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DAN MORALES
 AlToRN*
       OENLRAL
                                    April 22,199l




 Honorable Bruce Gibson                        Opinion No. DM-18
 Chairman
 Government Organization                       Re:    Whether an individual who is an
 Texas House of Representatives                audiologist  member of the Board of
 P. 0. Box 2910                                Examiners in the Fitting and Dispensing of
 Austin, Texas 78768-2910                      Hearing Aids may be employed by a retail
                                               hearing aid company (RQ-2180)



  Dear Representative   Gibson:

          You have requested our opinion as to whether an individual who serves as
  the audiologist member of the Board of Examiners in the Fitting and Dispensing of
  Hearing Aids may be employed by a retail hearing aid company. Article 4566-1.02,
  V.T.C.S., creates the board and provides that its nine members must have the
  following qualifications:

                (1) Five of such members shall possess the necessary
           qualifications to fit and dispense hearing aids in this state and
           have been residents of this state actually engaged in fitting and
           dispensing hearing aids for at least five years immediately
           preceding their appointment.     No more than two of such five
           members shall be employed by, franchised by, or associated
           exclusively with the same hearing aid manufacturer;

                (2) Two Board members must be members of the general
           public. A person is eligible for appointment as a public member
           if the person and the person’s spouse are not licensed by an
           occupational regulatory agency in the field of health care; are
           not employed by and do not participate in the management of a
           business entity or other organization that provides health-care
           services or that sells, manufactures, or distributes health-care




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Honorable    Bruce Gibson -Page 2      (DM-18 )




            supplies or equipment; and do not own, control, or have, directly
            or indirectly, an interest in a business entity or other
            organization that provides health-care services or that sells,
            manufactures, or distributes health-care supplies or equipment;

                 (3) One of such members shall be a citizen of the United
            States and a resident of this state for a period of at least two
            years immediately preceding his appointment, shall be an active
            practicing physician or surgeon duly licensed to practice in this
            state by the Texas State Board of Medical Examiners, and
            specialize in the practice of otolaryngology. Such member shall
            not have a financial interest in a hearing aid manufacturing
            company or a wholesale or retail hearing aid company; and

                 (4) One of such members shall be a citizen of the United
            States and a resident of this state for a period of at least two
            years immediately preceding his appointment and shall be an
            active practicing audiologist.   Such member shall not have a
            financial interest in a hearing aid manufacturing company or a
            wholesale or retail hearing aid company.



        Subsection (a)(4) prohibits the audiologist member from having “a financial
interest in a hearing aid manufacturing company or a wholesale or retail hearing aid
company.” Under the facts you present, the audiologist member is an employee of
such a company. You ask whether an employee. has a “financial interest” in his
company for purposes of subsection (a)(4).

        Article 4566-1.02 does not define “financial interest.”           Black’s Law
Dictionary, however, defines “financial interest” as “an interest equated with money
or its equivalent.” BLACK’SLAW DICTIONARY 568 (5th ed. 1979). Article 6252:9b,
V.T.C.S., defines “substantial interest” in a business entity to include any individual
who is an employee of the business entity. Another statute, section 171.002 of the
Local Government Code, declares that a person has a substantial interest in a
business entity if, inter ufia, “funds received by the person from the business entity
exceed 10 percent of the person’s gross income.” For most “employees,” their




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Honorable     Bruce Gibson - Page 3      ( DM-18 )




income from that employment         would ordinarily   exceed ten percent of their gross
income for a particular year.

         Furthermore, this office has long held that mere employment is sufficient to
trigger the common law prohibition against conflicts of interest on the part of public
officials. Mevers v. Walker, 276 S.W. 305 (Tex. Civ. App.--Eastland 1925, no writ),
stands for the proposition that

            [i]f a 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.

276 S.W. at 307.

         In Attorney General Opinion H-916 (1976), this office said that a school
district official should not contract with a company that employs a member of the
district’s board of trustees in a managerial capacity, even though the trustee derives
no direct financial benefit from the contract. The opinion relied on a series of court
decisions from other jurisdictions which had held that mere employment is sufficient
to invoke the common law prohibition against conflict of interest. See, e.g., Edward
E. Gillen Co. . C tv of Milwaukee 183 N.W. 679,681 (Wis. 1921); Miller v. Citv of
Martinez. 82 i2dr519. 523 (Cal. D;st. Ct. App. 1938); Stockton Plumbing & St&y
Co. v. Wheeler, 229 P. 1020, 1024 (Cal. Dist. Ct. App. 1924); Peoule ex rel.Pearsall v.
m,        145 N.E. 344,345-46 (Ill. 1924).

       Likewise, in Attorney General Opinion JM-171 (1984), this office, “[rlelying
on Attorney General Opinion H-916,” concluded

            that the conflict of interest prohibition is triggered when a
            member of the governing body of a political subdivision . . . is an
            officer or employee of a firm seeking to do business with that
            political subdivision. (Emphasis added.)

Finally, in Attorney General Opinion JM-884 (1988), this office said that the
common law prohibition against conflict of interest. prevents the Texas Commission




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Honorable   Bruce Gibson - Page 4 (DM- 18 1




for the Deaf from contracting with a local council for the deaf if a commission
member serves the local council as a paid employee or in a decision-making capacity
that authorizes him to contract for the council.

         It has been suggested that the term “financial interest” was not meant to
include employment, because subsection (a)(2) provides that the lay members of the
board may neither be employed by nor “own, control, or have, directly or indirectly,
an interest in a business entity or other organization that provides health-care
services or that sells, manufactures, or distributes health-care supplies or equip-
ment.” According to this argument, the statute recognizes a distinction between
employment and having an interest in a company, and the failure to include a
prohibition against employment in subsection (a)(4) indicates that the legislature
did not intend that “financial interest” be construed as encompassing employment.

        We disagree with this argument. A more reasonable approach is to view the
prohibitions listed in subsection (a)(2) as overlapping rather than discrete. Clearly,
some of the specific prohibitions in subsection (a)(2) are also included in the more
general ones. We do not believe it can be reasonably argued that employment in a
company would not constitute at least an indirect interest in it, but subsection (a)(2)
sets out separately its prohibitions against these connections.

         Moreover, subsection (a)(2) was drafted at a different time than subsections
(a)(3) and (a)(4). Before revision, the statute provided that neither the lay member,
the physician, nor the audiologist could have a “financial interest” in a wholesale
hearing aid company (the audiologist and physician members could not have a
financial interest in a retail hearing aid company either). A 1981 amendment of the
statute changed subsection (a)(2) by adding another lay member, broadening the
prohibition against industry affiliation by extending it to all health-care related
businesses, and specifying various types of forbidden connections. Acts 1981, 67th
Leg., ch. 774, at 2903, 9 1, eff. Sept. 1, 1981. Subsections (a)(3) and (a)(4) remained
the same. The amendment was clearly intended to strengthen the provisions against
conflict of interest (a specific conflict of interest provision was also added as section
(g)); it would be ironic if the addition of language to accomplish this purpose were
used as evidence for allowing additional industry affiliation under subsection (a)(4).

      Furthermore,  construction of “financial interest” to include employment
seems necessary to preserve the legislature’s intent in carefully structuring the




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Honorable    Bruce Gibson - Page 5    ( DM-18 1




composition of the board. The statute lays out a specific structure for the board,
balancing the need for expertise in the field against the need for independence from
the industry as a whole and impartiality toward individual entities within it. Thus,
subsection (a)( 1), which presupposes that members within it will be affiliated with
the hearing aid industry, provides that no more than two of such members may be
employed or associated exclusively with the same hearing aid manufacturer.          It
could destroy this scheme if members within other sections were also permitted to
have such industry ties. In such a scenario, the audiologist member could be
affiliated with the same hearing aid manufacturer as two of the subsection (a)(l)
members, defeating the purpose of the subsection (a)(l) provision.        This cannot
have been the intent of the legislature.      Rather, the legislature seems to have
intended that only subsection (a)( 1) members, the fitters and dispensers of hearing
aids, who inevitably have ties to the manufacturers and retailers of hearing aids, be
industry-affiliated.  An audiologist meeting the requirements of subsection (a)(l),
and employed by a hearing aid company, may be a member of the board, but only in
a subsection (a)( 1) position.

       On the basis of the prior decisions of this office ‘which construe the term
“pecuniary interest” for purposes of common law conflict of interest, as well as what
we deem to be the intent of the legislature in enacting article 4566-1.02, we
conclude that “financial interest” as used in that statute encompasses employment.
As a result, it is our opinion that an individual who serves as the audiologist member
of the Board of Examiners in the Fitting and Dispensing of Hearing Aids may not be
employed by a hearing aid manufacturing company or a wholesale or retail hearing
aid company.

                                   SUMMARY



                An individual who serves .as the audiologist member of the
            Board of Examiners in the Fitting and Dispensing of Hearing




                                            p.    85
Honorable    Bruce Gibson - Page 6     ( DM-18 )




            Aids may not be employed by a hearing aid manufacturing
            company or a wholesale or retail hearing aid company.




                                                   DAN      MORALES
                                                   Attorney General of Texas

WILLPRYOR
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Rick Gilpin & Faith Steinberg
Assistant Attorneys General




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