Fellow Attorneys:
One of my cities has a Concessionaire Agreement with a gentleman.  Does this prohibit him, or any of his entities, from bidding on a major city construction project?
I think it does, but I appreciate comments.  Would it make a difference, if his Concessionaire Agreement is with one of his LLC entities, and another of his business entities bid the contract?  ( In my opinion, there is still a prohibition.)
Also... one of the Councilmembers  on the City Council was elected and seated AFTER the Concessionaire Agreement was signed.  Now, the holder of the Concessionaire Agreement wants to bid on a city construction project...., and one of his employees is a Council member.
Fraught with conflict, or none?
??????
Kay Wall

Kay,

I have not read the agreement, and am assuming that the only relationship that exists between the gentleman and the city is based on that agreement.  I would review the agreement with a critical eye.  Does the Concessionaire Agreement make the gentleman an agent of the city in some way or otherwise create a relationship that could require he be treated as a public official, or agent or employee of the City?  That would be the critical issue.  Generally, it would create a conflict for a third party to have more than one contractual relationship with a city.  The conflict principals generally apply when the person looking to contract with the city is a public official, officer or employee in some capacity.  The existence of that relationship is what makes the conflict principles applicable.

Section 11, Article X of the Oklahoma Constitution contains a broad provision designed to preclude conflicts of interest by absolutely prohibiting transactions.  Section 11 provides:

The receiving, directly or indirectly, by any officer of the State, or of any county, city, or town, or member or officer of the Legislature, of any interest, profit, or perquisites, arising from the use or loan of public funds in his hands, or moneys to be raised through his agency for State, city, town, district, or county purposes shall be deemed a felony.  Said offense shall be punished as may be prescribed by law, a part of which punishment shall be disqualification to hold office.

In its broadest terms, §11 prohibits public officers “from receiving benefits from the use of public funds in their hands or raised through their agencies for governmental purposes.”  As Oklahoma’s Attorney General noted, §11 prohibits public officers “from receiving a direct or indirect profit from the use of public funds.”  Oklahoma Attorney General Opinion, 1985 OK AG 138.  As noted by the Attorney General:

This provision is broad in its sweep, and severe in its punishment of violations.  Since violation of this provision results in punishment for a felony crime and disqualification to hold office it must be strictly construed, as are all penal statutes.  Strict construction of Article X, Section 11 shows it covers only officers of the State, or any county, city, town or member of the Legislature.  It does not, for example, prohibit conduct of members of a board of education of a school district, since a school district is not the State, nor a county, city or town, but a separate entity, nor does it include trustees of a public trust, which is also a separate and distinct legal entity.

Oklahoma Attorney General Opinion, 2004 OK AG 40 (12/15/2004).  This constitutional prohibition has been applied in a number of relevant contexts.  However, they generally involve situations where a company is owned in part by a member of the public group.  1980 OK AG 298 (01/14/1981) (company owned by member of board of regents); 2001 OK AG 32 (07/18/2001) (company employs a councilmember); 1981 OK AG 129 (06/10/1981) (state cannot contract with company half-owned by wife of legislator).

The primary state statute is 11 Okla. Stat. §8-113.  Section 8-133 provides in part that:

A.            Except as otherwise provided by this section, no municipal officer or employee, or any business in which the officer, employee, or spouse of the officer or employee has a proprietary interest, shall engage in:

1.        Selling, buying, or leasing property, real or personal, to or from the municipality;
   

2.        Contracting with the municipality; or
   

3.        Buying or bartering for or otherwise engaging in any manner in the acquisition of any bonds, warrants, or other evidence of indebtedness of the municipality.
   

Section 8-113 generally does not apply to any municipality with a population of not more than 2,500 if the officer or employee’s business is the only business of that type within five miles of the city limits, and even then the activities cannot exceed $500.00 for any single activity and cannot exceed $10,000.00 in any calendar year (unless the items purchased are regularly sold to the general public in the normal course of business and the price charged to the municipality does not exceed the price charged to the general public).  Under §8-113, “any person who receives wages, reimbursement for expenses, or emoluments of any kind from a municipality, any spouse of the person, or any business in which the person or spouse has a proprietary interest shall not buy or otherwise become interested in the transfer of any surplus property of a municipality or a public trust of which the municipality is beneficiary unless the surplus property is offered for sale to the public after notice of the sale is published.”  As with the Oklahoma Constitutional prohibition, “any transaction entered into in violation of [§8-113] is void.”  11 Okla. Stat. §8-113(E).  Section 8-113 goes further, however, and provides that “any member of a governing body who approves any transaction in violation of the provisions of this section shall be held personally liable for the amount of the transaction.”  11 Okla. Stat. §8-113(E).

There are other statutes that can be referred to for guidance.  However, I think it will depend on the nature of the relationship created under the Concessionaire Agreement.  If there is no relationship created under that agreement that would place the gentleman in a conflict position, I am not aware of any rule that would prohibit him from having more than one contractual relationship with the city.

Jonathan E. Miller
City Attorney
City of Mustang
1501 N. Mustang Road
Mustang, Oklahoma 73064
Telephone: (405) 376-7746
Facsimile: (405) 376-7721

This email is sent by the City Attorney and may contain information that is privileged or confidential. If you received this email in error, please notify the sender by reply email and delete the email and any attachments.  If you are a and officer, employee or agent of the City of Mustang, you should not share this email with others.  Sharing this email may result in a loss of the attorney-client privilege.

From: Kay Robbins Wall lkrw@sbcglobal.net
Sent: Friday, December 3, 2021 2:41 PM
To: OAMA Luistserv oama@lists.imla.org
Subject: [CAUTION: SUSPECT SENDER] [Oama] conflict of interest

Fellow Attorneys:

One of my cities has a Concessionaire Agreement with a gentleman.  Does this prohibit him, or any of his entities, from bidding on a major city construction project?

I think it does, but I appreciate comments.  Would it make a difference, if his Concessionaire Agreement is with one of his LLC entities, and another of his business entities bid the contract?  ( In my opinion, there is still a prohibition.)

Also... one of the Councilmembers  on the City Council was elected and seated AFTER the Concessionaire Agreement was signed.  Now, the holder of the Concessionaire Agreement wants to bid on a city construction project...., and one of his employees is a Council member.

Fraught with conflict, or none?

??????

Kay Wall

Kay,

I missed the second part of the question that the holder of the Concessionaire Agreement employees a councilmember.  Section11 of the Constitution may prohibit the city from contracting with the gentleman that employs a councilmember, even though the councilmember owns no interest in the company and the councilmember’s compensation is not paid out of funds received from the city.  Take a look at 2001 OK AG 32 (07/18/2001).  Whether an actual conflict exists would require delving into the company’s finances to determine if the company could survive without the city funds or if the city funds “have a relationship to the funds that are used for the city official's compensation.”  Id.  Section 11 would prohibit a public member of the Environmental Quality Board, or a company, firm or other entity that employs or is owned by such board member, from entering into a contractual or other business relationship with the Department of Environmental Quality.  See 2004 OK AG 40 (12/15/2004).  The Oklahoma Supreme Court once stated: “Government officials and employees must exercise great care to avoid even the appearance of impropriety in their duties; for they, like Caesar’s wife, must be above reproach.”  Westinghouse Electric Corp. v. Grand River Dam Authority, 1986 OK 20, 720 P.2d 713.  The City may want to avoid any potential conflict in this situation.

Jonathan E. Miller
City Attorney
City of Mustang
1501 N. Mustang Road
Mustang, Oklahoma 73064
Telephone: (405) 376-7746
Facsimile: (405) 376-7721

This email is sent by the City Attorney and may contain information that is privileged or confidential. If you received this email in error, please notify the sender by reply email and delete the email and any attachments.  If you are a and officer, employee or agent of the City of Mustang, you should not share this email with others.  Sharing this email may result in a loss of the attorney-client privilege.

From: Kay Robbins Wall lkrw@sbcglobal.net
Sent: Friday, December 3, 2021 2:41 PM
To: OAMA Luistserv oama@lists.imla.org
Subject: [CAUTION: SUSPECT SENDER] [Oama] conflict of interest

Fellow Attorneys:

One of my cities has a Concessionaire Agreement with a gentleman.  Does this prohibit him, or any of his entities, from bidding on a major city construction project?

I think it does, but I appreciate comments.  Would it make a difference, if his Concessionaire Agreement is with one of his LLC entities, and another of his business entities bid the contract?  ( In my opinion, there is still a prohibition.)

Also... one of the Councilmembers  on the City Council was elected and seated AFTER the Concessionaire Agreement was signed.  Now, the holder of the Concessionaire Agreement wants to bid on a city construction project...., and one of his employees is a Council member.

Fraught with conflict, or none?

??????

Kay Wall