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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Protecting the Public’s Interest: A Tutorial on Local Government Ethics and Transparency in New York State

Module 3 - Case Studies on Conflicts of Interest

Discussion of Situation 4

The Town Supervisor is unable to complete his term of office and an individual must be appointed to fill the vacancy. One of the potential replacements is well qualified, but he is an officer of the bank that is now the town depository, and he owns less than 5% of the bank’s stock. Neither this person’s pay and compensation from the bank, nor his duties with the bank, directly involve the bank’s relationship with the town. There are several other banks in the town that could also serve as the town depository.

If this individual is appointed as town supervisor, will he have a prohibited interest in contract? Why or why not? Are there any other issues with which the town should be concerned?

If the individual is appointed as town supervisor he would not have a prohibited interest in a contract with the town.

  1. There is a "contract" between the town and the bank because the town designated the bank as a depository.
  2. The potential replacement for the supervisor would be deemed to have "interests" in the contract because he is an officer and stockholder of the bank.
  3. Because the town supervisor is the "treasurer" of the town, the individual’s interest in the contract would be prohibited unless a statutory exception applies.
  4. In this case, however, several of the exceptions in Article 18 apply.
    1. The exception for pre-existing contracts would apply because the current designation of the bank as a town depository would pre-date the individual’s appointment as supervisor; however, this exception would not apply to future designations.
    2. With respect to the current designation of the bank as town depository, and future designations, the exception for small stock holdings would apply because the individual owns less than 5% of the bank’s stock.
    3. Another exception would apply to the interest arising from the individual’s status as an officer of the bank because his duties at the bank, as well as his compensation from the bank, are not affected by its relationship with the town.

Therefore, although the potential replacement for the town supervisor has interests in a town contract (the designation of the bank as town depository), the interests are not prohibited because statutory exceptions apply to the interests. The individual’s interest resulting from his status as an officer of the bank would have to be disclosed. The disclosure would have to be written and made publicly to the town board.

Other Issues to Consider:

The town’s code of ethics should be reviewed for relevant provisions, such as a requirement that the individual refrain from participating in the town board’s discussions and votes on matters affecting his bank.

  Next: Situation 5