    OFFICE   OF   THE   /iTTORNEY   GENERAL   * ST.4TE   OF   TEX;zS

    JOHN      C~RNYN




                                                     November           26,2002



The Honorable David Counts                                             Opinion No. JC-0585
Chair, Committee on Natural Resources
Texas House of Representatives                                         Re: Whether, for the purposes of section 49.052
P.O. Box 2910                                                          of the Water Code, an entry-level employee
Austin, Texas 78768-29 10                                              working for the independent        contractor that
                                                                       operates a municipal utility district’s water and
                                                                       wastewater      system, is a “person providing
                                                                       professional     services to the district,” thereby
                                                                       disqualifying the employee’s relative from serving
                                                                       on the district’s board (RQ-0566-JC)

Dear Representative          Counts:

          A person who “is related within the third degree of affinity or consanguinity to . . . the
manager, engineer, attorney, or other person providing professional services to the district” is
disqualified from serving on the board of a water district that is subject to Water Code section
49.052. TEX. WATER CODE ANN. 6 49.052(a)( 1) (V emon 2000) (emphasis added). You ask whether
a district director will be disqualified if the independent contractor that operates and maintains the
district’s water and wastewater system employs the director’s son.’ In our opinion, section 49.052
uses the term “person” to refer only to an individual. Consequently, assuming that the independent
contractor is a corporate entity and not, in effect, the son’s alter ego, the son’s employment would
not disqualify the director. Whether the son provides professional services to the independent
contractor is irrelevant. See TEX. WATER CODE ANN. 5 49.052(a)( 1) (Vernon 2000).

         You aver that the son of a member of an unidentified municipal utility district’s bead seeks
entry-level employment with the company that, under contract with the district, operates and
maintains the district’s water and wastewater system (the “operating company”). See Request Letter,
supra note 1, at 1. If he were hired, the son would not own any “part, portion, or interest” in the
company, but he might be assigned to the district, although you do not describe what services the
son might perform. Id. You believe that the son’s employment is not “the type of professional
services” that section 49.052(a)( 1) contemplates, and that the director would remain qualified to
serve on the board if the son accepts the employment. Id. at l-2.



          ‘Letter from Honorable David Counts, Chair, Committee on Natural Resources, Texas House of
Representatives, to Honorable John Comyn, Texas Attorney General (June 20,2002) (on file with Opinion Committee)
[hereinafter Request Letter].
The Honorable David Counts      - Page 2       (JC-0585)




        The district, you state, is a conservation and reclamation district created under article XVI,
section 59 of the Texas Constitution and operates under chapters 49 and 54 of the Texas Water
Code. See id. at 1. You also indicate that the district is subject to section 49.052 of the Water Code.
See id. We assume that the operating company is a corporate entity of some sort. We base our
conclusion on this assumption and on the information you have provided us.

         Chapter 49 of the Water Code applies to a district created under article XVI, section 59 of
the Texas Constitution, although it does not apply to a “conservation and reclamation district
governed by [clhapter 36” of the Water Code “unless a special law” that applies to the district “states
that this chapter applies to that district.” TEX. WATER CODEANN. 5 49.001(a)(l) (Vernon 2000)
(defining “district”). Section 49.052(a) provides that a district board member is disqualified in
certain circumstances:

                        A person is disqualified from serving as a member of a board
                of a district that includes less than all the territory in at least one
                county and which, if located within the corporate area of a city or
                cities, includes within its boundaries less than 75[%] of the
                incorporated area of the city or cities, if that person:

                       (1) is related within the third degree of affinity or
               consanguinity to a developer of property in the district, any other
               member of the board, or the manager, engineer, attorney, or other
               person providing professional services to the district.

Id. 0 49.052(a) (emphasis added). When a board determines that a disqualifying relationship exists,
the board must, within sixty days, replace the disqualified board member with a qualified person.
Id. $ 49.052(b). A disqualified board member who “willfully occupies” the office “is guilty of a
misdemeanor and, on conviction,” will be fined $100 to $1,000. Id. 8 49.052(c); see State v. Hall,
829 S.W.2d 184, 187 n.6 (Tex. Crim. App. 1992) (en bane) (stating that conduct is “‘wi1fu1’ if it is
intentional, as distinguished from negligent, and if it is done in bad faith or without reasonable
groundfor believing it to be lawful”).

          We do not address chapter 54 of the Water Code, which you inform us also applies to the
district.   Chapter 54 does not provide for disqualification    of a board member because of a
relationship with a person who provides “professional services” to a district. See TEX.WATER CODE
ANN. 8 54.102 (Vernon Supp. 2002) (“Qualifications for Directors”); see also id. 0 54.011 (Vernon
1972) (describing municipal utility districts to which chapter 54 applies). See generally id. ch. 54
(Vernon 1972 & Supp. 2002).

        Your question requires us to determine the meaning of the term “person” in section
49.052(a)(l).   A son is related to his parent within the third degree by consanguinity.    See TEX.
GOV’T CODEANN. 8 573.023(c)( 1) (V emon 1994). If, through his employment with the operating
company, the son is a “person” who provides “professional services” to the district, his parent is no
longer qualified to serve on the district’s board and must be replaced. TEX. WATER CODE Am.
The Honorable    David Counts    - Page 3        (JC-0585)




5 49.052(b) (v emon 2000). Neither section 49.052 nor chapter 49 of the Water Code defines the
term “person.” See id. 8 49.001 (defining’ terms for purposes of chapter 49).

         We conclude that the term “person” in section 49.052(a)(l) of the Water Code refers only
to a natural person. The section uses the term to refer to two different entities: first, to refer to “[a]
person [who] is disqualified from serving as a member of a board”; and second, to refer to a “person
providing professional services to the district.” Id. 8 49.052(a)(l) (emphasis added). The first
reference certainly indicates an individual, because a corporate entity could not be a board member,
nor could a corporate entity be related to a property developer or fellow board member. See id.; see
also id. $3 49.055 (requiring board member to “make the sworn statement prescribed by the
constitution for public office”); 49.102 (providing for director election); Tex. Att’y Gen. LO-88-44,
at 3 (“By its very nature, a corporation does not have relatives.“). To construe the term to refer to
a corporate entity in its second application in section 49.052 is possible, but makes little sense.

         Moreover, in the nepotism context, this office has construed an analogous provision to apply
to natural persons only. Section 573.041 of the Government Code, which prohibits a public official
from appointing, confirming the appointment of, or voting to appoint or confirm a closely related
“individual” to certain positions, does not apply to a governmental body’s engagement of a corporate
entity. TEX. GOV’T CODE ANN. 6 573.041 (Vernon 1994); see Tex. Att’y Gen. Op. No. DM-76
(1992) at 2-3 (stating that nepotism law applies only to hiring of natural person, whether as employee
or as independent contractor); Tex. Att’y Gen. LO-97-028, at 2 (same); LO-88-44, at 3 (same). As
this office has pointed out in connection with section 573.041, a governmental body that contracts
with a corporation does not vote to appoint or employ any particular individual to the corporation;
rather, “it is the corporation that is responsible” to appoint, supervise, and pay its employees. Tex.
Att’y Gen. LO-95-080, at 3.

        In light of the fact that Government Code section 573.041 and Water Code section 49.052
both appear to be aimed at preventing nepotism, as well as the fact that section 49.052 uses the terrn
“person” in other phrases clearly to refer to an individual, we construe section 49.052 consistently
with section 573.041. We do not distinguish between the two statutes on the basis of their express
terminology-section      573.041 refers specifically to appointing or employing “an individual,” see
TEX. GOV’T CODEANN. 8 573.041 (Vernon 1994), while section 49.052 refers to a “person providing
. . . services to the district,” see TEX. WATER CODE ANN. 8 49.052(a)(l)              (Vernon 2000).
Furthermore, we believe that the Code Construction Act’s general definition of the term “person”
does not apply in the context of Water Code section 49.052. The Code Construction Act, chapter
3 11 of the Government Code, see TEX. GOV’T CODEANN. 0 311 .OOl (Vernon 1998), defines the
term “person” to include a corporate entity:

               The following definitions apply unless the statute or context in which the
        word or phrase is used requires a different definition:
The Honorable    David Counts    - Page 4        (JC-0585)




                         (2) “Person” includes corporation, organization, government
                or governmental subdivision or agency, business trust, estate, trust,
                partnership, association, and any other legal entity.

Id. 0 3 11.005; see also id. 9 3 11.002 (delineating   laws to which chapter 3 11 applies).

         We consequently conclude that section 49.052(a)( 1) of the Water Code does not disqualify
a district director if the director’s son is employed in an entry-level position with the district’s
operating company. See Request Letter, supra note 1, at 1. We assume, as we have done in the
nepotism context, that the corporate entity here does not serve “merely” as the son’s “alter ego.”
Tex. Att’y Gen. LO-88-44, at 3.

         We do not answer two other questions you ask. You ask first, if the son’s employment
disqualifies the district director under section 49.052(a)(l), the result would differ “if the son were
employed by the Operating Company but not assigned to the district.” Request Letter, supra note
1, at 2. Because we have concluded that the son’s employment does not disqualify the district
director under section 49.052(a)(l), this question’s premise is moot. You ask second whether the
director may “continue to serve if the son is promoted within the Operating Company but maintains
no ownership interest, or is not an office holder, in the Operating Company.” Id. Because you
indicate that the son would not own all or part of or hold office in the company, we assume that a
promotion would not make the company the son’s alter ego. Consequently, we do not believe the
son’s promotion would affect the director’s qualifications for membership on the district board.

        In any of the situations about which you ask, the director must comply with chapter 17 1 of
the Local Government Code, which regulates a local government officer’s conflicts of interests.
See TEX. WATERCODEANN. 8 49.058 (Vernon 2000); TEX. Lot. GOV’T CODEANN. ch. 171 (Vernon
1999). Under section 17 1.004 of the Local Government Code, a local government officer who “has
a substantial interest in a business entity” involved in a matter before the governmental body must
disclose that interest and abstain from participating further in the matter if action “on the matter will
have a special economic effect on the business entity that is distinguishable from the effect on the
public.” TEX. LOC. GOV’T CODEANN. 8 171.004(a) (Vernon 1999). Under section 171.002 of the
same code, an officer has a “substantial interest in a business entity” if a person related to the officer
“in the first degree by consanguinity,” such as the officer’s son, see TEX. GOV’T CODE ANN. 8
573.023(c)( 1) (V emon 1994), has a substantial interest, as that term is defined by section 17 1.002(a).
TEX. Lot. GOV’T CODEANN. 8 17 1.002(a), (c) (V emon 1999). An officer’s failure to comply with
chapter 17 1 may constitute a criminal offense. See id. 8 17 l.O03(a)( 1).
The Honorable David Counts     - Page 5        (JC-0585)




                                        SUMMARY

                       The phrase “person providing professional services” in section
               49.052(a)(l) of the Water Code refers only to an individual, not a
               corporate entity. Accordingly, a member of a water district board
               subject to that section is not disqualified from serving on the board if
               the director’s son is employed by the company that contracts to
               operate and maintain the district’s water and wastewater system.
               TEX. WATERCODEANN. 8 49.052(a)( 1) (Vernon 2000). The director
               must comply with chapter 171 of the Local Government Code,
               which regulates a local public official’s conflicts of interest, however.
               See TEX. Lot. GOV’T CODEANN. ch. 171 (Vernon 1999).

                                               Ve    truly yours,



                                             4akr
                                               JOtiN    CORNYN
                                               Attorney General of Texas



HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General, Opinion Committee
