Telephone Membership Corporations; Double Office Holdings

Subject:

Requested By: Aaron A. Hathcock, Administrator Rural Electrification Authority

Questions: Whether serving as President of the Board of Directors of a telephone membership corporation and on the Board of the Rural Electrification Authority is prohibited dual office holding?

 

1.  
2. Whether a conflict of interest under N.C.G.S. § 14-234 would arise from the President of the Board of Directors of a telephone membership corporation serving on the Board of the Rural Electrification Authority?

    

Conclusions: No

 

1.  
2. No

    

The North Carolina Constitution in Article VI § 9 prohibits concurrent office holding of any combination of appointive offices, places of trust or profit and elective office except as the legislature should provide. N.C.G.S. § 128-1.1(a) allows a person who holds an appointive office, place of trust or profit in State or local government to concurrently hold one other appointive office, place of trust or profit or elective office in either State or local government. Elective office is defined in N.C.G.S. § 128-1.1(d) as

"any office filled by election by the people when the election is conducted by a county or municipal board of elections under the supervision of the State Board of Elections."

The Rural Electrification Authority (hereinafter REA) is an agency of the State whose members are appointed by the Governor. N.C.G.S. § 117-1. A telephone membership corporation is a public agency of the State with the same rights (within the limits for which it is formed) as any other political subdivision of the State. N.C.G.S. § 117-33. The board members of a telephone membership corporation are elected by the members of the corporation entitled to vote. Members of the corporation are those persons who are supplied telephone service by the corporation and have complied with the terms and conditions regarding membership set forth in the corporation’s bylaws. The board of directors then elect a president and secretary from their own number.

N.C.G.S. § 117-30 incorporating by reference N.C.G.S. §§ 117-13 and 16.

Membership on the REA is clearly an appointive office. 25 NCAG 275 (1939). Membership on the board of directors of a telephone membership corporation is not appointive office. It would be more in the category of a position of public trust. This office is of the opinion that N.C.G.S. § 128-1.1(a) permits membership on both the board of the REA and a telephone membership corporation board of directors. See also 33 NCAG 106 (1956).

N.C.G.S. § 14-234 prohibits a person appointed or elected to discharge any trust in which the State, county, city or town is in anyway interested from undertaking or contracting for his own benefit in that authority. Basically this makes it the public policy of the State to prohibit a public official from taking advantage of his position in letting contracts to himself or to firms or corporations in which an official has an interest. The REA is empowered to investigate applications for the creation of telephone membership corporations; and to grant authority to form such a corporation; to act as agent for a corporation in securing loans and grants; to secure whatever assistance is available from the federal government; to review service rules and regulations and do whatever else may be necessary in securing telephone service in rural communities. N.C.G.S. § 117-31.

In Insulation Co. v. Davidson County, 243 N.C. 252, 254, 90 S.E.2d 496, 498 (1965), the court found that the prohibition of N.C.G.S. § 14-234 extended to the officer of a corporation who made contract with the board of which he was a member. The court quotes with approval State v. Williams, 153 N.C. 595, 68 S.E. 900 (1910) that

"he who is entrusted with the business of others cannot be allowed to make such business an object of pecuniary profit to himself." Supra.

The REA approves loan and grant applications of telephone membership corporations for federal funds, but such action does not result in profit to the president, directors and other members of the telephone membership corporations. This office is of the opinion that N.C.G.S. § 14-234 does not disqualify a president of a telephone membership corporation organized pursuant to Chapter 117 from also serving as a member of the REA by reason of the statutory duties of the REA as they relate to telephone membership corporations. We have considered the differences in Chapter 117 between telephone membership corporations and electric membership corporations, but we do not believe the distinction is material as it relates to the application of N.C.G.S. § 14-234.

Rufus L. Edmisten Attorney General

Evelyn M. Coman Assistant Attorney General