to apply the exception set forth in Code Section 25-4-105(4)(a), cited above, the requestor is advised that this exception is only applicable to a violation of Code Section 25-4-105(3)(a), cited above, and is not applicable to a violation of Constitutional Section 109 and Code Section 25-4-105(2). Notwithstanding its proper application, the requestor is also advised that the exception set forth in Code Section 25-4-105(4)(a) will not apply when a public board member holds either a position on the bank’s board of directors or the bank’s advisory board.  The reason that the Code Section 25-4-105(4)(a) exception does not apply in such instances is because a bank board member does not come within the statutory exception of  “officer” or  “stockholder.”

 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, a community college trustee serving as a board member of one of the community college’s depositories certainly can be expected to create suspicion among the public and reflect unfavorably upon the community college and the trustees.  Therefore, such a circumstance should be avoided to comply with the public policy mandate set forth in Code Section 25-4-101.
 
 

Scott Rankin
Executive Director
 

¹ Towner v. Moore, 604 So. 2d 1093 (1992): “The fact that Mary Towner did not vote to hire her husband, or, in her words, ‘attempt to influence members . . . to vote for such employment’ is beside the point.  Both constitution [Section 109] and statute [Code Section 25-4-105(2)] speak of contracts authorized while she was a member of the board, however she may have voted or abstained.

² Waller v. Moore, 604 So. 2d 265 (1992): “Waller argues that his negative vote on hiring his wife insulated him from the violation and liabilities . . . There is no such provision exempting him from the prohibition of Section 109 and 25-4-105(2).  It is his interest in his wife’s contract, not his vote, that is prohibited.”