This Advisory Opinion concerns the following issues as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on May 3, 1996, basing its approval solely on the facts and circumstances stated herein.

1. May the administrators or chief executive officers of public community hospitals accept appointments and serve on the board of directors or as officers of a non-profit corporation established as a rural health network by their respective public community hospitals?

2. May administrative employees of public community hospitals, but not the administrator or chief executive officer, accept appointments and serve on the board of directors or as officers of a managed care organization, or other affiliated corporations, established by a rural health network that was itself established by their respective public community hospitals?

3. May the boards of trustees of public community hospitals contract with managed care organizations, or other affiliated corporations, that have the hospitals' administrative employees serving as directors and officers and that were established by a rural health network that was itself established by these same hospitals?

    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 entities' 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 25-4-103(c), (d), (e), (f)(i)(ii), (g)(i)(ii)(iii)(iv)(v), (h), (i), (k)(i)(ii)(iii)(iv), (1), (m) and (p)(i)(ii)(iii) 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 non-profit 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' 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) 'Governmental' means the state and all political entities thereof, both collectively and separately, including but not limited to:

(i) Counties;

(ii) Municipalities;

(iii) All school districts;

(iv) Ml courts; 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 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);

(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.

(1) '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.

(m) 'Person' means any individual, firm, business, corporation, association, partnership, union or other legal entity, and where appropriate a governmental entity.

(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), (2), (3)(a) 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.

(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 him self, 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 in the form of the requestor's letter, absent identifying data, are by attachment incorporated into and made a part of this opinion.

    The Commission formally adopts Advisory Opinion No. 92-234-ER in response to this request and by attachment incorporates it into this opinion as it is referenced in the requestor's letter.

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

    Issue 1. The administrators or chief executive officers of public community hospitals may accept appointments and serve on the board of directors or as officers of a non-profit corporation established as a rural health network by their respective public community hospitals provided the network does not compensate them.

    Issue 2. The administrative employees of public community hospitals may accept appointments and serve on the board of directors or as officers of a managed care organization, or other affiliated corporations, established by a rural health network that was itself established by their respective public community hospitals provided the managed care organization or other corporations do not compensate them.

    Issue 3.  The boards of trustees of public community hospitals may contract with managed care organizations, or other affiliated corporations, that have the hospitals' administrative employees serving as directors and officers, even though they were established by a rural health network that was itself established by these same hospitals, provided the managed care organization or other corporations do not compensate the hospitals' administrative employees.

    Should the rural health network, managed care organization, or other affiliated corporations, compensate the hospitals' administrative officers and employees then they could be in violation of Code Section 25-4-105(3)(a), cited above, if the compensation results in the hospitals' employees having a material financial interest in the network, managed care organization or other affiliated corporations. A material financial interest is defined in the above cited Code Section 25-4-103(k). [Emphasis added]

    Notwithstanding the above, the requestor is advised that should the members of the boards of trustees of the public community hospitals be appointed as directors or officers of the rural health network, managed care organization or other affiliated corporation then Constitutional Section 109 and Code Section 25-4-105(2), both cited above, would come into play.

    Constitutional Section 109 and Code Section 25-4-105(2) prohibit the hospitals' trustees, as public board members, from having an interest, directly or indirectly, in any contract authorized by their board during their term and for one year thereafter. These sections would prohibit an inherent interest arising from a fiduciary responsibility to the rural health network, managed care organization or other affiliated corporation. However, neither of these sections applies to the hospitals' administrative employees.

    The administrators, chief executive officers and other administrative employees of the public community hospitals also are advised to remain keenly aware of the above cited Code Section 25-4-105(1) and (5).

    Code Section 25-4-105(1) prohibits public servants from using their official positions to obtain a pecuniary benefit for themselves, a relative or a business with which they are associated.

    To avoid using their official positions to obtain a pecuniary benefit, the public servants must totally and completely recuse themselves from subject matters providing the pecuniary interests. An abstention is a vote with the majority of the governing entity's board and therefore does not qualify as a recusal.

    A total and complete recusal requires that the public servant not only avoid debating, discussing or taking official action on the subject matter, but also avoid discussing the subject matter with board members, staff or any other person prior to and after an official action. This includes casual comments, as well as detailed discussions, made in person, by telephone or by any other means.

    Also in order 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.

    Code Section 25-4-105(5) prohibits a public servant from using or disclosing information obtained through his or her official position that could result in a pecuniary benefit for the public servant, any relative or any other person. A "person" as defined in Code Section 25-4-103(m), cited above, would include a rural health network, managed care organization or other affiliated corporation.

    The requestor is cautioned 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 member's vote, the authorization by the member's board nonetheless results in a contract in which the board member has a prohibited interest.
 
 

Ronald E. Crowe Executive Director