Opinion 2001 - 9


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Codes of Ethics (prohibition against county officials serving as officers of not-for-profit corporations) -- Exceptions (contracts with not-for-profit corporations)

GENERAL MUNICIPAL LAW §§801, 802(1)(f), 803, 805-a: A member of a county governing board who also serves as an officer of two not-for-profit corporations and a director of one of the corporations does not have a prohibited interest in contracts between the county and either corporation. The board member, however, must disclose any interest in such a contract pursuant to General Municipal Law §803, and avoid contravening the statutory prohibitions against disclosure of confidential information and compensated appearances before county agencies in General Municipal Law §805-a. A county code of ethics may include a provision requiring county governing board members to recuse themselves from discussions relating to not-for-profit corporations for which they serve as officers and to abstain from voting on any contracts between the county and such corporations. Even if not required by such code, the county board member should not participate in county board discussions or decisions relating to county contracts with not-for-profit corporations for which the board member serves as an officer, employee or director.

You ask whether a member of a county governing board would have a prohibited interest in contracts between the county and either a local chamber of commerce or an empire zone corporation, if he serves, in a "shared capacity," as chief operating officer of both contracting entities. We are informed that both the empire zone corporation and the chamber of commerce are not-for-profit corporations. We are also informed that the individual in question currently serves as a chair of the board of directors of the empire zone corporation. 1

Article 18 of the General Municipal Law generally provides that certain "interests" of municipal officers and employees in "contracts" of the municipality are prohibited (see General Municipal Law §801) and contains certain additional prohibitions (see General Municipal Law §805-a). Article 18 defines "contract" to include "any claim, account or demand against or agreement with a municipality, express or implied ..." (General Municipal Law §800[2]). "Interest" is defined in section 800(3) as a "direct or indirect pecuniary or material benefit accruing to a municipal officer or employee as the result of a contract with the municipality which such officer or employee serves." Article 18 also provides that a municipal officer or employee is deemed to have an interest in any contract with a firm, partnership, association or corporation of which he or she is an officer, employee or director (General Municipal Law §800[3][b],[c]).

Pursuant to General Municipal Law §801(1), unless an exception set forth in section 802 applies, an interest in a contract is prohibited if the officer or employee has the power or duty, individually or as a member of a board, to (a) negotiate, prepare, authorize or approve the contract or authorize or approve payment thereunder, (b) audit bills or claims under the contract, or (c) appoint an officer or employee who has any such powers or duties. Any contract willfully entered into in which there is a prohibited interest is null, void and unenforceable (General Municipal Law §804) and any officer or employee who willfully and knowingly violates the provisions of article 18 is guilty of a misdemeanor (General Municipal Law §805).

As an officer of each not-for-profit corporation and as director of the empire zone corporation, the county board member is deemed to have an interest in contracts between each corporation and the county. If, as a member of the county board, he has powers and duties listed in section 801, that interest is prohibited unless an exception in section 802 applies. In the cases presented, we are informed that members of the county governing board have section 801 powers to authorize the contracts in question and to appoint an officer or employee who has the power to audit bills or claims under the contracts (see, e.g., County Law §§215, 224, 369, 600). An exception under section 802, however, applies in each instance.

Section 802(1)(f) excepts from the applicability of section 801(1) any contracts "... with a membership corporation or other voluntary non-profit corporation or association." Since the corporations in question are both not-for-profit, the county board member, pursuant to this exception, would not have a prohibited interest in contracts between the county and the corporations (see Stettine v County of Suffolk, 66 NY2d 354, 497 NYS2d 329; 1992 Opns St Comp No. 92-30, p 78). 2

The board member, however, would have to comply with the disclosure requirements of General Municipal Law §803(1). Pursuant to section 803, the board member would be required to disclose publicly, in writing, to the county board the nature and extent of an interest in any actual or proposed contract with the county. The disclosure statement must be set forth in the official minutes of the county board. The board member also must avoid contravening the statutory prohibitions against disclosure of confidential information and compensated appearances before county agencies in General Municipal Law §805-a(1)(b),(c) and (d). 3

We also note that each county is required to adopt a code of ethics setting forth, for the guidance of its officers and employees, the standards of conduct reasonably expected of them (General Municipal Law §806). Codes of ethics must address certain specified subjects, including private employment in conflict with official duties, may regulate or prescribe conduct that is not expressly prohibited by article 18, and may provide for the prohibition of conduct (General Municipal Law §806[1]). We have expressed the opinion that a county code of ethics could include a provision that requires county governing board members to recuse themselves from all discussions relating to not-for-profit corporations for which they serve as officers and to abstain from voting on any contracts between the county and such corporations (Opn No. 92-30, supra). The county should consult its code of ethics to determine whether it contains any pertinent provisions. 4

Further, even if the code of ethics does not require abstention and recusal, we note that court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions which, although not constituting a literal violation of article 18, 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; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of Tuxedo, 69 AD2d 320, 418 NYS2d 638; see also Parker v Town of Gardiner Planning Board, 184 AD2d 937, 585 NYS2d 571 lv denied 80 NY2d 761, 592 NYS2d 670; Cahn v Planning Board of the Town of Gardiner, 157 AD2d 252, 557 NYS2d 488). Based on these decisions, we believe that, even if not required by the county's code of ethics, the county board member should not participate in county board discussions or decisions relating to county contracts with not-for-profit corporations for which the board member serves as an officer, employee or director.

August 6, 2001

Dennis V. Tobolski, Esq., County Attorney
County of Cattaraugus

1 Since our opinion will address only the individual's potential interest in county contracts with the not-for-profit corporations, the propriety of his holding several private positions and any potential conflict that may arise therefrom (see generally, Not-For-Profit Corporation Law, article 7 [§700 et seq.], esp. §715) is beyond the scope of this opinion.

2 We note that depending on the facts and circumstances, an exception pursuant to section 802(1)(b) may also apply to a contract with the chamber of commerce. The exception in section 802(1)(b) applies to situations in which a municipal officer or employee has an interest in a contract with a "…person, firm, corporation or association," solely by reason of being employed as an officer or employee thereof. The applicability of this exception depends upon whether the contract directly affects the officer's or employee's private remuneration and whether the duties of the private employment directly involve the procurement, preparation or performance of any part of the contract.

3 General Municipal Law §805-a(1), as is pertinent here, prohibits municipal officers and employees from: (a) disclosing confidential information acquired in the course of official duties or using such information to further personal interests; (b) receiving or agreeing to receive compensation for services to be rendered in relation to any matter before any municipal agency of which he is an officer or over which he has jurisdiction or appointment power; or (c) receiving or agreeing to receive contingent compensation for services to be rendered in relation to any matter before any agency of the municipality.

4 In Opn No. 92-30, supra, we concluded that, because a code of ethics may not be inconsistent with the provisions of article 18 (1980 Opns St Comp No. 80-234, unreported; 1971 Opns St Comp No. 71-417, unreported; Belle v Town Board of Town of Onondaga, 61 AD2d 352, 402 NYS2d 677), a code may not provide that interests of county officers and employees in county contracts with not-for-profit associations or corporations are prohibited or that any contract in which there is such an interest is void. We also concluded that a code of ethics may not prohibit a county board member from serving as an officer of a not-for-profit corporation with which the county contracts.