GENERAL MUNICIPAL LAW, §801: A town councilman who resides
with the owner and president of a hardware store and maintains
office space in the same building in which the store is
located, but has no relationship with the corporation which
owns the hardware store, could have a prohibited interest in
contracts between the town and the corporation if he or she
receives a direct or indirect pecuniary or material benefit as
a result of such contracts.
You ask whether a town councilman would have a prohibited conflict of interest in purchases by the town from a hardware store if the councilman resides with the president and owner of the hardware store and maintains office space in the same building in which the store is located. We assume, for purposes of this opinion, that the councilman is not an officer, director, stockholder or employee of the corporation which owns and operates the hardware store and that the councilman has no ownership interest in the building in which the store is located.
Article 18 of the General Municipal Law (§800, et seq.) contains provisions of law which relate to conflicts of interest of municipal officers and employees. Pursuant to General Municipal Law, §800(3), a municipal officer or employee has an interest in any contract with his or her municipality if he or she receives a direct or indirect pecuniary or material benefit as a result of that contract. In addition, an officer or employee is deemed to have an interest in, inter alia, any contract of a corporation of which he or she is a director, officer, employee or stockholder (General Municipal Law, §800[c],[d]). That interest is prohibited if the officer or employee, individually or as a member of a board, has the power or duty to: (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties (General Municipal Law, §801), and none of the exceptions contained in article 18 are applicable (General Municipal Law, §802). If an officer or employee has an interest in a contract that is not prohibited under the provisions of article 18, General Municipal Law, §803 nonetheless generally requires that the interest be disclosed in writing and included in the official record of the governing board's proceedings. Disclosure is not required under section 803 in the case of an interest in a contract which is not prohibited under subdivision two of section 802 (General Municipal Law, §803).
As a member of the town board, the individual in question would have section 801 powers and duties in connection with purchases from the hardware store (see, e.g., Town Law, §§20[b], 64, 118, 119). Therefore, if the councilman has an interest in contracts between the town and the corporation owning the hardware store, that interest would be prohibited unless an exception under section 802 applies. Although we have assumed, for purposes of this opinion, that the councilman has no relationship to the corporation, he could, nonetheless, still have a prohibited interest in contracts with the hardware store if he receives a direct or indirect pecuniary or material benefit as a result of the contracts. The determination of whether he receives such a benefit involves questions of fact to be resolved initially at the local level. For example, you state that the councilman and the store owner reside together and that the councilman maintains office space in the same building as the store. Thus, the councilman may receive an indirect benefit if the proceeds of the town's contracts with the store are directly or indirectly used to defray common household expenses, or affect the amount of rental paid by the councilman for office space.
Finally, even if there is no prohibited contractual interest here, the town's code of ethics should be consulted to determine if it contains any relevant provisions (see General Municipal Law, §806). Further, the courts of this State have held public officials to a high standard of conduct and, on occasion, have negated certain actions which, although not violating the literal provisions of article 18 of the General Municipal Law or a code of ethics, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest self-interest, partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of the Town of Tuxedo, 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521). Thus, even if not required by the town's code of ethics, we believe the town councilman should recuse himself from any discussions and votes of the town board on matters relating to contracts between the hardware store and the town to avoid even the appearance of impropriety.
January 8, 1992