Untitled Texas Attorney General Opinion

The Attorney General of Texas
JIM MAl-fOX
June18, 1984
Attorney General
SupremeCourtBuilding Honorable Michael J. Siamang Opinion No. ``-171
P. 0. Sax 12548
AUstln. TX. 78711.2S4S
Lee County Attorney
P. 0. Box 236 Re: Whether a member of a city
512/4752501 ._
Telex 910/874-1287 Giddlngs. Texas 78942 council may be employed by a
Telecopier 512/47502SS corporation doing business with
the city
714 Jackson, Suits 700
Dallas. TX. 75202.4508 Dear Mr. Simang:
214”42-8944
You ask whether a member of the Giddings city council may
continue to serve on the council while he is employed by a corporation
4824 Albma Ave.. Suite lS0
El Paso. TX. 799052793
that does business with the city. We conclude that there is no legal
915l533.34B4 impediment to his serving, but that the contract entered into between
the city and the general contractor would be void as contravening
public policy.
11 Texas, Suite 7W
~ston. TX. 77002.3111
You inform us that a member of the Giddings city council is also
713r223aSea
the vice-president of a local corporation which sells, repairs, and
maintains air conditioning units. lie receives a salary from the
5% Broadway, Suite 312 corporation and participates in its profit sharing program, but he
Lubbock. TX. 79401~3479 owns no stock in the corporation. The corporation was employed as a
8081747-5238 subcontractor by a corporation which was itself employed by the city
as the general contractor in the construction of the new Giddlngs city
4349 N. Tenth. Suite B jail.. The corporation’s employment and the awarding of the general
McAllen, TX. 7SSOl~lSSS contract to the general contractor were based upon competitive bids.
5121882-4547 You state that the council member has received no direct financial
benefit from this contract, although the corporation does perform
MO Main Plaza. Suite 400 maintenance work on the units installed In accordance with warranties
San Antonlo. TX. 782052797 given with the units. The council member himself has performed no
512/2254191 work on any of the units involved, and there is no maintenance
contract for the units between the city and the corporation. Giddings
became a home-rule city effective January 1, 1982. The council member
An Equal OpportunityI
Affirmative Actlon Employer who is the subject of this request assumed office In April, 1982. The
city council awarded the contract in July, 1982.
Article 988, V.T.C.S., which prohibited, inter alia, a member of
a city council from being “directly or indirectly interested in any
work, business or contract . . .” the consideration for which is paid
by city funds, was repealed and replaced by a new article 988b,
V.T.C.S., effective January 1, 1984. The now-repealed article 988
reached only general law cities. Woolridge v. Folsom, 564 S.W.2d 471
(Tea. Civ. App. - Dallas 1978, no writ). The new statute reaches
other political subdivisions including home rule cities, in addition
p. 750
Honorable Michael J. Sfsnaang - Page 2 (JM-171)
to general law cities. Because the contract at Issue was entered into
prior to the effective date of the new statute, we need not address
whether, under the new statute, the contract would involve the council
member in a conflict of interest. Rather, we must determine whether
the contract violates public policy. We conclude that it does.
We must first determine whether the council member would benefit
If the city were to contract directly with the firm of which the
council member is vice-president. If he would so benefit, we must
then determine whether the fact that the firm was a sub-contractor
rather than a general contractor, would effectively remove the council
member from the reach of the conflict-of-interest prohibition. We
first conclude that, in this instance, the council member would
benefit sufficiently were the city to contract directly with the firm
of which he is vice-president so ss to bring him within the ambit of
the conflict-of-interest prohibition.
The factual situation in the instant request is very much
analogous to the one presented in Attorney General OpLnion R-916
(1976). That opinion addressed whether a school district may contract
with a paper company which employed a member of the district’s board
of tmstees. The trustee worked for the company in a managerial
capacity but owned no stock. Re entered into an agreement with his
employer which provided that he would not receive any coaasission,
bonus, or other remuneration based upon sales made by the company to
the district, although he was paid a year-end bonus on the basis of
other company sales. In concluding that entering into such a contract
was Impermissible. this office declared:
It is well established that, even in the
absence of a statute, the public policy of the
state prohibits transactions which involve a
conflict of interest on the part of public
officials . . . .
Attorney General Opinion H-916 (1976).
Attorney General Opinion R-916 then quotes language from a
relevant Texas court opinion:
If s public official directly or indirectly has
a pecuniary interest in a contract, no matter how
honest he may be, and although he may not be
influenced by the interest, such a contract so
made is violative of the spirit and letter of our
law, and is against public policy. Meyers v.
Walker, 276 S.W. 305, 307 (Tex. Civ. App. -
Eastland 1925, no writ).
If an employee of a corporation can be held to benefit when the
company for which he is employed contracts with a political
p. 751
Honorable Michael J. Siamang - Page 3 (JM-171)
subdivision, the governing body of which he is a member, then a
fortiori an officer of such a corporation may be said to benefit. It
caonot be disputed that, even if the council member received no direct
compensation from the city’s cootrsct with the general contractor, he
would certaiolv benefit at least iodirectlv when the firm of which he
is vice-president prospers. As the court-declared in Delta Electric
Construction Co. v. City of San Antonio, 437 S.W.2d 602. 609 (Ter.
Civ. App. - San Antonio 1969, writ ref’d 0.r.e.).
[i]t is the existence of such interest which is
decisive and not the actual effect or influence,
if any[.] of the interest . . . .
See Beaar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San
Antonio 1964, writ ref’d n.r.e.); Kolppa v. Stewart Iron Works, 66
S.U. 322 (Tex. Civ. ADD. 1902. no writ): Attorney General Opinions
MW-155, MI&124 (1980);’ MW-34 .(1979); B-734, R-849, H-638 (1975).
Relying on Attorney General Opinion E-916 and the authorities cited
above, we conclude that the conflict of interest prohibition is
triggered when a member of the governing body of a political
subdivision, in this instance a member of a city, council, is an
officer or employee of a firm seeking to do business with that
political subdivision.
It has been suggested that. since the couocll member Is an
officer of a sub-contractor, as opposed to the generalcontractor, his
vote on such a contract affects only the general cootractor and oot
the sub-contractor and that this effectively removes him from any
conflict-of-interest prohibition. In Attorney General Opinion O-2306
(1940), this office concluded that a trustee of a school district
could receive compensation from a contractor performing a construction
contract for the district g there was no agreement between the
contractor and the trustee at the time when the district entered into
the contract with the contractor. This office therein declared:
Under the facts set out in your letter, we
assume that the contractor is an independent
contrsctor. This being tme, the will of the
school board is represented only as to the result
of the work and the contractor is left to
determine the manner and means Involved in the
performance of said contract.
If,
at the time the contract in question was
let. there was oo egreement. express or implied,
between the contractor and the school’trustee with
reference to the employment in question, It would
appear that the trustee in question has no such
pecuniary interest in the contract as to make it
void under the public policy doctrine. (Emphasis
added).
p. 752
Honorable Michael J. Simmang - Page 4 (``-171)
Conversely, we conclude that if there were an agreement at the time
the contrsct between the general contractor and the city wss let,
whether express or implied, between the general cootractor and the
firm for which the council member served as vice-president, as to the
sale, repair, or maintenance of air conditioning units, the council
member would have a pecuniary interest in the contract so as to make
it void under the rule set out in City of Edinburg v. Ellis. 59 S.W.2d
99 (Tex. Comm'n App. 1933.. holding approved). See Attorney General
Opinions MW-155 (1980); MW-34 (1979). If, on theother hand, there
were no agreement between the general contractor and the firm for
which the couocll member served as vice-president at the time the
contract between the general contractor and the city was let, the
council member would not have a pecuniary interest in the contract.
This is a factual determination which we are not empowered to make.
You also ask whether the member of the council may continue to
serve if there Is such s conflict. There is no provision in either
constitutional. statutory, or case law which would provide for an
automatic vacancy in the council position in the situation which you
describe. If a vacancy is to be crested, it can only occur through
resignation or removal from office as provided by law.
SUMMARY
A city council, may not contract with a general
contrsctor which has previously contracted with a
sub-contractor employing a member of the city
council as an officer, if the firm employing the
member acts as a subcontractor on the city job.
The affected member of the city council does not
automatically vacate his office in the event that
the city council so contracts.
JIM HATTOX
Attorney General of Texas
TOMGREEN
First Assistant Attorney General
DAVID R. RICRARDS
Executive Assistant Attorney General
Prepared by Jim Moellinger
Assistant Attorney General
p. 753
Ronorable Michael J. Simmeng - Page 5 (JM-171)
APPROVED:
OPINIONCOMMITTEE
Rick Gilpin, Chairman
Jon Bible
Colln Carl
Sussn Garrison
Jim Moellinger
Nancy Sutton
p. 754