Opinion 2004 - 4


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Employment Contracts (law partner of school board member as attorney for school district) -- Interest in Contract (law partner of school board member as attorney for school district) -- Legal Services (law partner of school board member as attorney for school district)

GENERAL MUNICIPAL LAW 800(3): If the compensation paid to the law partner of a school board member, who is engaged by the school district as its attorney, is not mixed with other revenues of the partnership, and if the board member, directly or indirectly, receives no benefit from the monies paid by the district, then the board member would not have an interest in the contract between the district and the law partner, irrespective of whether the law partner is engaged as an independent contractor or employee. The district's code of ethics, however, should be consulted to ascertain whether it contains any pertinent provisions that may be more restrictive than Article 18 of the General Municipal Law. In addition, in light of the board member's business relationship with the school district's attorney, the board member should recuse himself or herself from discussions, and abstain from voting, on matters pertaining to the compensation, and other terms and conditions of the engagement by the school district, of the law partner.

You ask whether a member of the board of education of a central school district would have a prohibited conflict of interest under the following circumstances. The board member is a partner in the law firm of an attorney who has been appointed as "the attorney for the School District." You inform us that the monies paid to the school district's attorney for his services are not mixed with funds of the law firm and the board member receives no portion of these monies paid by the district.

Article 18 of the General Municipal Law (800 et seq.) contains provisions of law that 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 the officer or employee receives a direct or indirect pecuniary or material benefit as a result of that contract. In addition, irrespective of whether an officer or employee receives a direct or indirect pecuniary benefit from a contract, an officer or employee is deemed to have an interest in any contract of a partnership of which the officer or employee is a member (General Municipal Law 800[3][b]). A "contract" for this purpose means any claim, account or demand against or agreement with the municipality, whether express or implied (General Municipal Law 800[2]). If an officer or employee has an interest in a contract, that interest generally must be disclosed in writing and included in the official record of the governing board's proceedings (General Municipal Law 803).

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, individually or as a member of a board, has any of the following powers or duties set forth in General Municipal Law 801: (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. 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 "shall be guilty of a misdemeanor" (General Municipal Law 805).

Under the above provisions of Article 18, the board member, as a law partner, would be deemed to have an interest in any contract between the school district and his law firm. Further, the board member would have an interest in any contract between the school district and a partner of the law firm as an individual, if the consideration under the contract were paid into the partnership and if, under the terms of the partnership, the board member would share in the moneys received under the contract, or if the board member would otherwise benefit from the consideration paid to the partner (1981 Opns St Comp No. 81-40, p 41; 1980 Opns St Comp No. 80-164, unreported; 23 Opns St Comp, 1967, p 589). Such an interest would be prohibited because the board member clearly would have "section 801" functions in connection with those contracts (see, e.g., Education Law 1709[20-a], 1724, 1804[1]). If, however, the law partner is engaged by the school district, independent of the partnership, either as an employee of the district or an independent contractor, and all compensation is to be paid by the district directly to the law partner individually, with the board member not receiving, even indirectly, any pecuniary or material benefit, then the board member would not have an interest in the contract between the district and the law partner (see 1988 Opns St Comp No. 88-67, p 133; 23 Opns St Comp, 1967, supra; 1978 Atty Gen [Inf Opns] 250).

Accordingly, if, as suggested in the inquiry here, the compensation paid to the law partner is not mixed with other revenues of the partnership and the board member, directly or indirectly, receives no benefit from the monies paid by the district, then the board member would not have an interest in the contract between the district and the law partner.1  The district's code of ethics, however, should be consulted to ascertain whether it contains any pertinent provisions that may be more restrictive than Article 18 (see General Municipal Law, 806). We also note that 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, 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). Based on these cases, we further suggest that, in light of the board member's business relationship with the school district's attorney, the board member recuse himself from discussions, and abstain from voting, on matters pertaining to the compensation, and other terms and conditions of the engagement by the school district, of his law partner.

April 29, 2004

Margaret E. Lane, President of Board of Education
Cazenovia Central School District

1 This conclusion applies irrespective of whether the law partner is engaged as an independent contractor or employee. Therefore, we need not address whether the law partner is an employee of the school district or an independent contractor for this purpose.