Untitled Texas Attorney General Opinion ( 1985 )

The Attornely General of Texas
November 14. 1985
JIM MAlTOX
Attorney General
Honorable Benjamin :Euresti,Jr. Opinion No. JN-379
P. 0. Box 12s4a Cameron County Attmuey
Austl,,, TX. 7011% 2548 974 E. Barrison Strfeet BE?: Whether a school trustee
512l4~1 Brownsville. Texas 78520 violates article 988b, V.T.C.S.,
Tdex 9101(1741337
Tetw#ef 512i47502@ by discussing with school board
its lawsuit against a bank in
which he owns,stpck
714 J8olmon. suite 700
wlu,lx. 7si32-4506
Dear Mr. Eutesti:
214l742-2244
You have.reqwasted an Attorney GeneralOpinion on the application
4224 Alberta Ave., Suite 180 of conflict of intrrest law to a school trustee. Where a trustee of 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
1001 Texas, Mt. 700 such lttigeticm. but does discuss the litigation with members of the
t+ouston.
TX.770024111 board of trustees. bas the trcstee neverthelessviolated the law
71- regaxdiug public o:Cficialsand conflicts of interest?
aaa snxcway, suite 312
Pou state the the trustee ouns 400 shares of non-voting stock in
Lt##J& TX l94cl-3479 a local bank uader s Gogh individual retir-t plan. The shares are
ww747423a valued at.$16,000. The bank in question along with other local banks
seed the city and the school district in 1980. challenging the
property tax valuation of their stocks. The suit wes amended to
4302 N. Tenth, Suite 6
challenge valuatians made in subsequent years. It was settled in
MoAllen. TX. 1850%155.5
512m824547 October 1984.
During the course of this litigation. the trustee was a share-
200Matll
Ptuo Suite
4w holder in one of 1:b.e
plaintiff banks. He was not named plaintiff in
aalAntonlo.
TX.7aM52797 any of the proceed:Lngs,although ae a trustee he was named defendant.
512f2254191
You state that it nppears that this trustee abstained from voting for
or against any matter pertaining to the tax litigation, although he
An EqudOwXtULunitY/ 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:~oas of 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. Seem Attorney General Opinion
J'M-171 (1984). Ccmiuct prior to the effective date of article 988b.
9
p. 1731
I
Eowrable Benjamin Euresti, Jr. - Page 2 (JM-379) ‘
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 ia which a Ixustee had 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 County v. 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 prohibition against contractual conflicts
of interest.
After January 1, 1984, the trustees were subject to ariicli 988b,
V.T.C.S. -See Attorney General Opinion JM-171 (1984).
Article 988b. V.T.C.S., provides ia part:
Sectiou .I. In .this Act:
'Local public official' means a member of
th?) tw-rning ‘body . . . of any district
(including a school district). . . .
(2) 'Business entity' -8 a sole proprietor-
ship, partnership, firm, corporation, holding
company, joint-stock company. receivership, trust,
or any other enthy recognized in law.
Sec. 2. (a) A person has a substantial
interest in a bur;inessif:
(1) the interest is owaarship of 10 percent us
more of the voting stock~or shares of the business
entity or ownarsh~tpof $2,500 or more.of the fair
market value of I:he.businessentity. . . .
. . . .
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 reasoixzblyforeseeable that an action oo
p. 1732
Honorable Benjamin Euresti. Jr. - Page 3 (JM-379)
the matter w0ttl.d
confer an economic benefit to the
business entity involved;
. * . .
(b) An offense under this section is a Class A
misdemeanor.
Sec. 4. If a local public official or a person
related to ttiit official in the first or second
degree by eitber affinity or consanguinity has a
substantial interest in a business entity that
would be pecc.liarly affected by any official
action taken by the governing body, the local
public official, before a vote or decision 0x1 the 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-
davitmust be filed with the official recordkeeper
of the governmental entity.
Sec. 5 [Esceptionfor contracts for purchase
of services or personal property where business
ent%ty is only supplier within the jurisdiction
~snd the only bidder on the coutract.]
Sec. 6. The :?enaltiesand remedies provided by
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 violation under this article does not
render an action of the' governing body voidable
unless the uteaw:re that was the subject of. an
.e
action lavolvlng conflict of interest would not
heve passed the gwerning body trLthoutthe vote of
the person who vMLated this article.
The trustee owns more than $2,500 in stock of a plaintiff bauk.
His interest in the bank is a substantial interest within section 2(a)
of article 988b, V.T.C.S. m-m
See Attorney General Opiniou JM-291 (1984).
You have informed us that the school trustee abstained from
voting for or against an:i matter .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 knowingly participating in a vote or decision on
a matter involving a businms entity in which he is substantially
interested. In our opiuion, this provision reaches knowing participa-
tion in a decision by discusttingit with other board members.
p. 1733
Honorable Benjamin Euresti, .Jr.- Page 4 (n-379)
.
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.n greater detail than does article 988b.
V.T.C.S.; nonetheless, the court's discussion is pertinent to our
question.
The statute discussed in Graham v. McGrail, 345 N.E.2d 888 (Mass.
1976) prohibited a nnmici~al employee from participating in a matter
in which he or his inmedir,tefamily had a financial interest. Three
school committee members had immediate family members 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 committee member 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 from which he
disqualified himself because of his relative's financial interest.
The Massachusetts statute ,?rohibitedschool committee members from
participat[ing] . . . personally and substantially
asa . . . municipal employee. through approval,
disapproval,~ Cl!CiSion. recomendation, the
rendering of advisce,investigation or othetise.
345 N.E.2d at 891. The cou'rtstated:
We agree with the judge that this definition
eucompasses more than the act of voting. To
preside over a 'vote is 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 for vote is to participate in the matter.
Ordinarily. the wise course for one who is
disqualified from all participation in a matter is
to leave the rotm.
345 N.E.2d at 891-892.
Section 3 of artic:Le 988b, 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
p. 1734
Honorable Benjamin Euresti. Jr. - Page 5 (JM-379)
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 the board's vote; 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 deliberating with the board
about the matter. A nar'rover interpretation of this language would
undermine the legislature's effort to control conflicts of interest,
in that a trustee with a personal interest in a matter could discuss
it with board members ard influence the board's final action with
impunity as long as he ab;rtainedfrom the formal vote.
I?e do not have suffLcient information to determine whether the
school trustee has partic,ipatedin a vote or decision of the board.
You do not state with certainty that he even discussed the litigation
with other trustees. OtiLy discussions 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 that it is reasonably foreseeable that an action on the matter
would confer an economic benefit 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.; therefore we cannot express en
opinion on wbether he vic'lated section 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 (abuse of office).
SUMMARY
A school trustee who engages in school board
deliberations lez.dingup 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
Executive Assistant Attorney General
p. 1735
Honorable Benjamin Ruresti, Jr. - Page 6 (JM-379)
ROBWT GRAY
Special AassistantAttorney General
RICK GILPIN
Chsirmsn, Opinion Comittee
Prepsred by Susan L. Garris'm
Assistant Attorney General
APPROvgD:
OPINION COMMITlZE
Rick Gilpin, Chairman
Colin Carl
Susan Garrison
Tony Gnillory
Jim Moellinger
JcMifer Riggs
Nancy Sutton
Sarah Uoelk
p. 1736