OPINION NUMBER - 124

ADOPTED - 1990/03/03

SUBJECT - Conflicts of Interest

REQUESTED BY: Kerry P. Eagan, Deputy Lancaster County Attorney

QUESTION: Does a County Commissioner have a conflict of interest if he or she is on the Board of Directors of a non-profit corporation which exists for the purpose of raising funds for county care facilities and their residents?

CONCLUSION

See analysis.

FACTS

Lancaster County Commissioner Larry Hudkins is member of the Board of Directors of the Lancaster Foundation. The primary activity of the Lancaster Foundation is to raise funds for various projects which inure to the benefit of Lancaster Manor and its residents. For example, the Lancaster Foundation has conducted fund raisers for the purpose of purchasing Christmas gifts for the residents of Lancaster Manor and for the purpose of providing job related training for the staff of Lancaster Manor. Lancaster Manor is a nursing home owned and operated by Lancaster County. The Lancaster Foundation has never had any dealings with Lancaster County. Fundraising by the Lancaster Foundation is conducted entirely in the private sector. The bylaws of the Lancaster Foundation require that "one member of the Board of Directors shall be a sitting County Commissioner".

Commissioner Kathy Campbell has been asked to serve on the Board of Directors for the recently incorporated LOMR Foundation. Essentially, the LOMR Foundation was formed for the purpose of raising funds which inure to the benefit of the clients of the Lancaster Office of Mental Retardation (LOMR). The LOMR Foundation was incorporated in December of 1989 and therefore has engaged in little or no activity to date. However, it is the LOMR Foundation's intent to conduct all fundraising in the private sector. The decision to form the LOMR Foundation was based partly on the State funding shortages for mental health care. According to the by-laws of the LOMR Foundation, "one member of the Board of Directors shall be a sitting County Commissioner".

Commissioner Hudkins serves and Commissioner Campbell will serve on their respective foundation boards without pay. Neither foundation will receive any economic benefit from funding given to Lancaster Manor or LOMR by the Lancaster County Board.

ANALYSIS

Section 49-1499 of the Nebraska Political Accountability and Disclosure Act identifies a potential conflict of interest as a situation in which a public official, including on designated in section 49-1493, is faced with making a decision or taking an action which may cause financial benefit or detriment to: 1) the official; 2) a member of his or her immediate family; or 3) a business with which the official is associated. In addition, the benefit or detriment must be distinguishable from the effects of the action on the general public or a broad segment of it. An elected county official is a public official designated by section 49-1493(10).

Section 49-1408 of the Act defines "business with which the official is associated" as a business in which "the individual is a partner, director, or officer". Business is defined by section 49-1407 as "any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed, individual, holding company, joint stock company, receivorship, trust, activity or entity".

The two incorporated foundations are businesses as defined by the Act. Commissioner Hudkins has a business association with the Lancaster Foundation by virtue of his being a member of the Board of Directors of the Lancaster Foundation. Commissioner Campbell would have a business association with the LOMR Foundation if she became a member of the Board of Directors of the LOMR Foundation.

Neither Commissioner Hudkins nor Commissioner Campbell would have a conflict of interest simply by virtue of their simultaneously serving on the County Board and the Board of Directors of the described foundations. This is because neither is faced with taking an action nor making a decision which may cause financial benefit or detriment to his or her foundation. This does not mean that there will never be a conflict of interest. For example, there may come a time when the Lancaster Foundation will own land in Lancaster County on which it maintains its office. If an application for a change of zone were to be submitted by the Lancaster Foundation and ultimately came before the County Commissioners for decision, Commissioner Hudkins would have a potential conflict of interest because he is faced with making a decision or taking an action which could cause financial benefit or detriment to the foundation on whose Board of Directors he serves. However, the Act does not prohibit a public official from having a potential conflict of interest. In fact, it assumes that potential conflict of interests will occasionally occur and prescribes a course of conduct which the public official must follow. That course of conduct is set forth in section 49-1499.

Section 49-1499 provides that an official with a potential conflict shall, as soon as he or she is aware of such potential conflict or should reasonably be aware of such potential conflict: 1) prepare a written statement describing the matter requiring action or decision and the nature of the potential conflict; 2) deliver a copy of the statement to the Commission and 3) take steps as the Commission shall prescribe or advise to remove himself or herself from influence over the action or decision on the matter. Normally the Commission's advice will be that the public official should abstain from participating or voting upon the matter in which he or she has a potential conflict of interest.

A related question is whether the Lancaster Manor Foundation or the LOMR Foundation are indirectly benefited by the actions of the county as to Lancaster Manor and LOMR. While it may be possible under certain circumstances, we do not believe that the actions of Lancaster County as to Lancaster Manor or LOMR necessarily result in a financial benefit or detriment to the Lancaster Manor Foundation or the LOMR Foundation. By way of explanation we use an example employing generic terms. County plans to fund county-entity (Lancaster Manor or LOMR) for a fiscal year at the level of $6,000,000. Foundation (Lancaster Manor Foundation or LOMR Foundation) decides to give county-entity $500,000. If county later determines it will give county-entity $6,500,000 instead of $6,000,000 does this result in $500,000 benefit to foundation? We believe that it does not. Any obligations of the Lancaster Manor Foundation to Lancaster Manor or the LOMR Foundation to LOMR are self imposed. The two foundations may give to the county-entities or withhold as they please. Generally speaking, the action of the county, though it may affect the decision of the foundations, does not affect the finances of the foundations.

There are other requirements which may apply to certain public officials if a business with which the public official is associated has an interest in a contract before the governing body upon which the official now serves. These obligations are found at section 49-14,102 through section 49-14.103.07, inclusive. While we point out the existence of these statutes, we do not analyze them since they involve matters which are beyond the scope of the questions.

In summary, we conclude that there is no prohibition within the Nebraska Political Accountability and Disclosure Act which would prohibit Commissioner Hudkins from serving on the Lancaster Foundations nor prohibit Commissioner Campbell from serving on the LOMR Foundation.

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