# The Attornely General of 

# Texas
November 14. 1985 JIM MAlTOX Attorney General

P.0. Box 12s4a Austl,,, TX. 7011% 2548 512l4~1 Tdex 9101(1741337 Tetw#ef 512i47502@

714 J8olmon. suite 700 wlu,lx. 7si32-4506 214l742-2244 HonorableBenjamin :Euresti, Jr. CameronCountyAttmuey 974 E. Barrison Strfeet Brownsville.Texas 78520 OpinionNo. JN-379
BE?: Whether a school trustee violates article 988b,V.T.C.S., by discussingwith school board its lawsuit against a bank in which he owns,

stpck
DearMr. Eutesti:
You have.reqwastedan Attorney 

### General Opinion on the application 4224 Alberta Ave.,Suite 180 of conflictof intrrest law to a school trustee. Where a trusteeof a EtP&m,lx7llw=m schoul district owts ware theu $16,000 5.nnon-voting stock of a bank 91- that is involved in litigation with the school district, and such trustee abstains from voting for or against any matter pertaining to 1001Texas, Mt. 700 such lttigeticm. but does discuss the litigationwith members of the t+ouston. TX 770024111 board of trustees. 

### bas the trcstee 

### nevertheless violated the law 71- regaxdiugpublic o:Cficials and conflicts of interest?

aaa snxcway, suite 312 Lt##J& TX l94cl-3479 ww747423a

4302 N.Tenth, Suite 6 MoAllen.TX. 1850%155.5 512m824547 Pou state the the trustee ouns 400 shares of non-voting stock in a localbank uader s Gogh individualretir-t plan. The shares are valued at.$16,000. The bank in question along with other localbanks seed the city and the school district in 1980. challenging the property tax valuation of their stocks. The suit wes amended to challenge valuatians made in subsequent years. It was settled in October 1984.

200 Matll PtuoSuite

4w During the course of this litigation. the trusteewas a shareaal Antonlo. TX. 7aM52797 holder in one of 1:b.e plaintiff banks. He was not named plaintiff in 512f2254191 any of the proceed:Lngs, although ae a trusteehe was named defendant. You state that it nppears that this trustee abstained fromvoting for or against any matter pertaining to the tax litigation, although he AnEqud OwXtULunitY/ may have discussed this matter with other trustees. We assume that Aftlmutive Aotl~n Emtkw any such discussions were held in compliance with the Open Heetings Act, article 6252-17. V.T.C.S., and do not consider the conflict of interest implicat:~oasof discussions held in violation of that statute. Article 988b, V.T.C.S., is relevant to this question. -IlliS statute be- efEective January 1, 1984, and does not apply to couduct occurring before 

### that date. SeemAttorney General Opinion J'M-171(1984). Ccmiuct prior to the effective date of article 988b. 9

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‘

V.T.C.S.. wss governed by ~:oumm law conflict of interest doctrines. The con5on law, in essence, barrsd school districts from contracting with any entity iawhich a Ixusteehad a pecuniary interest,no matter how small. Attorney General ~pinio~s MU-342 (1981); E-916 (1976); iv. Ellis, 59 S.W.2d 99 (Tex. Comm'n App. Delta Electric Construction Company V. City of San Antonio, 437 S.W.fi-602 (Tex. Civ. App. - San Antonio 1969. writ ref'd n.r.e.); Bexar Countyv. Wentworth, 378 S.W.2d 126 (TAX. Civ. App. - saa Antonio 19g4,writ ref'd n.r.e.); Meyers v. Walker, 276 S.W. 305 (Tex. Civ. 1qp. - Eastland 1925, no writ); Attorney General Opinions JM-171 (1984); MW-179 (1980); M-1236 (1972). You have not informed us of'azy conduct prior to January 1, 1984 that would violate the cornon lm prohibitionagainst contractualconflicts 

### of interest. After January 1, 1984, the trusteeswere subject to ariicli 988b, V.T.C.S. SeeAttorney GeneralOpinion JM-171 (1984).

- Article 988b.V.T.C.S.,provides ia part:

Sectiou .I. In .this Act:
th?) 'Local public official'means a member of tw-rning ‘body
. . . of any district (includinga schooldistrict).
. . . (2) 'Businessentity'-8 a soleproprietorship, partnership, firm, corporation, holding company, joint-stockcompany. receivership,

### trust, or any other enthy recognized in law.
Sec. 2. (a) A person has a substantial interest in a bur;iness if: (1) the interest is owaarship of 10percent us more of thevoting stock~or shares of the business entity or ownarsh~tp of $2,500 

### ormore.of the fair marketvalue of I:he.business entity.
. . .

. . . . Sec. 3. (a) Except as provided by Section 5 of this Act, a Local public official commits an offense if he knowingly: (1) particip;ltesin a vote or decision on a matter involving a business entity in which the local public official has a substantial interest if it is reasoixzbly foreseeable that an action oo

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thematterw0ttl.d

confer an economicbenefit to the business entity involved;

. *
. . (b) An offenseunder this section is a ClassA misdemeanor.
Sec. 4. If a localpublic official or a person related to ttiitofficial in the first or second degree by eitber affinity or consanguinity has a substantial interest in a business entity that would be pecc.liarlyaffected by any official action taken by the governing body, the local public official,before a vote or decision 0x1the I matter, shall file an affidavit stating the nature and extent of the interest and shall abstain from further partid.pation in the matter. The affi

### davit must be filedwith the official recordkeeper of the governmentalentity.
Sec. 

### 5 [Esception for contracts for purchase of services or personal property where business ent%ty is only supplier within the jurisdiction ~sndthe only bidder on 

### thecoutract.] 

### Sec.6. The :?enalties and remediesprovidedby thLs article do mt limit coumon law remedies of tort, contract, a’r equity, including a suit for damages. irtjuwt:lcm, or msndaitus. The finding by a court of a violationunder 

### thisarticle does not render an action of the'governing body voidable unless the uteaw:rethat was the subject of.an .e action lavolvlng conflict of interest would not heve passed the gwerning body trLthoutthevote of the personwho vMLated this article. The trustee owns more than $2,500 in stock of a plaintiff bauk. His interest in thebank is a substantial interestwithin section 2(a) of article 988b,V.T.C.S. SeeAttorney General Opiniou JM-291 (1984). m-m You have informed us that the school trustee abstained from voting for or against an:imatter .pertainlng to the litigation, although ha may have discussed this matter with other members of the board of trustees. Section 3 of article 988b, V.T.C.S., prohibits a public official from knowinglyparticipating in a vote or decision on a matter involving a businms entity in which he is substantially interested. In our opiuion, thisprovision reaches knowingparticipation in a decisionby discustting it with other board members.

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.

A Massachusetts court discussed the term "participate" as it appeared in a conflict of :Latereststatute. Graham v. McGrail, 345 N.E.2d 888 (Mass. 1976). The Massachusetts statute describes the prohibited participation j.ngreater detail than does article 988b. V.T.C.S.; nonetheless, the court's discussion is pertinent to our question. The statutediscussed in Grahamv. McGrail, 345N.E.2d 888 (Mass. 1976) prohibited a nnmici~al employee from participating in a matter in which he or his inmedir,te family had a financial interest. Three school committeemembers had immediate familymembers who were school system employees. The three school committee members voted on the budget which set the compensation of school system employees, including their own farnil], members. Bach committeemember abstained from particular budget decisions that affected his relative,but all attended 

### work sessions and formal meetings on the budget. On occasion, a school committm member presided over a vote fromwhich he disqualified himself because of his relative's financial interest. The Massachusetts statute ,?rohibited school committeemembers from participat[ing]
. . .personallyand substantially asa . . .municipal employee. through approval, disapproval,~ Cl!CiSion. recomendation, the renderingof advisce, investigationor othetise. 345N.E.2d at 891. The cou'rt stated:
We agree with the judge that this definition eucompasses more than the act of voting. To preside over a 'voteis to participate in it, and it is clear that two of the individual defendants presided over some of the contested votes while purporting not to participate. Moreover, there is every Indication that during the 'work sessions' they participatr!din other ways in the contested mstters. To participate in the formulation of a matter forvote is to participate in thematter. Ordinarily. the wise course for one who is disqualified from allparticipation in a matter is to leave the rotm. 345N.E.2d at 891-892. Section 3 of artic:Le988b, V.T.C.S., prohibits conduct which includes, but is not liwlted to, formally recording a vote when the board takes official action. In particular, the language "participates in a . . . decision" indicates that the legislature intended the statute to reach more than merely casting a vote. Cf. V.T.C.S. art. 6252-9b, §l;(a)(state officer personally interestedin

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decision pending before his board "shall not **vote** or otherwise participate in the deciriion?. Section 4 of article 988b, V.T.C.S.. which requires the interested public official to file an affidavit stating his interest, requirss him to "abstain from further participation in the O;itter." This provision is not limited to participation in theboard'svote; it prohibits all participation.
In our opinion,participation "in a vote or decision" in section 3(a) of article 988b. V.T.C.S., includes deliberatingwith the board about the matter. A nar'roverinterpretation of this language would undermine the legislature'seffort to control conflicts of interest, in that a trusteewith a personal interest in a matter could discuss it with board members ard influence the board's final action with impunityas long as he ab;rtained from the formalvote.
I?edo not have suffLcient information to determine whether the school trustee has partic,ipatedin a vote or decision of the board. You do not statewith certainty that he even discussed the litigation with other trustees. OtiLydiscussions which occurred after the January 1, 1984 effectiw date of article 988b. V.T.C.S.. would be subject to its prwiaious.~ Moreover, section 3(a)(l) also requires a showing 

### thatit is reasonably foreseeablethat an action on thematter would confer an economicbenefit on the business entity, and we have not been provided any facts on this question.
You do not **know**whether the trustee filed the affidavit required by section 4 of article 98:%,V.T.C.S.; thereforewe cannot expressen opinion on wbether he vic'latedsection 4 of article 988b. V.T.C.S. The penalty provision of article 988b. V.T.C.S., does not apply to v~olntions of section 4. Ilcdsee Penal Code 139.01 (abuseof office). ---SUMMARY
**A** school trustee who engages in school board deliberations lez.ding up to a **vote** or decision on a matter in which he is substantially interested has participated in a vote or decision of that matter within section 3(a)(l) of article 98813, V.T.C.S.

JIM MATTOX Attorney General of Texas
MARY KELLER ExecutiveAssistantAttorney General

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ROBWT GRAY SpecialAassistant AttorneyGeneral
RICK GILPIN Chsirmsn,Opinion Comittee Prepsredby SusanL. Garris'm AssistantAttorneyGeneral APPROvgD: OPINION COMMITlZE Rick Gilpin, Chairman Colin Carl Susan Garrison Tony Gnillory Jim Moellinger JcMifer Riggs Nancy Sutton SarahUoelk

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