OPINION NUMBER - 097
ADOPTED - 1987/02/13
SUBJECT - Conflict of Interests/LB548
REQUESTED BY: David L. Kimble on behalf of the Utica Village Board
QUESTION: 1. Under LB548, does an officer whose only interest in a prospective project is that of an employee to a potential bidder have an interest sufficient to invoke the disclosure requirements?
2. Assuming that three members of the five member board are required to disclose and not participate, may those three board members vote anyway, if their not voting would prevent the governing body from securing a quorum?
3. Three of the five member board have filed disclosure statements under the requirements of LB548. If the answer to question #1 is that the employee board member does not need to disclose, may his already filed disclosure be withdrawn?
You indicate that the Village Board of Utica, Nebraska has pending before it a project to replace water wells and associated transmission lines, which is to be funded through a Community Development Block Grant. It appears that two members of the Board are potential bidders on the project, and that a third member is employed by a business which may bid on certain aspects of the project.
You further indicate that all three members have disclosed their involvement as per the requirements of LB548, a measure which amended the Accountability Act effective in July, 1986. You have requested this opinion in order to determine whether three of the five Utica Village Board members have an interest in the wells project that would disqualify them from voting and therefore prevent a quorum of the board's members from considering the matter.
LB548, approved by the Legislature in the spring of 1986, added sections 49-14,103.01 through 49-14,103.07 to the Nebraska Political Accountability and Disclosure Act (See Nebraska Revised Statutes 1986 Cumm. Supp.). The law prohibits a member of a village board which spends and administers its own funds and any elected village official from having an interest in a contract to which his or her governing body, or anyone for its benefit, is a party. Section 49-14,103.01 (4) provides that, "An officer who (a) has no business association as defined in section 49-1408 with the business involved in the contract or (b) will not receive a direct pecuniary fee or commission as a result of the contract shall not be deemed to have an interest within the meaning of this section". "Business association" is defined in Section 49-1408 R.R.S. (1986 Supp.) as follows:
Business with which the individual is associated or business association shall mean a business: (1) In which the individual is a partner, director, or officer; or (2) in which the individual or a member of the individual's immediate family is a stockholder of closed corporation stock worth one thousand dollars or more at fair market value or which represents more than a five per cent equity interest, or is a stockholder of publicly traded stock worth ten thousand dollars or more at fair market value or which represents more than ten per cent equity interest.
You indicate that one of the board's members is an employee of a company which may bid on the wells project. Under section 49-1408 of the Accountability Act such a person would not have a business association, and thus would not have an interest in the contract under LB548 so long as he does not receive a direct fee. Therefore, he would not be required to disclose an interest in the project, nor to abstain from consideration of the matter. You have also asked whether board members could vote on a matter even though they have an interest, where prohibiting their participation would prevent the governing body with all members present from securing a quorum on the issue. This question is answered by Section 49-14,103.01(3)(b). That section generally states an officer may have an interest in a contract and such interest does not render the contract voidable if the officer does not vote on the matter of granting the contract "except that if the number of members of the governing body declaring an interest in the contract would prevent the body with all members present from securing a quorum on the issue, then all members may vote on the matter". If three of the five board members had interests as defined in the Nebraska Political Accountability and Disclosure Act, then all three could vote on the matter of the awarding the contract.
A concern of all of the parties involved in this matter is the Uniform Requirements for Assistance to State and Local Governments which governs the grant for which the village has applied. Attachment 0, number 7, code of conduct of the uniform requirements states "no employee, officer, or agent of the grantee shall participate in selection, or in the award or administration of a contract supported by federal funds if a conflict of interest real or apparent, would be involved. Such a conflict of interest would arise when: a) the employee, office or agent; b) any member of his immediate family; c) their partner; or d) an organization which employs, or is about to employ any of the above, has an financial or other interest in the firm selected for the award". Does this then allow all board members to vote because the inability to vote of those declaring a conflict of interest would prevent the body with all members present from securing a quorum on the issue? It does not. Section 49-14,103.01(3)(b) which allows members of a governing body to vote if the number of members declaring an interest in a contract would prevent the body from securing a quorum on the issue exempts the application only of Section 49-14,103.01(2). Section 49-14,103.01(2) applies only to conflicts of interest or interest as defined by the Nebraska Political Accountability and Disclosure Act. It does not refer to conflicts of interest or interest under any federal law or regulation. We cannot say, therefore that a conflict of interest under a federal law or regulation which is not a conflict as defined by the Nebraska Political Accountability and Disclosure Act triggers the provisions of Section 49-14,103.01(3)(b).
Finally, you ask whether the board member who is an employee of a potential bidder may withdraw his disclosure of a "contractual interest" in the wells project. We do not believe you can delete from the record the prior disclosure. However, you may make a correction to the record that the prior disclosure was erroneously made and its legal effect may be disavowed.
Nothing in this opinion should be construed to suggest a manner of conduct which is permissible under the Uniform Requirements for Assistance to State and Local Governments nor any other federal act, law or regulations.