**JIM MAnOX**  **Attorney General** 

**BUpIW7 P.**  **Atntln. TX.**  **70lll- 2548**  **512/4752501 Telex**  **9lwEl711567 Tdwo~lor**  **5W475.0288**

**714 Jackson.** 

**Suit. 700**  **oallaa, TX.**  **752024506 214il42a44** 

**4824 AlberM**  **Avr. Buna**  **1w El**  Paso.**TX. 7WO527W**  **01-**

**200 MaIn**  **PIUL suna**  **400 Ban**  **Antonlo. TX.**  **7Bm527w 512G254181** 

**An Equal**  **oppwtunlty/ Aftlmutlva**  **Actton Empkwr**  

# The Attorney General of Texas

**June 22,**  1984

**Honorable** Carl A. Parker c!-irun Senate Eduutha Codttee 'Texae State 8enate P, 0. Box 12068.Capitol Station ~Austln,

Texu 78711

, Opioio~ NO. JM-178 Ile: **Whether au**  officer of banklug inetitution who eervee am a member of the board of higher educationauthority eubject to article 988b. V.T.C.S.
Dear SenatorParker:
You have .a&d the following two quutimcr relatingto the bill frequently-referred to ae the Local Offlciale Conflict of Intereet Bill: ,(l) Ia ac offlclal of a .backlcg inetitutlon 

### l e~iog.ae a member of the board.:of dlrectora

of a hlgber ,,..educatioa authority a 'local public .offlckl! under the.prwimlone of article 988b. j 7.T.C.S.T.~ .' ., 3r. (2) If eo, and if the financial lnetltutlon ,i yit~+tlch+qch~,boatd member 1~ meociated. or aa .>:'rqp .I ~~fl&i+~e~,~~laatltatlon~ acb am :1 I

back,aolding -~'t ,- ~-. ( 2 c: .> $?qfmY~

$ ,av- t+.-makee::m :etudent:,.- ~loace !:, >Ti I,)' 7 ,,;sutnnteca.~b~'il~hipher ~edacu:oa~cothorlty; .doee euch board member then vioIate the prwieione of ..,II •~~~1~,,,~988b

.br~, particlpatlag In a vote or ..$e@eIpIL

of.tha board .of

dlrectoroIf hla back or .,,filuncia~ lnetitutloca ~::~affillated

therevith recelvea..ln~ereet..:Ancome '011 

### l n.~:eligible

etudect $oan o~/procecde

peld in the 

### ,weat of default oc euch loan frao,,tho <guaraatee

.fuadof the higher education



### l utborlty?
He con&de that r-member of the board of directore of a higher l ducatloc.aiihorlty ie l local.public

official**uithia the**  **maniag** the Local OfficialaZocflict of Intereat Bill and. therefore. **subject** to the applicable provieione

of **the act.**  It ie our opinion **thet** a board member **ufth** a l ubetantial interest in a lending lcetltutloc vlolatee the urovleiono~ of thet act bv knovlcgb

# If

Honorable Carl **A.** Parker - Page 2 (JIG178)

participating

in a vote ore

decisionof the board **of** directorsif the member caa reasonably foreecc that such actionvi11 result In receipt of Interest incolleeto the lending Institution from eligible student loans. Section l(1). article 988b. V.T.C.S. defines a "local public official"

as*

.
a member of the governing body **or** another.offlcar. whether elected 

### o tl ppolated,paid ot unpaid. of any district (lncludlnS e school district), -U-Y. city. precinct, central 

### l ppralaal diatrlct.transitauthority or district.or other local gave-ntal entity UhO' exercl8ee reaponsibilitiee

beyond those that are advlaoryln nature.
A higher education authorityIs craatedunder chapter 53 of the Texas Education

Code by the governing body of a city or cities. Sec. 53.11. .An

-authority

Isa "body politic .andcorporate" which may sue and be cued and may Uke. rrcnd. aad repeal its bylaws. Sec. 53.13. It is a governmental body mhlch is subject to the Cpen MeetingsAct, article 6252-17. V.T.C.S.. and **to** the Open Records **Act,** article 625247a. V.T.C.S. 'See AttorneyGeneralOpinionIfW-177 (1980). It %e a local .gove-ntal: entity vhlch is governed by ltn board of ~dltectora. Sec. 53.14. A member of -such'a board clearly exercises reeponalbUltlea beyond thorn8 that are advisory in nature and is subject to tha provialoas in article 988b vrhlch prohibit certain conduct.

-~: .A.~ .local~publlc-@rofflcial c&to a Claaa **A** tiedemeanor under .section:S(a)@)

of l rt4cle9SSb, ciecpt'ln those lnmtances

prwidad.ln 'rection

b~~-(~ich:-pn*~ldes'~~tar~~al~ for ~ibmtcntioa frop voting on utt~~wh&ivthe~&ffclaf la &atercsted) **3f** he knwingly

._ c,,. .~,.. partldpatea'

ina'vote or 'dedision on a Utter invoWing ~.a bualnees entltp in ~whlch the local

. publioiofficial.haa ‘a aubstaatlal

interest If it is reaaonably~'foreseaable 'that 'an ~actlonon the rtter ~vouldconfer an 'ecoiioric .benefltto the business

entity iaoolved

. . . . The elements of the offenae involve aeveral factual determinations.

one of.uhichis vhethcr a local public official has a l ubstaatlal

interest In the business entity. Under eection 2 of the act. **a** pereonhas a oubstantlal InterestIn a business if: (1) the lntercrtIs ownership of 10 percentor lora of the votluS stock or shares **of** the business

p. 780Honorable Carl A. Varker - Page 3 (J&178)

entity or ownership of $2.500 **ot** ore of the fair rrket value of the businessentity;or (2) :fuade received by the pereou from the ..bueineee

eutlty: e.xceed,10~percent

of,the person's gross lncoms for the previous yeet
. . . . AIao. ao Interest

of a peraon **releted** la the first or seconddegreeby either affix&y or coneanguinlty to the local public official is a "eubetmtlal~lntereet."~ Sec. 2(c). ..::'+ ,. .~~,~~.loca.public

offlclal

must knowingly

participatein a **vote** or d&i&m 'ou 'a'ratter .prohlbited by article 988b to violate the provlaiona

of.tbatact. Section3(a)(l)appears to refer to aa actlou ou a,.~eatter

if .it ie .~reaeouably foreseeablethat the action will coafer s l

conoeic benefit to **the** business entity in queetloa, regardleer

of the sourceor the emouat of ecouomic beaeflt. The studenthigher l ducatiou loaae in questionusually are made by private leading inetitutione at interest ratee 'lover than the geuerallyavaiIablerates. We understandthat until the loan is in pay-back etatus, **the** holder **of** the loan recelvee from the federal gwe-t aa lntereet subsidy payment for the facial emouot of the interestplus a variable leaders l peclal l

llmemce that brings the interestlucomsup to the regular **market** level of Interest. When the loan is la pay-back etatue. the student borrower pays the Interest eubeidy payments ou reeainlug unpaid balances. and the federal gwenmeet cootlnueepayment of the lenders epecial allovauce. In case of default,the higher education authority

~guaraateeing

tha loan pays the l

tudent'e

unpaidprincipal

and intereat. We believe that the interest income to a lending Institutionthat it receives l o the holder **of** a guaranteedatudeat loau constitutes au l couoeic benefit within the meealngof article988b. Therefore,

l eeuelugt&t a mmber of the board of directore of a higher l

ducatloul

uthotityhas a "eubetantlal interest"in a leading lnetltutloe.

ve believe the hoard member vioIatee the provieioueof article 988b ff the member kwvlmgly pattlcipatea In a vote or decision

of the board vhea the member can reasonably foreseethat euch action vlll result la **the** leodiog inetltutiou receiving lnteteet iacorc oe eligible l tudent loaae or receiving any other eccmmic benefitfrom the highereducation authority's

student loan program. SUHMARY **A** camber of the board of directorsof a higher education authority is a public official vithin the eaaning of article 988b. V.T.C.S. Such a hoard member with a aubetantiel iatereet in a

p. 789Honorable Carl **A.** Parker - Pa&e 4 (JH-178)

lendinginetitution vlolateethat act by knwingly participatiag

la a vote or declelonof the board of directorsif **the** Prober can reasonably foresee that such actionwL:ll reeult in InterestIncome to the lending inetltstionfrom guaranteed student loeae.

Verytrulyyou 

# J k

fk JIM WATTOX **Attorney** Generalof Texee
**TOM GREEN**  FirstAssistant **Attorney** General
DAVID R. RICRARDS Executive

Assistant

**Attorney** General Prepared

by Nancy Sutton Aeeisteut

Attorney

General
APPRGVRD:

Rick Gilpln.Chaimea David Brooke Colln Carl Swan Garrieoo JlmHoelIlnger Nancy Sutton

p. 790