Request By:
Honorable Rodney A. Miller
City Attorney
City of Fulton
313 Main Street
Fulton, Kentucky 42041
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of July 12 in which you relate that the city of Fulton, a city of the fourth class operating under the city manager form of government, is preparing to implement the city employee's retirement benefit program through insurance and, in doing so, the city has asked several insurance companies to submit bids pursuant to specifications. However, a possible conflict of interest question has been raised as indicated in the following statement of facts and question:
"One of the Commissioners is an insurance agent and has authority to solicit and procure applications for life and other insurance with several companies which might (through other agents or representatives) submit a bid pursuant to the specifications to the City. The Commissioner is not connected in any way with those agents or representatives. Also the particular Commissioner is not on a salary basis or a paid employee with any of the companies. His relationship with the several companies is as an agent who receives a commission only for sales made.
* * *
"The City Commission wishes to know whether or not under the terms of KRS 61.270, a contract can be executed between the City and anyone of the several insurance companies for the purpose of implementing the pension program where the Commissioner is an agent for that company, but will receive no commission directly or indirectly through the contract for the pension program."
KRS 61.270 reads as follows:
"If any officer of a city of the fourth class becomes directly or indirectly interested as agent, principal or surety in any contract with the city, he shall thereby vacate his office, and the contract, if entered into while he is in office, shall be void. "
We do not believe that a conflict of interest would exist with respect to the commissioner in question since the disqualifying interest must be pecuniary by which he stands to gain or lose something, and such would not exist under the related facts. As pointed out in McQuillin, Mun. Corps., Vol. 10, § 29.97:
". . . it is generally held that whenever a public officer enters into a contract the execution of which may make it possible for his personal interests to become antagonistic to his faithful discharge of a public duty, such contract will be held void as against public policy. . . ."
Next referring to the case of Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936), the Court of Appeals declared:
"It is a salutary doctrine that he who is intrusted with the business of others cannot be allowed to make such business an object of profit to himself. This is based upon principles of reason, of morality, and of public policy. These are principles of the common law and of equity which have been supplemented and made more emphatic by the foregoing and other statutory enactments. Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091, 17 Ky. Law Rep. 933. In their application and operation it is impossible to lay down any definite rules defining the nature of the interest of the officer, or indicating the line between that which is proper and that which is unlawful. In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something. . . ." (Emphasis added).
See also the late case of McCloud v. City of Cadiz, Ky. App., 548 S.W.2d 158 (1977).
Thus, as long as the commissioner in question is not personally involved in the execution of the contract as an agent for the insurance company and receives no commission resulting from the contract, no violation of KRS 61.270 would exist. However, if the contract is awarded to an insurance company of which he is an agent, he should as a matter of public policy refrain from voting on the awarding of the contract.