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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 (fire district commissioner an employee of firm doing business with district) -- Exceptions (remuneration and duties exception)
GENERAL MUNICIPAL LAW, §§800(3)(c), 801(1), 802(1)(b): A fire district commissioner, who is a salaried employee of a firm doing business with the district, does not have a prohibited conflict of interest in purchase contracts between the firm and the district if the exception contained in General Municipal Law, §802(1)(b) is applicable.
This is in response to your letter asking whether a fire district commissioner who is also a salaried employee of a firm doing business with the district would have a prohibited conflict of interest in contracts between the firm and the district.
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 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 firm, partnership, association or corporation of which the officer or employee is an employee (General Municipal Law, §800[b], [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, even if an interest in a contract 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 commissioner would be deemed to have an interest in a contract between the district and a firm with which he or she is employed. Therefore, unless an exception in section 802 is applicable, that interest would be prohibited because, as a member of the board of commissioners, the commissioner has powers and duties listed in section 801 (see, e.g., Town Law, §176[4-a]).
One exception contained in section 802 may be pertinent to your inquiry. Subdivision 1(b) of section 802 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.
According to your inquiry, the commissioner is paid a fixed salary by the firm and does not receive commissions. This suggests that the commissioner's remuneration with the firm would not be directly affected as a result of any contract with the district. However, you do not state whether the duties of the commissioner's employment with the firm directly involve the procurement, preparation or performance of any part of contracts with the district. Therefore, we cannot determine whether General Municipal Law, §802(1)(b) is applicable. Further, since the exception in section 802(1)(b) applies only when a municipal officer or employee has an interest in a contract solely by virtue of his or her status as an officer or employee of a private firm, we note that, even if section 802(1)(b) applies, it must also be determined that the commissioner does not have an interest in the contract by virtue of some other provision of Article 18.
Finally, we note that, even if it is determined that no prohibited conflict of interest would arise, the district's code of ethics, if any, should be consulted to ascertain whether it contains any pertinent provisions which may be more restrictive than Article 18. 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. Zagoreos 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).
In our view, Zagoreos, supra, is of particular relevance in this instance. In that case, the court set aside a town board decision to grant a large scale development permit to an electrical utility where decisive votes were cast by board members who were employees of the utility because, "(u)nder these circumstances, the likelihood that their employment by [the utility] could have influenced their judgment is simply too great to ignore". (109 AD2d at 288, 491 NYS2d at 364). Thus, even if the contracts between the district and the firm are found not to violate the letter of Article 18 of the General Municipal Law or the code of ethics, consideration should be given to the possible consequences of any judicial review of such contracts. The commissioner should, therefore, consider abstaining from voting and discussions with respect to a contract between the district and the firm with which he is employed, even if there is no prohibited conflict of interest or code of ethics violation.
December 6, 1988
Arnold Russo, Chairman
Board of Fire Commissioners