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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 (town board member employed by engineering firm) -- Interest in Contract (town board member employed by town's engineering firm); (interest arising after execution of contract)
GENERAL MUNICIPAL LAW, §§800(3)(c), 802(1)(b): A town board member acquires an interest in the contract between the town and the engineering firm with which the town contracts when the board member becomes employed by the firm.
This is in reply to your letter asking whether a town board member who is an employee of an incorporated engineering firm with which the town has contracted for services has a prohibited conflict of interest in the town's contract with the firm. You state that the board member is a part-time employee of the firm and that his duties with the firm do not require him to work within the town. You further state that this individual was a member of the town board at the time the contract was entered into, but was not an employee of the firm at that time. You indicate that the board member has disclosed the fact of his employment at a town board meeting and will refrain from voting on any matter involving the firm.
Article 18 of the General Municipal Law (§§800, et seq.) contains the provisions of law which 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 municipality if he or she receives a direct or indirect pecuniary or material benefit as a result of that contract. In addition, regardless 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 corporation of which the officer or employee is a director, officer or employee (General Municipal Law, §800[c]). That interest 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 payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties (General Municipal Law, §801), and none of the exceptions contained in Article 18 are applicable (see General Municipal Law, §802).
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 or knowingly violates the provisions of Article 18 may be guilty of a misdemeanor (General Municipal Law, §805). We also note that, if an officer or employee has an interest in a contract that is not prohibited under the provisions of Article 18, General Municipal Law, §803 nonetheless generally requires that the interest be disclosed in writing and included in the official record of the governing board's proceedings. Disclosure is not required under section 803 in the case of an interest in a contract which is not prohibited under subdivision two of section 802 (General Municipal Law, §803).
Based on the foregoing, the board member is deemed to have acquired an interest in the contract between the engineering firm and the town when he became employed by the firm. In this regard, we note that Article 18 does not distinguish between employment relationships which arise prior to or after a municipality enters into a contract (see 23 Opns St Comp, 1967, p 761; cf. General Municipal Law, §802[h] which provides, in effect, that a municipal officer's or employee's interest in a contract entered into prior to the time he or she was elected or appointed is not prohibited).
As a board member, this individual has the power to authorize and approve the engineering contract (Town Law, §§20, 64), and to audit and approve or, if the town has a comptroller, appoint an officer who audits and approves claims arising under the contract. Thus, the board member clearly has section 801 functions in connection with the engineering contract and, therefore, the interest would be prohibited unless an exception in section 802 applies. It should be noted that, under Article 18, it is the existence of the statutory power or duty of an officer or employee to perform section 801 functions which gives rise to the conflict of interest under that section without regard to whether those functions are actually performed (Dykeman v Symonds, 85 Misc 2d 289, 380 NYS2d 567, affd 54 AD2d 159, 388 NYS2d 422). Thus, abstention from voting on matters relating to the engineering firm will not cure a prohibited conflict of interest (1983 Opns St Comp No. 83-180, p 226; 1987 Opns St Comp No. 87-75, p 111).
It appears that the only exception which may be applicable in this instance is contained in section 802(1)(b). Subdivision 1(b) provides an exception in those instances where an interest is prohibited solely by reason of employment as an officer or employee of a corporation if (1) the remuneration of such employment will not be directly affected as a result of such contract and (2) the duties of such employment do not directly involve the procurement, preparation or performance of any part of such contract. We do not have sufficient facts to determine whether this exception is applicable. However, assuming it is applicable, the board member's interest would not be prohibited, although disclosure of the interest in accordance with section 803 would be required. Although you state that the board member disclosed his employment relationship at a board meeting, we cannot determine whether the disclosure was in writing, made part of the board's minutes and otherwise in compliance with section 803.
Even if it is determined that there is no prohibited conflict of interest in this case, the town's code of ethics should be consulted to determine whether it contains any pertinent provisions. In this regard, we note that codes of ethics are required to contain provisions relative to private employment in conflict with official duties (General Municipal Law, §806). Also, we 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. Zagoreous v Conklin, 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation and Taxpayers Ass'n v Town Board of the Town of Tuxedo, 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman, 122 Misc 2d 531; 471 NYS2d 521). Thus, even if a contract is found not to violate the letter of Article 18 of the General Municipal Law or the code of ethics, the board member should continue to abstain from voting and discussions in connection with matters involving the engineering firm to avoid any appearance of impropriety.
October 26, 1988
Benjamin N. Hewitt, Esq., Town Attorney
Town of Lewiston