JIM MAl-fOX Attorney General

Supreme CourtBuilding P.0. Sax12548 AUstln.TX. 78711.2S4S 512/4752501 Telex 910/874-1287 Telecopier 512/47502SS

714Jackson,Suits700 Dallas.TX.75202.4508 214”42-8944

4824Albma Ave..SuitelS0 ElPaso.TX.799052793 915l533.34B4

11Texas,Suite7W ~ston. TX.77002.3111 713r223aSea

5% Broadway,Suite312 Lubbock.TX.79401~3479 8081747-5238

4349N.Tenth.SuiteB McAllen,TX. 7SSOl~lSSS 5121882-4547

MOMainPlaza.Suite400 SanAntonlo.TX.782052797 512/2254191

AnEqualOpportunityI AffirmativeActlonEmployer 

# TheAttorney General ofTexas June 18,1984

Honorable Michael J. Siamang Opinion No. ~~-171 Lee CountyAttorney P. 0. Box236 Re: Whether amember

._ of acity Giddlngs. Texas 78942 council may be employed by a corporation doing business with the city

DearMr. Simang:

You ask whether a member of the Giddings city council may continue to serve on the council while he is employed by acorporation that does business with the city. Weconclude that there is no legal impediment to his serving, but that the contract entered into between the city and the general contractor would be void as contravening public policy.

Youinform us that amemberof the Giddings city council is also the vice-president of a local corporation which sells, repairs, and maintains air conditioning units. lie receives a salary from the corporation and participates in its profit sharing program, but he
ownsno stock in the corporation. The corporation was employed as a subcontractor by a corporation which was itself employed by the city
as the general contractor in the construction of the newGiddlngs city jail.. The corporation’s employment and the awarding of the general contract to the general contractor were based upon competitive bids. You state that the council memberhas received no direct financial benefit from this contract, although the corporation does perform maintenance work on the units installed In accordance with warranties given with the units. The council memberhimself has performed no work on any of the units involved, and there is no maintenance contract for the units between the city andthe corporation. Giddings becameahome-rule city effective January 1, 1982. Thecouncil member whois the subject of this request assumedoffice InApril, 1982. The city council awardedthe contract in July, 1982.
Article 988, V.T.C.S., which prohibited, inter alia, amemberof
a city council from being “directly or indirectly interested in any work, business or contract

. . .” the consideration for which is paid by city funds, was repealed and replaced by a new article 988b, V.T.C.S., effective January 1, 1984. The now-repealed article 988 reached only general law cities. Woolridge v. Folsom, 564 S.W.2d 471 (Tea. Civ. App. - Dallas 1978, no writ). The new statute reaches other political subdivisions including homerule cities, in addition

p. 750Honorable Michael J. Sfsnaang- Page2 (JM-171)

to general law cities. Because the contract at Issue wasentered into prior to the effective date of the newstatute, weneed not address whether, under the newstatute, the contract would involve the council memberin a conflict of interest. Rather, wemust determine whether the contract violates public policy. Weconclude that it does.

Wemust first determine whether the council memberwould benefit If the city were to contract directly with the firm of which the council memberis vice-president. If he would so benefit, we must then determine whether the fact that the firm was a sub-contractor rather than ageneral contractor, would effectively remove the council member from the reach of the conflict-of-interest prohibition. We first conclude that, in this instance, the council member would benefit sufficiently were the city to contract directly with the firm of which he is vice-president so ss to bring himwithin the ambit of the conflict-of-interest prohibition.

The factual situation in the instant request is very much analogous to the one presented in Attorney General OpLnion R-916 (1976). That opinion addressed whether aschool district maycontract with a paper companywhich employed a memberof the district’s board of tmstees. The trustee worked for the company in a managerial capacity but owned no stock. Re entered into an agreement with his employer which provided that he would not receive any coaasission, bonus, or other remuneration based upon sales madeby the companyto the district, although he was paid a year-end bonus on the basis of other companysales. In concluding that entering into such acontract wasImpermissible. this office declared:

It is well established that, even in the absence of a statute, the public policy of the state prohibits transactions which involve a conflict of interest on the part of public officials

. . . . Attorney General Opinion H-916 (1976). Attorney General Opinion R-916 then quotes language from a relevant Texas court opinion:

If s public official directly or indirectly has
a pecuniary interest in a contract, nomatter how honest he may be, and although he may not be influenced by the interest, such a contract so madeis violative of the spirit and letter of our law, and is against public policy. Meyers v. Walker, 276 S.W. 305, 307 (Tex. Civ. App. - Eastland 1925, nowrit).

If an employee of a corporation can be held to benefit whenthe company for which he is employed contracts with a political

p. 751Honorable Michael J. Siamang- Page 3 (JM-171)

subdivision, the governing body of which he is a member, then a fortiori anofficer of such a corporation maybe said to benefit. It caonot be disputed that, even if the council memberreceived nodirect compensation from the city’s cootrsct with the general contractor, he would certaiolv benefit at least iodirectlv whenthe firm of which he is vice-president prospers. As the court-declared in Delta Electric Construction Co. v. City of SanAntonio, 437 S.W.2d 602. 609 (Ter. Civ. App. - SanAntonio 1969, writ ref ’d 0.r.e.).
[i]t is the existence of such interest which is decisive and not the actual effect or influence, if any[.] of the interest

. . . . See Beaar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San Antonio 1964, writ ref ’d n.r.e.); Kolppa v. Stewart Iron Works, 66 S.U. 322 (Tex. Civ. ADD. 1902. no writ): Attorney General Opinions MW-155, MI&124 (1980);’ MW-34.(1979); B-734, R-849, H-638 (1975). Relying on Attorney General Opinion E-916 and the authorities cited above, we conclude that the conflict of interest prohibition is triggered when a member of the governing body of a political subdivision, in this instance a member of a city, council, is an officer or employee of a firm seeking to do business with that political subdivision.

It has been suggested that. since the couocll member Is an officer of asub-contractor, as opposed to thegeneralcontractor, his vote on such a contract affects only the general cootractor and oot the sub-contractor and that this effectively removes him from any conflict-of-interest prohibition. In Attorney General Opinion O-2306 (1940), this office concluded that a trustee of a school district could receive compensation from a contractor performing a construction contract for the district g there was no agreement between the contractor andthe trustee at the time whenthe district entered into the contract with the contractor. This office therein declared:

Under the facts set out in your letter, we assume that the contractor is an independent contrsctor. This being tme, the will of the school board is represented only as to the result of the work and the contractor is left to determine the manner and means Involved in the performance of said contract. If, at the time the contract in question was let. there was oo egreement. express or implied, between the contractor andthe school’trustee with reference to the employment in question, It would appear that the trustee in question has no such pecuniary interest in the contract as to makeit void under the public policy doctrine. (Emphasis added).

p. 752Honorable Michael J. Simmang- Page4 (~~-171)

Conversely, we conclude that if there were an agreement at the time the contrsct between the general contractor and the city wss let, whether express or implied, between the general cootractor and the firm for which the council memberserved as vice-president, as to the sale, repair, or maintenance of air conditioning units, the council memberwould have a pecuniary interest in the contract so as to make it void under the rule set out in City of Edinburg v. Ellis. 59S.W.2d 99 (Tex. Comm'nApp. 1933.. holding approved). See Attorney General Opinions MW-155(1980); MW-34(1979). If, on theother hand, there
were no agreement between the general contractor and the firm for which the couocll member served as vice-president at the time the contract between the general contractor and the city was let, the council memberwould not have a pecuniary interest in the contract. This is a factual determination whichweare not empoweredto make.

You also ask whether the memberof the council maycontinue to serve if there Is such s conflict. There is no provision in either constitutional. statutory, or case law which would provide for an automatic vacancy in the council position in the situation which you describe. If a vacancy is to be crested, it can only occur through resignation or removal from office as provided by law.

SUMMARY

Acity council, maynot contract with a general contrsctor which has previously contracted with a sub-contractor employing a member of the city council as an officer, if the firm employing the memberacts as a subcontractor on the city job. The affected memberof the city council does not automatically vacate his office in the event that the city council so contracts.

JIM HATTOX Attorney General of Texas

TOM GREEN First Assistant Attorney General

DAVIDR. RICRARDS Executive Assistant Attorney General Prepared byJimMoellinger Assistant Attorney General

p. 753Ronorable Michael J. Simmeng- Page 5 (JM-171)

APPROVED: OPINION

COMMITTEE
Rick Gilpin, Chairman JonBible Colln Carl SussnGarrison JimMoellinger NancySutton

p. 754