This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on July 12, 1996, basing its approval solely on the facts and circumstances stated herein.

May an economic development authority purchase a country club's property when some board members of the economic development authority are stockholders in the country club?

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 25-4-103(f)(i)(ii), (g)(i)(ii)(v), (h) and (p)(i)(ii)(iii) states:

"(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 finds.

(g) 'Governmental' means the state and all political entities thereof, both collectively and separately, including but not limited to:

(i) Counties;

(ii) Municipalities; and

(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 finds.

(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 finds or which expends, authorizes or recommends the use of public finds; 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."

As Chairman of the EDA, my board has requested a ruling in regard to a potential conflict of interest problem.

The EDA is in the process of working on an option to purchase the Country Club property, to be used for industrial purposes. Some members of the EDA Board are also stockholders in the Country Club and need to know if it is proper for them to vote for this option and potential deed of trust.

The Country Club stock was bought for $900 per share. It is the Country Club's intent to purchase additional property for a new club. The Country Club would then purchase shares of stock for $900, offer to waive the $600 initiation fee, and the stockholders would pay $3,500 per share for the new country club.

We do not see any conflict since our board members who are also members of the Country Club would not actually make any profit. In fact, if they become members of the new country club it would cost them additional money.

Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibit the economic development authority's purchase of the country club property of which some of its members are stockholders during those members' terms and for one year thereafter.

The requestor is cautioned to advise the board members that a recusal or an abstention will not prevent a violation of Constitutional Section 109 or Code Section 25-4-105(2). Even without the board members' votes, the authorization by the members' board nonetheless results in a contract in which the board members have a prohibited interest.

In regard to the question of profit, the requestor is directed to the Mississippi Supreme Court's decision in Noxubee County Hardware Co. v. City of Macon, (90 Miss. 636). In Noxubee, the Court was concerned with the effect of a contract on Constitutional Section 109 that was reasonable and fair and cheaper to the town. Although Noxubee's concern is different from whether the public official makes a profit as posed by the requestor, the Court's finding nonetheless appears to adequately address the question of profit.

In Noxubee, the Court said, "These questions [of fairness or cost] are all utterly immaterial and wholly out of place when the effort is here to have enforced a wise and salutary policy of protection for all the people by the Constitution in section 109. The public interest is supreme in controversies like this. The contention that the ratification of a contract is not within section 109 of the Constitution is far too technical. It would destroy the purpose of the section."

If there is any question whether Noxubee still holds, the Court has addressed this as recently
as Frazier v. State, 504 So.2d 675 (1987), and Cassibry v. State, 404 So.2d 1360 (1981).

In Frazier, the Court said, "As noted in Noxubee County Hardware Co., the transgression test is intended to be mechanistic and objective, and motives and intentions of persons who violate it are immaterial. Its purpose is to remove any temptation to invade its proscription."

In Cassibry, the Court, quoting from Noxubee, said, "These questions (fact town received its money's worth) are all utterly immaterial and wholly out of place, when the effort is here to have enforced a wise and salutary policy of protection for all people by the Constitution in section 109. The public interest is supreme in controversies like this. There are several states with constitutional and statutory prohibitions similar to Section 109 and 97-11-19. A good statement of the reasons behind the constitutional and statutory prohibition is contained in Norbeck & Nicholson Co. v. State, 32 SAD. 189 (1913): ...the illegality consists of or arises, not from the inherent nature of the subject- matter of the contract itself, but from the express prohibition against parties, situated in certain fiduciary or trust relationship toward each other, entering into contracts at all with each other, either directly or indirectly."

Ronald E. Crowe Executive Director