OPINION NUMBER - 009
ADOPTED - 1978/03/02
SUBJECT - Statements of Financial Interests; Conflicts of Interest
REQUESTED BY: Paul Kosch, President, First National Bank, David City, Nebraska
1. Whether members of a board of trustees for a county hospital are required to file Statements of Financial Interests?
2. Whether there is a potential conflict of interest to be disclosed and other action to be taken in the case of a county hospital's funds being deposited in a bank in which that hospital board member is an officer and director?
3. Whether the insurance division or affiliate of the bank is denied the right to bid on insurance for the hospital?
1. Members of the board of trustees for a county hospital appointed pursuant to the provisions of section 23-343.01, R.R.S., 1943, are not required to file Statements of Financial Interests.
2. There is no potential conflict of interest to be disclosed pursuant to the Nebraska Accountability and Disclosure Act, but the situation may be subject to certain prohibitions or limitations as discussed in the following analysis.
3. A member of a county hospital board as an insurance agent or the insurance division or affiliate of the bank in which he is an officer or director may bid on insurance for the hospital subject to certain prohibitions and limitations as discussed in the following analysis.
1. Members of a board of trustees for a county hospital appointed pursuant to the provisions of section 23-343.01, R.R.S., 1943, are not elected county officials and therefore are not required to file Statements of Financial Interests pursuant to the provisions of section 49-1493(9), nor are they members of a board or commission of the county which examines or licenses a business, trade, or profession, or which determines rates for or otherwise regulates a business pursuant to the provisions of section 49-1493(7). Even though such a board of trustees has the power to fix room rates, the same is done in its capacity of running the business of the hospital as distinguished from determining rates for or otherwise regulating a business as a regulatory agency.
2. As far as the Nebraska Political Accountability and Disclosure Act is concerned, a potential conflict of interest need not be disclosed with respect to governmental actions by the county hospital board in depositing funds in a bank in which a member of the board is an officer or director. Section 49-1499 requiring disclosures of potential conflicts of interests applies only to officials required to file Statements of Financial Interests and to officials or employees of the executive branch of state government. As indicated above, a member of the board of trustees for an appointed county hospital board is not required to file a Statement of Financial Interests and, of course, such a member is not an official or employee of the executive branch of state government.
3. With respect to whether or not the insurance division or affiliate of the bank or the board member as an insurance agent may bid on insurance business for the hospital or for that matter whether the county hospital's funds may be deposited in the bank in which that board member is an officer or director, section 49-1498 of the Nebraska Political Accountability and Disclosure Act may apply. It provides that "the majority of the members of a nonelective governmental body shall not have a financial interest, either personally or through a member of their immediate family or a business with which they are associated . .." In the request for the advisory opinion we are advised that another director of the bank is also a member of the county hospital's board of trustees. If the board of trustees is a three man board as distinguished from a five man board pursuant to the provisions of section 23-343.01(1), then depositing hospital funds in the bank or being awarded the hospital's insurance business could result in a majority of the board members having a financial interest in matters subject to the jurisdiction of the board contrary to the provisions of section 49-1498.
This section (49-1498) goes on to provide that the financial interest in question must be other than an interest of de minimus nature or an interest that is not distinct from that of the general public. Such determinations are matters of fact to be determined from all of the circumstances involved although it is submitted that such a financial interest would not be distinct from that of the general public.
If the question of the financial interest of a majority of the members of the board is not an issue, the matter of bidding on the hospital's insurance and for that matter the depositing of funds in the bank could be subject to the provisions of section 49-14,102. This section provides that no public official or public employee, a member of that individual's immediate family or business with which the individual is associated shall enter into a contract valued at $2,000 or more, in any one year, with a governmental body unless the contract is awarded through an open and public process which includes prior public notice and subsequent availability for public inspection . . . of the proposals considered and the contract awarded.
There are other provisions of law pertaining to county officers and to county hospital trustees which have a bearing but under which the transactions involved would not be prohibited. Section 23-343.09 of the county hospital code provides that no trustee shall have a direct or indirect personal pecuniary interest in the purchase or any material to be used or supplies for such facility or facilities. It is submitted that this section does not restrict the board member under the circumstances in question since the contract for depositing of funds or for insurance involves services or intangibles as distinguished from material.
Section 23-146, R.S.Supp., 1976, provides that no county officer shall in any manner, either directly or indirectly, be pecuniarily interested in or receive the benefit of any contracts executed by the county for the furnishing of supplies or any other purpose when the consideration of the same is in an amount in excess of $5,000 in any one year . . . Opinions of the Attorney General 1957 - 1958, No. 11, takes the position that county hospital board members are not officers of the county but agents or public employees.
In view of the foregoing, it is concluded that if the awarding of insurance or the deposit of funds is done through public bidding and the county hospital board of trustees is a five member board then there is no restriction or prohibition to such insurance being awarded or funds being deposited. Such trustee or trustees would have to abstain from voting on the awarding of such contracts and otherwise refrain from using their public offices to affect the awarding thereof so as to not be in violation of section 49-14,101(3). This section prohibits the use of public office or confidential information received through the holding thereof to obtain financial gain, other than compensation provided by law, for himself, a member of his family or a business with which he is associated.
It is sumbitted that even without public bidding, unless the consideration to the county hospital board member or to the business with which he is associated exceeds $2,000 or more, such awarding of insurance deposit of funds would be valid even though the amount to be paid by the board for such insurance or to be deposited in the bank exceeds $2,000 in any one year. Opinons of the Attorney General 1969 - 1970, No. 63, construes the dollar limitation of section 23-146 as having reference to the amount of pecuniary interest of the official or any business with which he is associated rather than the consideration set forth in the contract between the county and the firm having the direct contractual agreement with the county. The prohibition of entering into any contract "valued" at $2,000 or more gives rise to the question of how or with respect to whose interest any such contract is to be valued. That Attorney General's opinion leads us to conclude that such language pertains not to the consideration for the direct contract but to the consideration that will flow to the public official or public employee or the business with which he is associated. In other words, regardless of the amount the county hospital board will pay in premiums and regard less of the amount of the funds deposited in the bank, public bidding would not be required unless the commission to the insurance agency would be $2,000 or more, or unless the earnings on the deposit would be $2,000 or more, in any one year.
It is further submitted that if the hospital board trustee or trustees abstain from voting upon the awarding of such contracts of insurance or depositing of funds, such contracts could be entered into with or without public bidding. Section 49-14,102 also provides that this section shall not apply to a contract when the public official or public employee does not in any way represent either party in the transaction. The original language of this subsection in the initiative petition for the adoption of the Nebraska Political Accountability and Disclosure Act provided that this section does not apply to a contract when the public official or public employee does not solicit the contract, does not take part in the negotiations for or in the approval of the contract or an amendment thereto, and does not in any way represent either party in the transaction. Thus, it appears that the intent was not to prohibit a contract with a business with which a public official or public employee was associated if it was clear that the public official or public employee was not representing the business in seeking the contract nor representing the governmental body in approving or awarding the contract.