Opinion 96 - 3


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Engineering Services (environmental review by village trustee or firm of the trustee) -- Exceptions (competitive bidding not an exception); (recoupment of contract cost through fees not an exception) -- Interest in Contract (village trustee providing environmental review services) -- Stock Ownership (village trustee as stockholder of firm providing environmental review services)

GENERAL MUNICIPAL LAW, §801: A village trustee would have a prohibited interest in a contract for environmental review and planning services between the village and either the trustee individually, or the firm of which the trustee is the primary stockholder, irrespective of whether the contract is awarded after competitive bidding or if some or all of the costs of the contract are defrayed through the imposition of fees.

You ask whether a prohibited conflict of interest would arise if a village contracted with either a village trustee individually, or with the firm of which the trustee is the primary stockholder, to provide environmental review and planning services, if the contract is entered into after a competitive bidding process and some or all of the cost of the review and planning is charged as a fee to applicants appearing before the village board.

General Municipal Law, article 18 (§800 et seq.) contains provisions relative to conflicts of interest of municipal officers and employees and, inter alia, prohibits certain interests in municipal contracts. A municipal officer or employee has an "interest" in any contract with the municipality he or she serves if he or she receives a direct or indirect pecuniary or material benefit "as the result of the contract" (General Municipal Law, §800[3]). A municipal officer or employee is also deemed to have an interest in contracts of a firm, partnership or association of which the officer or employee is a member or employee, and in contracts of a corporation of which the officer or employee is an officer, director, employee or stockholder. Unless an exception applies (see General Municipal Law, §802), an interest in a contract 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 payment under the contract; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has such powers and duties (General Municipal Law, §801[1]). Any contract willfully entered into by or with a municipality in which there is a prohibited interest is null, void and wholly unenforceable (General Municipal Law, §804). In addition, any municipal officer or employee who willfully and knowingly violates the interest in contract provisions of article 18 shall be guilty of a misdemeanor (General Municipal Law, §805).

It is apparent that as an individual contracting with the village, the trustee would receive a pecuniary or material benefit as a result of the proposed contract with the village and, therefore, would have an interest in the contract. Similarly, as a stockholder of a firm contracting with the village, the trustee would be deemed to have an interests in contracts between the firm and the village. Unless an exception applies, these interest would be prohibited because, as trustee, the individual would have powers and duties listed in General Municipal Law, §801 in connection with the contract (Village Law, §§1-102, 4-412, 5-524).

Article 18 contains no exception for contracts let pursuant to competitive bidding or, in the case of contracts exempt from competitive bidding, let pursuant to the alternative competition requirements of a municipality's procurement policies and procedures adopted under General Municipal Law, §104-b (see 1981 Opns St Comp No. 81-113, p 116; cf. Public Officers Law, §73[4][a], relative to state officers and employees). There also is no exception for contracts, the cost of which is recouped by the municipality from fees charged to third parties. An interest arises when a pecuniary or material benefit accrues to an officer or employee "as the result of a contract with the municipality which such officer or employee serves", and is deemed to arise by virtue of a municipal officer or employee's position with, or relation to, a firm, partnership, association or corporation (General Municipal Law, §800[3]), irrespective of whether the municipality defrays the cost of the contract through the imposition of fees. Further, there is no other exception which is applicable here (cf. General Municipal Law, §802[2][a], providing an exception when an officer or employee has an interest by reason of being a stockholder, but he or she owns or controls less than 5% of the outstanding stock of the corporation).

Accordingly, it is our opinion that the trustee would have a prohibited interest in a contract between the village and either the trustee individually, or the firm of which the trustee is the principal stockholder.

March 7, 1996
Richard Gabriele, Esq., Village Attorney
Village of Great Neck Plaza