Request By:
David A. Schneider
ZIEGLER & SCHNEIDER
200 Covington Mutual Building
629 Madison Avenue
Covington, Kentucky 41011
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Martin Glazer, Assistant Attorney General
You seek an opinion concerning interpretation of H.B. 306 enacted by the 1984 Assembly. You want to know whether a member of a regional mental health-mental retardation board is an "officer, employee or agent" within the meaning of that law.
The Act in Section 1 amends KRS 210.110 to prohibit officers, employees, or agents in the Cabinet for Human Resources, or a regional community mental health-mental retardation board from selling anything to any institution, facility, or organization under the Cabinet's control, nor participate in selection or in the award or administration of a contract supported by state or federal funds if a conflict of interest, real or apparent, would be involved.
The requisite of a public "office" is that it possess a delegation of a portion of sovereign powers of government independent of any superior human authority other than statutorily prescribed general control.
Lasher v. Commonwealth ex rel Matthews, Ky., 418 S.W.2d 416 (1967).
Or, said another way, a position is a "public office" when it is created by law, with duties cast on the incumbent which involves an exercise of some portion of the sovereign power and in the performance of which the public is concerned, and which are also continuing in their nature and not occasional or intermittent, while a "public employment" is a position which lacks one or more of the foregoing elements.
Varden v. Ridings, 20 F.Supp. 495 (D.C. Ky. 1937).
Regional mental health-mental retardation boards are established by state statutes (KRS 210.370, 210.380, 210.390). The duties of such a board are set out by statutes (KRS 210.400, 210.405).
KRS 210.470 creates a taxing district for such board and provides, in part:
(3) The members of the community mental health-mental retardation board recognized by the secretary for human resources pursuant to KRS 210.380 shall, by virtue of their office constitute and be the governing board of the mental health and mental retardation taxing district. . . ." (Emphasis supplied.)
So there is no question by virtue of statute and duties assumed that these board members are "officers" within the meaning of Section 1 of H.B. 306.
You next ask what is meant by an "apparent" conflict of interest.
In
Sievers v. Flynn, 305 Ky. 325, 204 S.W.2d 364 (1947), the Court, in dealing with an apparent easement stated, "'apparent,' as used in this connection, does not mean notorious visibility but rather susceptibility of ascertainment on careful inspection by persons ordinarily conversant with the subject."
An example of a real conflict of interest would be one in which the owner of a company would sell supplies to the board and vote as a board member in accepting the contract. An apparent conflict would arise when the board member was related to the owner of the company selling such products. He might not have a direct or any financial interest in selling the product. He is only related by blood to that person.
You also ask what is meant by immediate family in subsection 2 of the amendment to KRS 210.110.
In construing the term, "immediate family, " in an insurance contract, the
Court in Bay v. Mahan, Ky., 362 S.W.2d 732, 733 (1962) quoted from
Bell v. Keader, 80 Ky. 423, Ky.Law Rptr. 520 and 653 stated:
In legal contemplation, whomsoever it is the natural or moral duty of the debtor to support, or is dependent upon him for support, may be considered and treated as a member of his family. Accordingly, it has been consistently held that the infant brother or sister or aged and helpless parent of the debtor may constitute a family in the meaning of the law.
Considering the purpose and nature of the conflict of interest statute, immediate family would include father, mother, brother, sister, son and daughter. They are immediately next up, or down, or on the same level as the board member. Cousins or nephews would be farther removed from "immediate."
You cite two examples and ask the following:
(1) If an adult brother or parent of a board member owns stock in General Motors Corporation, may a board member safely vote on the award of a contract to purchase a General Motors vehicle by the board, even where the contract has been competitively bid? Would this be a real or apparent conflict of interest, since a member of his immediate family has a financial or other interest in the award.
(2) The board makes frequent contracts with school districts relating to services for exceptional children. If a board member has a brother or sister employed by a school district, can a board member or employee participate in the selection, award or administration of the contract with the school district, since it would be an organization which has a financial or other interest in the award.
KRS 45A.340, which existed long before H.B. 306 was enacted, prohibits conflicts of interest of officers and employees of state agencies. Subsection 4 prohibits an officer or employee from transacting business with himself when he or his spouse has an interest greater than five percent of the firm. Subsection 5 prohibits a stockholder from transacting business where his interest is ten percent of the stock, unless the contract is competitively bid.
So, as to question (1), unless the ownership of General Motors stock is a very large amount, mere ownership of some shares of stock therein could not result in a conflict of interest. How could such ownership affect the stockholders' interest. The affect would be nil. If the board member feels that a possible conflict is apparent, he can refuse to vote on the contract.
As to question (2), whether there is a conflict would depend on the nature of the position held by the brother or sister in the school district. Certainly, a janitor or perhaps even a teacher who is a brother to a board member would not constitute a conflict of interest, but if he were the superintendent of the district or a school board member who was a brother to the mental health-mental retardation board member, a conflict may arise.
Conflict of interest statutes are purposely worded in general vague terms. Whether a conflict arises will depend upon the specific situation as determined by a court. But such vagueness and generality does not, per se, invalidate the statutes.
Again, if a board member questions whether a conflict exists, he can refuse to vote on a contract in which such may exist. If he, personally, does much business with a board of which he is a member, he should decide whether he wants to do business with the board and then resign his membership or forego the contract, or at least forego voting thereon to avoid violating the statute.