Request By:
Honorable Harvey G. Ershig
District Judge
200 S. Green Street
Henderson, Kentucky 42420
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You request our opinion concerning the conflict of interest statute, KRS 45A.340.
You are presently a District Judge in Henderson County. You currently own several pieces of rental property in that city. Prior to your going on the bench, your wife and you were the successful bidders to lease certain real estate to the state of Kentucky. You entered into a five-year lease with the state in 1976, which will expire shortly. You intend to bid to renew the lease after the state gives public notice and advertises for the submission of bids for same.
Your question:
"Can a District Judge lease property to the state if there is public notice and competitive bidding for the leased property? "
As a Judge of the Court of Justice (§ 109, Ky. Const.), you are of course a state constitutional officer. See § 113, Kentucky Constitution.
KRS 45A.340 (Conflicts of interest) applies to you, as you say, since the definition of "agency" in KRS 45A.335 covers the judiciary.
Subsection (1) of the latter statute prohibits a state officer from receiving compensation for any services to be rendered in negotiations with the state for the purchase by the state of an interest in real property. However, your leasing real estate to the state would not come under that subsection, since you would only be receiving a rental for your leased property, not for your services, etc.
Further, subsection (4), which prohibits a state officer from acting as an agent for the Commonwealth in the transaction of business with himself, has no application to the subject situation.
Subsection (5) of KRS 45A.340 reads:
"(5) No officer or employe of an agency or appointee shall knowingly himself or by his partners or through any corporation which he controls or in which he owns or controls more than ten percent (10%) of the stock, or by any other person for his use or benefit or on his account, undertake, execute, hold or enjoy, in whole or in part, any contract, agreement, sale or purchase of the value of twenty-five dollars ($25.00) or more, made, entered into, awarded or granted by any agency, unless said contract, agreement, sale or purchase was made or let after public notice and competitive bidding. "
Under the literal language of KRS 45A.340(5), and considering the facts given, it is our opinion that as a state officer you, and your wife, may legally engage in a lease to the state of real estate owned by you, provided that the lease is a result of a state award made only after public notice and competitive bidding.
As you suggest, it seems clear that the legislature did not wish to eliminate state officers and employees from participating in the bidding process, since to do so would have reduced the competitive potential accordingly.
The competitive bidding principle puts bidgers, regardless of whether they work for the state or not, on the same legal footing, while at the same time promoting the economic interests of the state and the taxpayers. The very central purpose of competitive bidding "is to protect the taxpaying public against the wasting of public funds and to prevent abuses such as fraud, favoritism, improvidence and extravagance." 72 C.J.S. Supp., Public Contracts, § 8, p. 182.
Under the facts given, it is our view that your lease to the state only after an award resulting from public notice and competitive bidding would indeed meet the mandatory terms of KRS 45A.340(5). See
Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962), holding that a statutory requirement of competitive bidding in the letting of public contracts is mandatory, and nonobservance renders the contract void.
We have only addressed the legal issues involved. You may wish to present this matter to the Judicial Ethics Committee, pursuant to SCR 4.310.