This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on October 7, 2005, basing its approval solely on the facts and circumstances stated herein.

 
May a city and county jointly lease real property to a corporation in which the attorneys for the city and county both hold an interest?

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(d), (h), (i), (k)(i)(ii)(iii)(iv), (l), (p)(i)(ii)(iii) and (q) states:
 

“(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.

(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);

(iii) The income as an employee of a relative if neither the public servant or relative is an officer, director or partner in the business and any ownership interest would not be deemed material pursuant to subparagraph (i) or (ii) herein; or

(iv) The income of the spouse of a public servant when such spouse is a contractor, subcontractor or vendor with the governmental entity that employs the public servant and the public servant exercises no control, direct or indirect, over the contract between the spouse and such governmental entity.

(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.”

Code Section 25-4-105(1) and (3)(a) 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.”

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

The City and County are each making an application to a state agency for $550,000 loans to be used for development in the county.

Specifically, the City and County will use these loan proceeds to purchase a now-vacant building, then lease this property to a home corporation, in a twenty-year lease agreement where the lessee, the home corporation will be required to make all of the lease payments and to post a letter of credit for the full amount of the debt to insure the full repayment of the indebtedness.

My brother is attorney for the County Board of Supervisors.  I am an attorney for the City in that county.  My brother and I both are among the numerous shareholder/investors in the home corporation, a for-profit Mississippi Corporation.  Each of us owns a minority interest in the company, but together our interest, including my spouse’s interest, exceeds 10% of the total outstanding stock.

The purpose of this letter is to request a formal opinion from the Ethics Commission as to whether the lease arrangement described in this letter complies with all the ethical rules overseen by the Ethics Commission.

In judging this matter, you may find your Opinion Nos. 04-082-E and 05-065-E, to be analogous and useful.

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

Section 25-4-105(3)(a), Miss. Code of 1972, quoted above, prohibits a public servant from having a material financial interest in a business which is a contractor, subcontractor or vendor with the governmental entity with which the public servant is associated. An attorney for a municipality and an attorney for a board of supervisors are both public servants, as defined in Section 25-4-103(p), above. See Ops. Miss. Ethics Commn. No. 05-063-E, 04-115-E and 96-055-E for further explanation.

Depending on the respective percentages of ownership and levels of income the individual attorneys or their spouses receive from the home corporation, they may each have a “material financial interest” in the corporation, as that term is defined in Section 25-4-103(k) above. Assuming both attorneys do hold a material financial interest in the home corporation, that corporation is prohibited from being a contractor to the attorneys’ respective governmental clients.

While the proposed lease agreement is clearly a contract, not every party to a contract with the government is a “contractor” to the government in the context of Section 25-4-105(3)(a). “The term contractor is generally used in the strict sense of one who contracts to perform a service for another and not in the broad sense of one who is a party to a contract.” Moore, ex rel. City of Aberdeen v. Byars, 757 So.2d 243, 248 ( 15) (Miss. 2000). Here the governmental entities are providing a service, in the form of leased property, to the home corporation. Thus, the home corporation is not a contractor to the lessor governments, and no violation of Section 25-4-105(3)(a) will result if the proposed lease agreement is executed.

However, the government attorneys should take measures to ensure no violation of Section 25-4-105(1) occurs. That subsection will prohibit the attorneys from taking any action in their respective governmental positions which would confer any pecuniary benefit upon a “business with which [they are] associated,” as that term is defined in Section 25-4-103(d) above. Once again, the home corporation may or may not meet that definition, depending on the respective percentages of ownership and levels of income the individual attorneys or their spouses receive from that corporation. Assuming the home corporation does meet the definition, the attorneys would be obliged to fully recuse themselves from any action taken by their respective governmental clients in this matter.

A total and complete recusal requires that the public servant not only avoid debating, discussing or taking action on the subject matter during official meetings or deliberations, but also avoid discussing the subject matter with staff or any other person. This includes casual comments, as well as detailed discussions, made in person, by telephone or by any other means. Furthermore, the minutes of the meeting should state the recusing member left the room before the matter came before the public body and did not return until after the vote. Thus, any legal services these governmental entities may require in connection with this lease agreement must be provided by another attorney.
 

Scott Rankin
Executive Director