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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Approval of Contracts (issuance of check by county treasurer) -- Leases (contract between county and corporation of which county treasurer is stockholder) -- Stock Ownership (county treasurer as stockholder)
GENERAL MUNICIPAL LAW, §§800(2), (3)(d), 801: Although the issuance of checks may not literally constitute a power or duty enumerated in General Municipal Law, §801, a court might find that a county treasurer has a prohibited conflict of interest in a lease pursuant to which the county rents a gravel pit from a corporation of which the treasurer owns more than 5% of the stock. Even if the treasurer does not have a prohibited interest in the lease, the treasurer's interest must be disclosed.
You ask whether a county treasurer would have a conflict of interest by virtue of the county's renewal of a lease of a gravel pit from a corporation of which the treasurer owns more than 5% of the stock. You state that the original lease was entered into before the treasurer was elected to office and that the treasurer acquired her interest in the corporation after she assumed office. You also state that the treasurer does not have the power or duty to negotiate, prepare, authorize or approve the contemplated lease renewal, or to approve payments or audit bills or claims under either the original lease or the renewal.
General Municipal Law, Article 18 (§800 et seq.) contains provisions of law relative to conflicts of interest of municipal officers and employees (see General Municipal Law, §800,). A municipal officer or employee has an "interest" in any contract with the municipality if he or she receives a direct or indirect pecuniary or material benefit as the result of the contract (General Municipal Law, §800), and is also deemed to have an interest in any contract of a corporation any stock of which is owned or controlled directly or indirectly by the officer or employee (General Municipal Law, §800[d]). For this purpose, a "contract" includes any express or implied claim, account or demand against or agreement with a municipality (see General Municipal Law, §800). An interest in a contract 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 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 and knowingly violates these provisions may be guilty of a misdemeanor (General Municipal Law, §805). We also note that, if an officer or employee has an interest in any actual or proposed contract that is not prohibited under the provisions of Article 18, General Municipal Law, §803 nonetheless generally requires that the nature and extent of the interest be disclosed in writing as soon as the officer or employee has knowledge of the actual or prospective interest. The written disclosure must be 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 provisions, the lease between the county and the corporation, as well as any renewal thereof, is a "contract" because it is an agreement with the county (see General Municipal Law, §800). The county treasurer is deemed to have an "interest" in that contract because she owns stock in the corporation (see General Municipal Law, §800[d]). That interest is prohibited if the treasurer has any of the powers or duties specified in General Municipal Law, §801, unless one of the exceptions in General Municipal Law, §802 is applicable (see General Municipal Law, §801).
As to whether a county treasurer has any of the powers and duties specified in General Municipal Law, §801, we note that the general powers and duties of the county treasurer are set forth in County Law, §550. Pursuant to section 550(1), the county treasurer is required to perform the duties prescribed by law as the chief fiscal officer of the county and such additional duties as may be prescribed by law and directed by the county board. Pursuant to section 550(2), the county treasurer must receive and be the custodian of all money belonging to the county or in which the county has an interest. As custodian of county moneys, the treasurer issues checks to pay claims approved by the auditing body or officer (see County Law, §§369, 577, 600). We have previously concluded, however, that the power of a municipal treasurer to issue checks is not a power encompassed by the literal provisions of General Municipal Law, §801 (1986 Opns St Comp No. 86-7, p 11; 1979 Opns St Comp No. 79-146, p 28).
We also note that a county treasurer, in the course of administering his or her department, may be required to negotiate, prepare, authorize, or approve contracts or claims arising from the operation of the department (see, e.g., County Law §§362, 577). Therefore, there may be instances when a county treasurer has one or more of the powers and duties enumerated in General Municipal Law, §801 with respect to a particular contract.
In this instance, however, we are advised that the county treasurer does not have the power or duty to negotiate, prepare, authorize or approve the contemplated lease renewal, or to approve payments or to audit bills or claims under either the original lease or the renewal. Further, a county treasurer would not normally have the power or duty to appoint an officer or employee with any of these powers or duties. Therefore, assuming the treasurer does not have any of the powers and duties enumerated in General Municipal Law, §801 with respect to the lease and renewal, she would not have a prohibited interest in either contract, although disclosure of her interest in both the original lease and the renewal would be required in accordance with General Municipal Law, §803.
We note that, even if the treasurer were determined to have powers or duties enumerated in section 801, certain exceptions contained in General Municipal Law, §802 should be considered. First, since we are advised that the original lease was entered into before the county treasurer was elected to office, we note that General Municipal Law, §802(1)(h) provides an exception from the provisions of section 801 for contracts which were entered into before a municipal officer was elected to office. The exception, however, does not apply to renewals of such contracts. Also, section 802(1)(d) provides an exception for the purchase by a municipality of an interest in real property, including a leasehold interest (see 1988 Opns St Comp No. 88-24, p 43; 21 Opns St Comp, 1965, p 319), if the purchase and consideration therefor is approved by order of the supreme court upon petition of the governing board. Therefore, if the treasurer were found to have one or more of the powers and duties set forth in General Municipal Law, §801 in connection with the original lease or the renewal, the treasurer's interest in the original lease would not be prohibited because of the exception contained in section 802(1)(h), and the treasurer's interest in the lease renewal would not be prohibited if appropriate judicial approval were obtained pursuant to section 802(1)(d).
Although the county treasurer may not technically have any powers or duties listed in section 801 in connection with the lease or the renewal, 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 the intent of the statute, are inconsistent with public policy, or suggest self interest or partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358 [2nd Dept 1985]; Matter of Tuxedo Conservation Taxpayers Ass'n v Town Board of the Town of Tuxedo, 69 AD2d 320, 418 NYS2d 638 [2nd Dept 1979]; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521 ). Based on these considerations and the principle that under certain circumstances a municipal treasurer has an obligation to protect municipal funds by not issuing checks to pay claims which have already been approved by the auditing body or officer, we have cautioned that, although the power to issue checks may not literally constitute a power or duty enumerated in General Municipal Law, §801, a court might find that a municipal treasurer has a prohibited conflict of interest in a contract between a municipality and a business of which the municipal treasurer is the proprietor (Opn No. 86-7, supra). Of course, as discussed above, if the governing board of the county obtained judicial approval of the lease renewal as authorized by General Municipal Law, §802(1)(d), the treasurer's interest in the contract would not be prohibited even if the power to issue checks were found to be a section 801 function.
Finally, even if there is no prohibited conflict of interest in this case, the county's code of ethics should be consulted to determine whether it contains any pertinent provisions. In this regard, we note that pursuant to General Municipal Law, §806 counties are required to adopt codes of ethics which contain standards relating to the conduct of officers and employees. Such codes of ethics may regulate or prescribe conduct which is not expressly prohibited by Article 18, but may not authorize conduct otherwise prohibited.
August 30, 1989
Nancy Rhodes, Treasurer
County of Hamilton