                                The Attorney            General of Texas
JIM MAl-fOX
                                                     June18, 1984
Attorney General


SupremeCourtBuilding          Honorable Michael J. Siamang                  Opinion No. ~~-171
P. 0. Sax 12548
AUstln. TX. 78711.2S4S
                              Lee County Attorney
                              P. 0. Box 236                                 Re: Whether a member of a city
512/4752501                                                                       ._
Telex 910/874-1287            Giddlngs. Texas    78942                      council   may be employed by a
Telecopier 512/47502SS                                                      corporation  doing business with
                                                                            the city
714 Jackson, Suits 700
Dallas. TX. 75202.4508        Dear Mr. Simang:
214”42-8944
                                    You ask whether a member of the Giddings       city council    may
                              continue to serve on the council while he is employed by a corporation
4824 Albma Ave.. Suite lS0
El Paso. TX. 799052793
                              that does business with the city.  We conclude that there is no legal
915l533.34B4                  impediment to his serving, but that the contract entered into between
                              the city and the general contractor    would be void as contravening
                              public policy.
   11 Texas, Suite 7W
  ~ston. TX. 77002.3111
                                     You inform us that a member of the Giddings city council is also
713r223aSea
                              the vice-president     of a local corporation        which sells,     repairs,    and
                              maintains     air conditioning     units.     lie receives    a salary    from the
5% Broadway, Suite 312        corporation     and participates     in its profit      sharing program, but he
Lubbock. TX. 79401~3479       owns no stock in the corporation.           The corporation    was employed as a
8081747-5238                  subcontractor     by a corporation     which was itself     employed by the city
                              as the general contractor       in the construction     of the new Giddlngs city
4349 N. Tenth. Suite B        jail..   The corporation’s      employment and the awarding of the general
McAllen, TX. 7SSOl~lSSS       contract    to the general contractor       were based upon competitive        bids.
5121882-4547                  You state that the council member has received               no direct    financial
                              benefit    from this   contract,     although the corporation        does perform
MO Main Plaza. Suite 400      maintenance work on the units installed           In accordance with warranties
San Antonlo. TX. 782052797    given with the units.         The council member himself has performed no
512/2254191                   work on any of the units            involved,    and there is no maintenance
                              contract for the units between the city and the corporation.                Giddings
                              became a home-rule city effective         January 1, 1982. The council member
An Equal OpportunityI
Affirmative Actlon Employer   who is the subject of this request assumed office            In April, 1982. The
                              city council awarded the contract in July, 1982.

                                    Article     988, V.T.C.S.,   which prohibited,   inter alia, a member of
                              a city council       from being “directly    or indirectly   interested      in any
                              work, business or contract . . .” the consideration          for which is paid
                              by city     funds, was repealed       and replaced    by a new article         988b,
                              V.T.C.S.,     effective    January 1, 1984.      The now-repealed    article     988
                              reached only general law cities.          Woolridge v. Folsom, 564 S.W.2d 471
                              (Tea. Civ. App. - Dallas 1978, no writ).              The new statute      reaches
                              other political       subdivisions  including home rule cities,      in addition



                                                               p. 750
Honorable Michael J. Sfsnaang - Page 2         (JM-171)




to general law cities.   Because the       contract at Issue was entered into
prior to the effective   date of the        new statute,  we need not address
whether, under the new statute,     the    contract would involve the council
member in a conflict   of interest.        Rather, we must determine whether
the contract violates  public policy.        We conclude that it does.

      We must first      determine whether the council member would benefit
If the city were to contract             directly   with the firm of which the
council   member is vice-president.            If he would so benefit,      we must
then determine whether the fact that the firm was a sub-contractor
rather than a general contractor,          would effectively   remove the council
member from the reach of the conflict-of-interest                prohibition.   We
first   conclude     that,    in this     instance,    the council   member would
benefit   sufficiently     were the city to contract directly       with the firm
of which he is vice-president          so ss to bring him within the ambit of
the conflict-of-interest        prohibition.

      The factual     situation    in the instant    request   is very much
analogous     to the one presented       in Attorney General OpLnion R-916
(1976).   That opinion addressed whether a school district       may contract
with a paper company which employed a member of the district’s          board
of tmstees.       The trustee     worked for the company in a managerial
capacity but owned no stock.         Re entered into an agreement with his
employer which provided        that he would not receive     any coaasission,
bonus, or other remuneration based upon sales made by the company to
the district,    although he was paid a year-end bonus on the basis of
other company sales.      In concluding that entering into such a contract
was Impermissible.    this office    declared:

                 It is well        established    that,   even in the
            absence of a statute,           the public policy   of the
            state     prohibits      transactions    which involve      a
            conflict     of    interest      on the part     of  public
            officials    . . . .

Attorney   General Opinion H-916 (1976).

      Attorney General Opinion         R-916    then   quotes   language      from   a
relevant Texas court opinion:

               If s public official    directly    or indirectly  has
           a pecuniary interest     in a contract,      no matter how
           honest he may be, and although he may not be
           influenced    by the interest,       such a contract    so
           made is violative    of the spirit      and letter of our
           law, and is against        public    policy.    Meyers v.
           Walker,    276 S.W. 305, 307 (Tex. Civ. App. -
           Eastland 1925, no writ).

     If an employee of a corporation  can be held            to benefit      when the
company for  which he is      employed contracts              with   a      political


                                            p. 751
Honorable Michael J. Siamang - Page 3         (JM-171)




subdivision,    the governing body of which he is a member, then a
fortiori   an officer   of such a corporation    may be said to benefit.     It
caonot be disputed that, even if the council member received no direct
compensation from the city’s       cootrsct with the general contractor,     he
would certaiolv    benefit   at least iodirectlv   when the firm of which he
is vice-president     prospers.    As the court-declared    in Delta Electric
Construction    Co. v. City of San Antonio, 437 S.W.2d 602. 609 (Ter.
Civ. App. - San Antonio 1969, writ ref’d 0.r.e.).

            [i]t   is the existence   of such interest   which is
            decisive   and not the actual effect    or influence,
            if any[.] of the interest    . . . .

See Beaar County v. Wentworth, 378 S.W.2d 126 (Tex. Civ. App. - San
Antonio 1964, writ ref’d       n.r.e.);    Kolppa v. Stewart Iron Works, 66
S.U. 322 (Tex. Civ. ADD. 1902. no writ):            Attorney General Opinions
MW-155, MI&124 (1980);’ MW-34 .(1979);          B-734, R-849, H-638 (1975).
Relying on Attorney General Opinion E-916 and the authorities               cited
above, we conclude        that the conflict      of interest   prohibition      is
triggered     when a member of the governing            body of a political
subdivision,     in this instance       a member of a city, council,       is an
officer    or employee of a firm seeking to do business              with that
political    subdivision.

        It has been suggested         that.    since   the couocll   member Is an
officer    of a sub-contractor,      as opposed to the generalcontractor,        his
vote on such a contract         affects     only the general cootractor      and oot
the sub-contractor       and that this effectively           removes him from any
conflict-of-interest      prohibition.        In Attorney General Opinion O-2306
(1940),     this office    concluded that a trustee          of a school district
could receive compensation from a contractor             performing a construction
contract      for the district      g    there was no agreement        between the
contractor      and the trustee at the time when the district         entered into
the contract with the contractor.            This office   therein declared:

                Under the facts   set out in your letter,   we
            assume that   the contractor   is an independent
            contrsctor.   This being tme,    the will   of the
            school board is represented only as to the result
            of   the work and the contractor      is  left  to
            determine the manner and means Involved     in the
            performance of said contract.

                   If,
                     at the time the contract    in question was
            let.   there was oo egreement. express or implied,
            between the contractor   and the school’trustee    with
            reference   to the employment in question,     It would
            appear that the trustee    in question has no such
            pecuniary interest   in the contract as to make it
            void under the public policy doctrine.        (Emphasis
            added).



                                           p. 752
Honorable Michael J. Simmang - Page 4        (~~-171)




Conversely,     we conclude that if there were an agreement at the time
the contrsct      between the general contractor    and the city wss let,
whether express or implied,       between the general cootractor        and the
firm for which the council member served as vice-president,          as to the
sale,   repair,    or maintenance of air conditioning     units,   the council
member would have a pecuniary interest      in the contract      so as to make
it void under the rule set out in City of Edinburg v. Ellis.          59 S.W.2d
99 (Tex. Comm'n App. 1933.. holding approved).          See Attorney General
Opinions MW-155 (1980); MW-34 (1979).        If, on theother       hand, there
were no agreement between the general contractor           and the firm for
which the couocll       member served as vice-president     at the time the
contract   between the general contractor       and the city was let,       the
council member would not have a pecuniary interest          in the contract.
This is a factual determination which we are not empowered to make.

      You also ask whether the member of the council may continue to
serve if there Is such s conflict.        There is no provision   in either
constitutional.      statutory, or case law which would provide      for an
automatic vacancy in the council position       in the situation  which you
describe.     If a vacancy is to be crested,     it can only occur through
resignation     or removal from office as provided by law.

                                 SUMMARY

              A city council, may not contract with a general
           contrsctor   which has previously   contracted with a
           sub-contractor    employing a member of the city
           council as an officer,     if the firm employing the
           member acts as a subcontractor      on the city job.
           The affected   member of the city council does not
           automatically   vacate his office   in the event that
           the city council so contracts.




                                              JIM     HATTOX
                                              Attorney General of Texas

TOMGREEN
First Assistant   Attorney   General

DAVID R. RICRARDS
Executive Assistant Attorney     General

Prepared by Jim Moellinger
Assistant Attorney General




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Ronorable   Michael J. Simmeng - Page 5 (JM-171)




APPROVED:
OPINIONCOMMITTEE

Rick Gilpin, Chairman
Jon Bible
Colln Carl
Sussn Garrison
Jim Moellinger
Nancy Sutton




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