Request By:
Mr. R. Michael Yates
Attorney at Law
P.O. Box 300
122 Clinton Street
Hickman, Kentucky 42050
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The City of Hickman is in the process of completing its Riverport Authority, as authorized under KRS 65.510 to 65.650. The members of the Riverport Board established by a city are appointed by the mayor of the city. KRS 65.540. Two current members of the board are employed by and are stock holders in a local grain company. This particular company is opposed to the Riverport Authority's leasing property to other grain companies. It has become apparent in the board's negotiations with prospective lessees that there will be at least two grain companies locating on the Riverport property.
The question presented is whether the two members who are also stock holders in a private corporation would immediately present a conflict of interest or whether by abstaining from voting on the prospective lease arrangements they can avoid any conflict.
Under KRS 65.540(3) a riverport authority member may be replaced by the appointing authority for, inter alia, a conflict of interest.
It has been written that "He who is entrusted 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 . . . . In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something." The interest to be disqualifying must be such as to be reasonably calculated to affect his judgment or conduct in the making of the contract.
Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936) 25, 26.
Here it appears from the facts that these two members will have a conflict of interest on the question of a lease or leases to grain companies, since they have already indicated they want no competing grain company as a lessee. This already externalized and declared subjective interest is sufficient to disqualify them under the above leading case on conflicts of interest in governmental contract situations.
Since KRS 65.540(3) relating to replacement of a board member for a conflict of interest involves a fait accompli [the leases have not been voted on yet], it is our opinion that if these two members will not attend the meeting in which the question of leases to grain companies will be voted on, and the two members will not attempt to influence the vote of the remaining four members [see KRS 65.520(1)] on this issue, the subject two members will not be subject to removal for conflict of interest.