Opinion 2006 - 11


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Purchases and Sales (from store at which town board member is employed) -- Exceptions (remuneration and duties exception)

GENERAL MUNICIPAL LAW §802(1)(b): When a town board member has an interest in town purchases from an auto parts store solely because the board member is an employee of the store, the interest would not be prohibited if the board member’s duties as an employee of the store do not include the procurement, preparation or performance of any portion of town orders from the auto parts store, he or she is paid a salary by the store and he or she does not receive compensation directly related to sales to the town. The board member’s interest, however, would have to be disclosed in accordance with General Municipal Law §803. Also, the town’s code of ethics should be consulted to ascertain whether it contains any pertinent provisions and, even if not required by the code of ethics, the board member should recuse himself or herself from discussions, and abstain from voting, on matters pertaining to purchases from the store.

You ask whether a salaried town board member would have a prohibited interest if the town makes purchases from an auto parts store that employs the board member as its manager. You state that the board member has no financial ownership interest in the store, that he does not receive commissions for auto parts purchased by the town and that his job at the store “does not rely upon the Town approving payments” to the store. In addition, you provided us with a copy of a letter from the board member’s employer, which states that the board member is a salaried employee of the auto parts store, that he is not “involved in any solicitation of business from the [town]” and that “his regular and ordinary job duties [do not] include the ‘procurement, preparation or performance’ of any portion of [town] orders from the store”. Finally, you inform us that the town purchases, in the aggregate, in excess of $750 of auto parts annually from the store.

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 firm, partnership, association or corporation of which the municipal officer or employee is an employee (General Municipal Law §800[3][b], [c]). 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]).

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). 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).

The town’s purchases from the auto parts store would constitute “contracts” within the meaning of article 18 (see, e.g., 1996 Opns St Comp No. 96-14, p 31).1 The board member would be deemed to have an “interest” in those contracts because he is an employee of the auto parts store. Unless one or more of the exceptions in section 802 apply, the board member’s interest in the purchase contracts would be prohibited because, as a member of the town board, he has at least one of the powers and duties referred to in section 801 of the General Municipal Law (see, e.g., Town Law §§20[3][b] [appointment of town comptroller], 64[6] [contract awards], 118[1] and 119 [audit of claims]).

The exception set forth in General Municipal Law §802(1)(b) is pertinent here. Section 802(1)(b) provides an exception in those instances when an interest in a municipal contract is prohibited solely because the municipal officer or employee is an officer or employee of a firm, association or corporation if (1) his or her remuneration from that private employment will not be directly affected as a result of the municipal contract and (2) the duties of the private employment with the firm, association or corporation do not directly involve the procurement, preparation or performance of any part of the municipal contract. 2

As noted, we are informed that the board member’s regular and ordinary job duties do not include procurement, preparation or performance of any portion of town orders from the auto parts store, that he is paid a salary by the store and that he does not receive commissions from sales to the town. Based on the facts presented, assuming the board member’s only interest in the purchase contract is his employment as manager of the store3, it appears that the criteria in section 802(1)(b) are met and the exception would apply. The interest in the purchase contracts would have to be disclosed pursuant to section 803 of the General Municipal Law.

The town’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). Towns are required, under section 806 of the General Municipal Law to adopt codes of ethics setting forth standards of conduct for the guidance of its officers and employees. The code of ethics must provide standards with respect to, among other things, private employment in conflict with official duties, and may “regulate or prescribe conduct” that is not expressly prohibited by article 18.

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 employment relationship with the auto parts store, he recuse himself from discussions, and abstain from voting, on matters pertaining to purchases from the store, even if the exception in section 802(1)(b) is applicable and the code of ethics is silent.

Accordingly, when a town board member has an interest in town purchases from an auto parts store solely because the board member is an employee of the store, the interest would not be prohibited if the board member’s duties as an employee of the store do not include the procurement, preparation or performance of any portion of town orders from the auto parts store, he or she is paid a salary by the store and he or she does not receive compensation directly related to sales to the town. The board member’s interest, however, would have to be disclosed in accordance with General Municipal Law §803. Also, the town’s code of ethics should be consulted to ascertain whether it contains any pertinent provisions and, even if not required by the code of ethics, the board member should recuse himself or herself from discussions, and abstain from voting, on matters pertaining to purchases from the store.

December 29, 2006

Robert H. Hafner, Esq., Attorney at Law
Town of Queensbury

1 Although not at issue here, we assume that the town’s purchases are made pursuant to the competitive bidding requirements of General Municipal Law §103 or, if competitive bidding is not required by law, pursuant to the town’s procurement policies and procedures adopted under General Municipal Law §104-b.

2 Because the town purchases in excess of $750 annually from the auto parts store, the exception in General Municipal Law §802(2)(e) is not applicable. Also, the exception in section 802(2)(j) is not applicable here since, assuming all other criteria for that exception were applicable, the board member does not serve without salary.

3 We do not have sufficient facts to determine whether he would have an interest because of factors other than his status as a store employee, such as whether he is a member or director of a firm that owns or operates the store. Those factual questions should be resolved, in the first instance, at the local level.