This Advisory Opinion concerns the following issues as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on October 1, 2004, basing its approval solely on the facts and circumstances stated herein.
 

ISSUE 1. May a board of aldermen employ an attorney as its board attorney when the attorney is a member of a law firm that represents a bank that serves as the city’s depository?

ISSUE 2. May a board of aldermen employ an attorney as its board attorney when the senior partner in the attorney’s law firm is on the board of directors of the bank that serves as the city’s depository and also is the parent of the attorney?

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), (e), (f)(i)(ii), (g)(ii), (h), (i), (k)(i)(ii), (l), (p)(i)(ii)(iii), (q) 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.

(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.

(e) ‘Compensation’ means 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:

(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.

(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).

(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.

(q) ‘Relative’ means the spouse, child or parent.

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

Code Section 25-4-105(1), (2), (3)(a)(d), (4)(a)(d) and (5) 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.

(d) Perform any service for any compensation during his term of office or employment by which he attempts to influence a decision of the authority of the governmental entity of which he is a member.

(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.

(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.

(5) No person may intentionally use or disclose information gained in the course of or by reason of his official position or employment as a public servant in any way that could result in pecuniary benefit for himself, any relative, or any other person, if the information has not been communicated to the public or is not public information.”

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 at the request of the City and requesting an official ethics opinion. The attorney that has represented the Mayor and Board of Aldermen for many years is retiring and the Board is shortly going to be faced with the prospect of hiring a new attorney. One of the attorneys that the Board is seriously considering for this position has a potential conflict that I feel should be addressed.

This attorney is a member of a law firm that represents the local bank that has served for a number of years, and currently serves, as the City’s depository.  Additionally, this attorney’s father, who is the senior partner of the law firm, is on the board of directors of the bank. My question, therefore, is whether this attorney would have a conflict of interest that would prevent him from serving as the attorney for the Board, with his law firm being the legal counsel for the bank and is the City’s depository and with his father (and law partner) being on the bank’s board of directors?

If you could provide me with an opinion on this issue at your earliest convenience, I would greatly appreciate it.

The Commission formally adopts Advisory Opinions No. 97-126-E with attachments and No. 00-139-E with attachments in response to this request and by attachment incorporates them into this opinion.

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

ISSUE 1. The employment contract between the city and the attorney results in the attorney being an employee of the city and therefore a public servant of the city as defined in the above cited Code Section 25-4-103(p).¹

Also,  this Commission has consistently recognized that any contract to represent a public client held by one partner of a law firm is actually held by the law firm and thereby its other partners.

As set forth in the attached Advisory Opinion No. 97-126-E: ISSUE 1, an attorney acting as counsel to a governmental entity’s board and as counsel to the governmental entity’s depository can easily violate the conflict of interest laws by asserting his influence as the governmental entity’s board’s counsel by urging the governmental entity’s board to select the bank he represents as its depository. Based on the above, this Commission finds that these same concerns equally exist when an attorney is acting as counsel to a governmental entity’s board and the attorney’s law firm is counsel to the governmental entity’s depository as is the case in this instance.

Specifically, Code Section 25-4-105(1) and/or (3)(d), both cited above, are identified in the attached advisory opinion as conflict of interest laws the attorney can violate by urging the governmental entity’s board to select the bank he or his law firm represents as its depository.  The prohibition set forth in Code Section 25-4-105(1) applies only if the bank is a business with which the attorney is associated.  Code Section 25-4-103(d), cited above, defines when a public servant’s interest in a business results in that business being “a business with which he is associated.”  Specifically, Code Section 25-4-103(d) provides that “a business with which he is associated” applies when either the public servant or his relative (which includes a parent) is a officer or director of the business.

Also, the attached opinion identifies Code Section 25-4-105(5), cited above, as a conflict of interest law an attorney can violate when he or his law firm is acting as counsel for a governmental entity and the governmental entity’s depository.  A violation of Code Section 25-4-105(5) occurs when a public servant discloses nonpublic information obtained in his public position that could result in a pecuniary benefit to the public servant or any other person.  A “person” as defined in the above cited Code Section 25-4-103(m) would include both the bank and the law firm.

A public servant may avoid a violation of Code Section 25-4-105(1), (3)(d) and/or (5) only if he totally and completely recuses himself from the matter raising the conflict.

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 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.

Therefore, the attorney should avoid officially or unofficially discussing matters concerning the bank with the city’s, mayor, board members and staff; should leave the board room; and should have the minutes show him absent when the board discusses, considers or takes actions regarding the bank.

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.

As set forth in the attached advisory opinion, it is clear to this Commission that the same attorney and/or law firm representing a governmental entity and the governmental entity’s depository has the potential of creating suspicion among the public and reflecting unfavorably upon the governmental entity.  Therefore, such dual legal representation should be avoided.

Although the attached Advisory Opinion No. 96-126-E does provide that an individual attorney serving as counsel to a governmental entity’s board does not violate Code Section 25-4-105(3)(a), cited above, when he is personally employed to serve as counsel to the governmental entity’s depository because of the exception set forth in Code Section 25-4-105(4)(a), cited above, that finding does not hold true when the attorney’s law firm is contracting to provide the bank/ depository legal services.²

Therefore, Code Section 25-4-105(3)(a) will prohibit the bank from contracting with the city as its depository, or in any other capacity, unless the two (2) or fewer commercial sources exception set forth in Code Section 25-4-105(4)(d), cited above, applies. However, the prohibition imposed by Code Section 25-4-105(3)(a) applies only if the attorney/public servant is receiving an income from the bank’s contracts with the law firm that results in him having a material financial interest in the bank as defined in the above cited Code Section 25-4-103(k)(i)(ii).

ISSUE 2.  The Commission adopts the attached Advisory Opinion No. 00-139-E in response to this issue.  The Commission’s finding in Advisory Opinion No. 00-139-E is restated below with modifications applicable to the specific facts of this request.

Code Section 25-4-105(3)(a), cited above, provides that a public servant of a governmental entity, including the board attorney of a city, shall not 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.

The requestor as the board attorney for the board of aldermen stands in the same position as the board attorney for board of supervisors and the board of trustees of the public school district discussed in the attached Advisory Opinions No. 00-139-E and No. 00-005-E.

Therefore, like these board attorneys, a city board attorney would violate Code Section 25-4-105(3)(a) should the board of aldermen contract with a bank to serve as its depository, or for any other reason, if the city board attorney was a member of the bank’s board of directors and had a material financial interest in the bank.   Also, the requestor is directed to Advisory Opinions No. 00-139-E and No. 00-005-E which state that being a member of a bank’s board of directors does not fall within the statutory exception found in Code Section 25-4-105(4)(a), discussed above, which refers only to an officer or stockholder.

Notwithstanding the above, the question presented here is whether the individual attorney being considered for the position of city board attorney will violate Code Section 25-4-105(3)(a) since his law partner (and father) serves as a member of the board of directors of the bank serving as the city’s depository.

As previously stated above, this Commission has consistently recognized that any contract to represent a public client held by one partner of a law firm is actually held by the law firm and thereby its other partners.

However, it is clear that the State Legislature in passing the exception found in Code Section 25-4-105(4)(a) intended that banks be able to serve as depositories for local governmental entities if the public servant individually did not hold a position with the bank, such as board of director member, whereby a fiduciary and/or trust responsibility was owed the bank thus conflicting with the public servant’s public fiduciary and/or trust responsibility.³

Therefore, the narrow and limited variation from the principle that a law firm’s contract to represent a client is held by its partners when representing public clients is set forth below.

A law partner of an attorney of a local governmental board may serve on the board of directors of a bank selected by said local governmental board as its depository without violating Code Section 25-4-105(3)(a) if the following circumstances exist.

The circumstances are:
 

1.  The law partner serving as board attorney is individually employed by the local city governmental board as anticipated by Code Section 21-15-25 and the law firm is not employed by the local governmental board as anticipated by Code Section 21-15-27.   The board attorney must be paid as an employee of the local city governmental board and no fees and/or other compensation paid by the local city governmental board for legal services can accrue, directly or indirectly, to the law firm or benefit, directly or indirectly, the law firm.

2.  The law partner serves as a member of the bank’s board of directors in his individual capacity and all fees and compensation paid for such individual service by the bank accrues to the law partner individually and not to the law firm.

3.  The board attorney has properly notified the local city governmental board of his law partner’s service on the bank’s board of directors prior to any depository selection and the board attorney has properly recused himself from the local city governmental board’s depository selection to comply with the public policy mandate set forth in the above cited Code Section 25-4-101.⁴

The requestor is advised that this opinion is limited solely to the factual circumstance of a law partner of an attorney of a local city governmental board serving on the board of directors of a bank selected by the local city governmental board as its depository when the board attorney is individually employed by the local governmental board.

Therefore, the requestor is cautioned that other factual circumstances such as the law firm or its partners having a material financial interest in the bank by way of other contractual interests and/or other pecuniary benefits as addressed in ISSUE 1 or such as the law firm or its partners having other contractual arrangements with the local city governmental board are not addressed in ISSUE 2.  Such additional factual circumstances could certainly result in a violation of Code Section 25-4-105(3)(a) or other state conflict of interest laws as identified in ISSUE 1.
 
 
 

Scott Rankin
Executive Director
 

¹ Code Section 21-15-25. Municipal attorney; appointment and compensation. In part states: The governing authorities may annually appoint an attorney at law for the municipality, prescribe his duties and fix his compensation, and/or they may employ counsel to represent the interest of the municipality, should the occasion require. [Emphasis added to underlined text]

² A bank serving the city in other capacities such as  investment broker, insurance provider, paying agent, bond registrar, trustee or financial advisor would not come within the exceptions set forth in Code Section 25-4-105(4)(a).

³ Board member of governmental bodies and boards always have such a fiduciary and/or trust responsibility that conflicts with there public fiduciary and/or trusts responsibilities when their bodies or boards contract with banks because of the prohibitions imposed specifically on public board members by Constitutional Section 109 and Code Section 25-4-105(2).

⁴ The requestor is referred to the attached Advisory Opinion No. 00-005-E in regard to the discussion of Code Section 25-4-101 and what constitutes a total and complete recusal.  (Infra pgs. 7-8.)