May a city contract with a local investment firm and employ the services of one of its investment brokers when the investment broker serves as a member of the city's park and recreation commission?

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(a), (c), (d), (f)(i)(ii), (g)(ii)(v), (h), (k)(i)(ii), (1) and (p)(i)(ii)(iii) states:

"(a) 'Authority' means any component unit of a governmental entity.

(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.

(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:

(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 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.

(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).

(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.

(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 (4)(b) 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.

(4) Notwithstanding the provisions of subsection (3) of this section, a public servant or his relative:

(b) May be a contractor or vendor with any authority of the governmental entity other than the 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 he is a member, officer, employee or agent where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws."

It is the Commission's understanding that the requestor's letter concerns a municipal park commission established under Section 21-37-33, 1972 Mississippi Code Annotated. A municipal park commission established under this law has members that serve a set term, hire and fire the municipal park department's employees, have jurisdiction over the park department's funds and purchasing, and have other general and specific powers and duties over the municipal parks.

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

The authorization of the investment firm's contract is made by the city council and not the city park commission. Therefore, the prohibitions set forth in Constitutional Section 109 and Code Section 25-4-105(2), both cited above, do not apply in this instance.

However, the city park commission's contracting with the investment firm would be in violation of Constitutional Section 109 and Code Section 25-4-105(2), if the Commission has the authority to contract.

Notwithstanding the above, there are other conflict of interest laws that are applicable to this situation.

Code Section 25-4-105(3)(a), cited above, prohibits a public servant from having a "material financial interest" in a business that is a contractor, subcontractor or vendor with the public servant's governmental entity.

Code Section 25-4-105(4)(b), cited above, also provides certain exceptions to the prohibition set forth in Code Section 25-4-105(3)(a). These exceptions apply when the public servant is a member, officer, employee or agent of one authority of the governmental entity and the business that the public servant has a "material financial interest' in is contracting with another authority of the governmental entity. The exceptions are "where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws."

The Commission's finding is that the authority granted a municipal park commission by Code Section 21-37-33 makes it a separate municipal authority from the municipality's general governing authority. A municipality's general governing authority being the mayor and city council.

Based on the above, this Commission finds that the park commissioner as a public servant of the city and as an employee of the investment firm would be in violation of Code Section 25-4-1 05(3)(a) should the city council contract with his investment firm. However, since the park commission is a separate authority of the city, there would not be a violation if the city council let the contract to the investment firm as the lowest and best bidder after competitive bidding and three (3) or more legitimate bids were received as allowed by Code Section 25-4-105(4)(b).

The requestor is cautioned to also advise the park commissioner to remain keenly aware of the above cited Code Section 25-4-105(1).

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.

In order 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 action on the subject matter during the official meeting, but also avoid discussing the subject matter with other 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 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.

The requestor is cautioned to advise the park commissioner that a recusal or an abstention will not prevent a violation of Constitutional Section 109 or Code Section 25-4-105(2) and (3)(a). Even without the park commissioner's vote, the authorization by the park commission board nonetheless results in a contract in which the park commissioner has a prohibited interest.

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, the city council's contracting with the investment firm employing one of the city's park commissioners, especially when the park commissioner will act as the investment broker under the contract, has the potential of creating suspicion among the public and reflecting unfavorably upon the city.

Ronald E. Crowe Executive Director