Public Officers and Employees; Conflict of Interest

Subject:

Requested By: Sarah T. Morrow, M.D., M.P.H., Secretary Department of Human Resources

Question: Is it allowable under the General Statutes for a member of an Area Mental Health Board to contract his services to a program which is under contract by the Area Authority?

Conclusion: Contract for remuneration for services as described would appear to violate G.S. 14-234.

This question appears to have arisen because of the specific method of operation of group homes under the auspices of area mental health authorities in this state. An area mental health authority is a local governmental entity responsible for the delivery of mental health, mental retardation, etc. services within its geographic situs, with an area mental health board serving as its governing body. See Article 2F, Chapter 122. In delivering some of these services, an area authority customarily contracts with a group home which is operated by a non-profit corporation. The situation under scrutiny involves remuneration of an attorney who is a member of the area mental health board, but has rendered services to the group home.

G.S. 14-234, in essence, proscribes any public official from making any contract for his own benefit under authority of his office. Lexington Insulation Company v. Davidson County, 243

N.C. 252 (1955). Thus, it is very clear that the attorney-board member could not contract with the board for his own services. 40 N.C.A.G. 566 (1969). However, the present situation is somewhat more complicated of resolution.

This Office has previously held to be forbidden contracts between governmental boards and a private business when a member of the board is also a partner of the business or an officer or stockholder in a corporation operating the business. See 44 N.C.A.G. 128 (1974); 42 N.C.A.G. 180 (1973); 42 N.C.A.G. 9 (1972), 40 N.C.A.G. 565 (1970); 40 N.C.A.G. 561 (1969); 41

N.C.A.G. 371 (1971). Conversely, where a board member is merely an employee of the other contracting party with no pecuniary benefit flowing directly to him as a person, the situation falls outside the ambit of G.S. 14-234. State v. Debnam, 196 N.C. 740 (1929); 44 N.C.A.G. 293 (1975); 40 N.C.A.G. 565 (1970). (It should be noted that one prior member of the Supreme Court of North Carolina has had occasion to describe even a case involving only an employee of a contracting party as ". . . not altogether seemly, nor to be commended. . . ." State v. Weddell, 153

N.C. 587, at page 590 (1910))

The situation presented does not squarely fall into any of the factual settings dealt with in prior opinions of this Office. However, G.S. 122-35.43 requires the Area Authority (through its board) to review and evaluate the area needs and programs and to develop the annual plan for utilization of facilities and resources; this plan must include the inventory of services to be provided and must set forth an indication of the expenditure of all funds by the Authority. G.S. 122-35.43. Consonant with these responsibilities, the Area Authority must submit a budget report indicating the receipts and expenditures for the total area mental health program. G.S. 122-35.44.

This particular situation, which has been characterized as a typical development if the question posed is answered in the affirmative, points up the probability of a conflict with the statute due to normal methods of operation. As described, what would be envisaged here is a transfer of specific funds into a proper line item in order to remunerate the attorney for services rendered, with the area board approving such transfer. Thus, in application, regardless of the absence of any improper motives on the part of any party, this type of transaction would indisputably present the appearance of evil and would appear to amount to a direct violation of G.S. 14-234.

Rufus L. Edmisten Attorney General

William F. O’Connell Special Deputy Attorney General