Request By:
Mr. William H. Pickett
Administrative Assistant
Lexington Center Corporation
430 West Vine Street
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of December 29, in which you raise a possible conflict of interest question with respect to the following factual situation.
"I am currently employed by the Lexington Center Corporation, a non-profit corporation formed pursuant to the Kentucky Non-Profit Corporation Act. This Corporation was formed to act as an agent or instrumentality of the City of Lexington, Kentucky and Fayette County, Kentucky for the development of a civic and convention center complex in downtown Lexington. Additionally, this Corporation has entered into a written agreement with the Lexington-Fayette Urban County Government to operate and manage the property known as the Lexington Center and the Lexington Opera House.
"I am considering running for the Urban County Council as a district representative. Before I finalize my plans for this endeavor I feel that it is appropriate to seek an opinion from your office, relative to a conflict of interest. Though my salary is not paid by the Urban County Government, nor am I an employee of same I feel that the question of a direct conflict of interest will be raised at some point. I wish to address that issue at this time."
In response to your question we initially refer to KRS 61.280 which prohibits officers of cities of the second class from being interested directly or indirectly in any contract with the city. This statute would be applicable, we believe, to the Urban County Government since the laws relating to cities of the second class apply to this form of government unless superseded by the charter provisions. See KRS 67A.060 and
Holsclaw v. Stephens, Ky., 507 S.W.2d 462 (1974).
The Lexington Center Corporation, as you point out, is a nonprofit corporation formed for the purpose of acting as agent for the Urban County Government for the development of a civic and convention center complex. The directors of the corporation are appointed by the council; however, the board of directors of the corporation appoint the subordinate officers and employees of the corporation which means that the council would have no control over your employment by the corporation.
On the other hand, the contractual agreement between the Urban County Government and the corporation, to operate the facility in question could bring into play the provision of KRS 61.080 if you were elected to the council because of your employment and the fact that you would have a remunerative interest in the contract. See
Com. v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936). However, in order to constitute a violation of KRS 61.080 the pecuniary interest must exist at the time the contract is executed as held in the case of
Collinsworth v. City of Catlettsburg, 236 Ky. 194, 32 S.W.2d 982 (1930). The term of the initial contract is for three years beginning in 1970; however, by its terms the contract is automatically renewed every three years unless canceled pursuant to Section (1) of the contract. This means that the contract has been executed prior to your becoming a member of the council and its automatic renewal while you may be on the council would not alter this fact. As a consequence KRS 61.260 would not be violated, in our opinion.
The next thing to consider is the Code of Ethics incorporated in the Urban County charter which is found in Article 16. Section 16.02 also deals with conflicts of interest and provides in effect that no officer of the Urban County Government shall knowingly engage in any business or transaction or have a financial or other personal interest, direct or indirect, which is incompatible with the proper discharge of his official duties or would tend to impair his independence of judgment or action in the performance of his official duties. There is also the provision that no such officer shall engage in or accept private employment or render services for private interest when such employment or services is incompatible with the proper discharge of his official duties. In addition such officer cannot vote or otherwise participate in the negotiations or the making of any contract with any business or entity in which he has a financial interest. Section 16.03 requires any council member who has a private interest in any matter pending before the council to disclose such interest and disqualify himself from participating in any decision or vote relating thereto.
The above provisions of the Ethics Code are simply an expansion of the conflict of interest statutes previously referred to and would not alter our conclusion that no conflict of interest would exist with respect to your employment with the Lexington Center Corporation, if elected to the Urban Council.
We suggest, however, that as a member of the council and as a matter of public policy you refrain from participating in any discussion or voting with respect to altering the terms of the agreement in question, if such becomes necessary.