Request By:
Mr. John C. Darsie, Jr.
General Counsel
University of Kentucky
Lexington, Kentucky 40506
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of July 1 concerning a possible conflict of interest involving Mr. A. Stevens Miles who was recently appointed by the Governor to the Board of Trustees of the University of Kentucky but has not yet taken the oath of office. Mr. Miles is President and Chief Executive Officer of the First Kentucky Trust Company, Louisville, Kentucky, which was awarded a personal service contract in the relm of investment services by the Board of Trustees on a low bid basis. At the time the contract was executed, Mr. Miles was not a member of the Board, however, if he takes the oath of office as trustee, he will be a member of the Board during the two remaining one-year renewal terms of the contract.
In conjunction with the related facts, you quote the provisions of KRS 45A.335(4) of the Model Procurement Act which deals specifically with conflicts of interest problems as they relate to members of the board of trustees and/or regents of the state universities. This statute reads as follows:
"No member of a board of trustees or regents shall have an interest in any contract with a state university unless such contract shall have been subjected to competitive bidding in compliance with KRS Chapter 45, unless such trustee or regent shall have been the lowest bidder and unless such trustee or regent shall have first notified in writing to the remaining members of the board, and to the newspaper having the largest circulation in the county in which the state university is located, of his intention to bid on such contract."
The above statute does not prohibit members of the board of trustees from having an interest in any contract with the university. It does, however, set up certain guidelines which are prerequisite to the execution of such a contract. These requirements, to the effect that the contract must be subject to competitive bidding and that the firm with which the trustee is associated must have submitted the low bid, have been complied with. The remaining two requirements concerning the notification of the other members of the board by the trustee of his intent to bid and his notification of the local newspapers of such intent, could not, of course, have been complied with by Mr. Miles since he was not a member of the board during the time the contract was negotiated and executed. As a consequence, we believe that KRS 45A.335(4) has, in fact, been substantially complied with, thereby removing the existence of a conflict of interest insofar as Mr. Miles is concerned.
Regardless, however, of our belief that the referred statute has been sufficiently complied with under the circumstances, we also believe it is applicable only to contracts executed during the board member's tenure and not those contracts executed prior to membership as is the case here. In this respect we cite the case of Collingsworth v. City of Catlettsburg, 236 Ky. 194, 32 S.W.2d 982 (1930), which declared that the interest of the officer must exist at the time the contract is made, otherwise a conflict of interest does not exist. The court in quoting from 44 C.J. 95 said:
'The interest must exist at the time the contract is made. If at the time a contract is executed no officer of the city has a pecuniary interest in it, it is valid and it will not be invalidated merely because an officer subsequently acquires an interest therein, provided there is no evidence of any conspiracy or criminal understanding between the contractor and the city officer at the time the principal contract was entered into.'
See also McQuillin, Mun. Corps., Vol. 10, § 29.99.
The Collingsworth case dealt with KRS 61.270 which prohibits any officer of the city from becoming directly or indirectly interested in any contract with the city.
Under the circumstances and as we have indicated above, we do not believe that any conflict of interest exists by virtue of Mr. Miles serving on the Board of Trustees of the University while at the same time the banking institution in which he has an interest, holds a contract with the University.