March 26, 1997
Vedia Jones-Richardson, Esquire Suite 1200 University Tower 3100 Tower Boulevard Durham, North Carolina 27707
RE: Advisory Opinion; Durham County Hospital Corporation; Conflict of Interest; N.C.G.S. § 14-234; Proposed Appointment of an Officer and Director of a Contracting Corporation to the Board of Trustees of the Hospital
Dear Ms. Jones-Richardson:
The Durham County Hospital Corporation (hereinafter "Hospital") is a public hospital authorized to provide health care services pursuant to Chapter 131E of the General Statutes of North Carolina. The Hospital is considering the nomination of an individual to its Board of Trustees who has a business relationship with one of its contractors. As counsel to the Hospital, you request our opinion whether N.C.G.S. § 14-234 prohibits the appointment of this individual (hereinafter "nominee") to the Board of Trustees. For reasons which follow, it is our opinion that so long as the nominee remains an officer and director of the professional corporation, his appointment would be in violation of N.C.G.S. § 14-234.
The nominee is a shareholder, officer and director of a professional corporation with which the Hospital has a contract. During the past year, that contract produced in excess of $10,000 in revenue to the professional corporation. However, the nominee holds less than ten percent of the stock of the professional corporation, performs no services under the contract, and receives no compensation from its proceeds. Although the nominee serves as an officer and director of the professional corporation, these are titles held by all shareholders of the professional corporation. The nominee currently serves on the executive committee of the professional corporation, but has indicated that he would consider resigning that position if nominated to the Hospital. The nominee will not resign his position as an officer and director of the professional corporation.
N.C.G.S. § 14-234 provides, in pertinent parts:
(a) If any person appointed . . . a . . . director to discharge any trust wherein . . . any county . . . may be in any manner interested shall . . . make any contract for his own benefit under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof . . . he shall be guilty of a misdemeanor.
(c1) The fact that a person owns ten percent (10%) or less of the stock of a corporation . . . or is an employee of said corporation . . . does not make the person "in any manner interested" or "concerned or interested in making such contract, or in the profits thereof," . . . as such phrase is used in subsection (a) of this section.
Since the nominee owns less than ten percent of the shares of the professional corporation, does Subsection (c1) apply? Put another way, is a director or officer of a corporation who owns ten percent or less of the stock of the corporation exempt from the prohibitions of Subsection (a). We think not.
Subsection (c1) was added in 1983. See, Chapter 544 of the 1983 Session Laws. A review of the legislative history of Subsection (c1) is not instructive, except to identify that Representative Harry Payne, now Commissioner of the North Carolina Department of Labor, was its chief sponsor. Although our courts have recognized time and time again that a statute must be construed to carry out the legislative intent and that legislative intent may not be established by the testimony of members of the legislature which adopted the statute, Styers v. Phillips, 277
N.C. 460 (1971), we find legislator recollections instructive, particularly if the sponsor has a specific recollection that is also supported by the words used in the statute. Mr. Payne reflected that when he sponsored the bill in 1983, he recalls distinguishing between an employee of a corporation and an officer or director of a corporation. The distinction Mr. Payne recalls is employees do not make policy; and, that policy is made by officers and directors of the corporation. Interestingly, Mr. Payne also recalls that when the 1983 bill was introduced, Subsection (c) of N.C.G.S. § 14-234 was already law and acknowledged that the legislature made a distinction between employee and director or board member.
We conclude, therefore, based upon the language of Subsection (c1), its legislative history and the evil sought to be remedied, that the legislature did not intend to exempt a policy maker -officer or director — of a corporation doing business with a public board or commission from the prohibitions of Subsection (a), regardless of whether that officer or director owned ten percent or less of the shares of stock in the corporation.
Andrew A. Vanore, Jr. Chief Deputy Attorney General