Request By:
Hon. John C. Darsie
General Counsel
University of Kentucky
Lexington, Kentucky 40506-0032
Opinion
Opinion By: David L. Armstrong, Attorney General; Carl T. Miller, Jr., Assistant Attorney General
You have requested an opinion of the Attorney General as to whether a conflict of interest is created when a member of the faculty of the University of Kentucky is also an officer, director and shareholder in a corporation which contracts with the university to purchase the surplus of a product produced in the Department for Biochemistry at the University's Medical Center. Your request letter provides the following factual background:
"1. A faculty member in the Department of Biochemistry at the University's Medical Center, Dr. Mary Sue Coleman, produces in the laboratory (which is funded under a grant from the National Institutes of Health) an enzyme known as terminal deoxynucleotidyl transferase (hereinafter referred to as TdT).
2. Dr. Coleman utilizes the TdT in her laboratory at the University.
3. The excess TdT produced in the laboratory has heretofore been sold through a contractual arrangement with Abbott Laboratories. However, the funds realized by the University have been relatively meager. (As you can imagine, there is no great demand for TdT at the neighborhood drug stores.)
4. Dr. Coleman together with Dr. Robert C. Dickson (another member of the University faculty) and Mr. Frank T. Becker (who is not a University employee) have formed a Kentucky corporation known as Kentucky BioTechnology, Inc. Drs. Coleman and Dickson and Mr. Becker are the sole shareholders of this corporation.
5. Kentucky BioTechnology, Inc. proposes to purchase TdT from the University, market same and pay the University an amount equal to 5% of the gross income from such sales. (Dr. Coleman and her associates are personally acquainted with many of the users of TdT in the Country. -- The Expected demand on an annual basis is approximately 100 mags.)
6. The University's administration has made inquiry of the Chairman of the Department of Biochemistry as to whether the proposed TdT production would have adverse effects upon the Department's operations. The Chairman's conclusion is that no adverse effect can be expected."
It is the opinion of the Attorney General that there is no statutory or common law conflict of interest created if and when the proposed transaction is executed.
The University of Kentucky faculty members, Dr. Coleman and Dr. Dickson, do not have decision making authority in the sale of the product, TdT. That authority resides in the University administration and it is the responsibility of the administration to decide if the proposed contract serves the best interest of the University.
We dealt with this same question in OAG 82-406 where the factual background was quite similar. A member of the University of Kentucky faculty was also a shareholder and director in a Lexington architectural firm which, from time to time, contracted with the University. We considered the state procurement statutes -- KRS 45A.330 to 45A.340 and also KRS 164.130, a statute pertaining specifically to the University of Kentucky. (For a detailed analysis of the application of those statutes to the question at hand we commend the full text of OAG 82-406.) We concluded that there was no statutory conflict of interest created by a contract of employment between the University of Kentucky and the architectural firm, and stated the following:
"We are of the opinion KRS 164.130(5) is likewise inapplicable to the present situation. The faculty member is not a part of the administrative staff of the University such as to be involved in the making or letting of a contract for architectural services. Therefore, we do not believe a conflict of interest has been created under KRS 164.130(5)."