Poison: Conflicts of Interest for Texas Local Public Officials
There’s a saying in toxicology: “the dose makes the poison.” This saying is derived from the concept that any substance, including water and oxygen, can become toxic at high enough concentrations. Well, a similar concept can be applied to conflicts of interest. Virtually any action taken by a public official can have some positive or negative effect on the official’s private interests if you follow the action’s consequences far enough. This is known as the “ripple effect.” But these effects on private interests only become a problem when they reach a certain “toxic” threshold and become impermissible conflicts of interest in the eyes of the law. Here, we will examine a few of those thresholds.
The conflicts of interest of local public officials is governed by Chapter 171 of the Local Government Code, which explicitly preempts the common law of conflicts of interest as applied to local public officials. Chapter 171 requires a local public official to file an affidavit and abstain from voting on any matter involving a business entity or real property if the local public official has a “substantial interest” in the business entity or real property. A substantial interest in a business entity is defined as owning 10% or more of the voting stock or shares of the business entity or either 10% or more or $15,000 or more of the fair market value of the business entity. A substantial interest in real property is defined as equitable or legal ownership with a fair market value of $2,500 or more.
Anything less than a substantial interest as defined by Chapter 171 is too small a “dose” to be “toxic” under Chapter 171, but certain lesser interests may still require some mitigation. For example, Chapter 176 of the Local Government Code requires a local government officer to file a conflicts disclosure statement if the local government entity is considering entering into a contract with a vendor that the local government officer has certain employment or other business relationships with, or if the local government officer has recently received gifts from the vendor of a certain aggregate value. These employment or other business relationships and gifts are not substantial enough conflicts of interest to require abstention, so the affected local government officer is still able to vote on the vendor contract after filing the required statement. I like to think of Chapter 176 as regulating “small potatoes” conflicts, and Chapter 171 as regulating “big potato” conflicts. By the way, potatoes can be toxic—especially green ones.
Another scenario requiring abstention has to do with nepotism, where a familial interest creates the conflict, rather than a pecuniary one. It’s worth mentioning that Chapters 171 and 176 also apply to certain family relationships, but what most people typically think of as nepotism is governed by Chapter 573 of the Government Code. Chapter 573 prohibits a public official, and in some cases an entire governing body, from appointing or confirming the appointment of an individual to a position that is to be directly or indirectly compensated from public funds or fees of office if the individual is related to the public official within a certain degree of consanguinity or affinity. Under Chapter 573, the “dose” that makes the “poison” relates to the degree of relationship rather than the degree of pecuniary interest, but the prohibition nevertheless applies only to compensated positions. Nepotism gives a whole new meaning to the phrase “toxic relationship,” doesn’t it?
There are other circumstances where the law requires an affected public servant to abstain from taking certain actions, but the conflict of interest and nepotism matters discussed above are certainly the most likely to occur in the ordinary course of public business. Because the applicable statutes specifically define the interests or relationships which are “toxic,” so to speak, there are occasionally circumstances where one might assume that abstention is required due to a particular relationship or interest, but abstention is not, in fact, required by law. Voluntary abstention is sometimes an option under those circumstances; but, in some cases, a voluntary abstention may be counted as a vote against the matter.
Incidentally, the number to the poison control hotline is (800) 222-1222. Please don’t call them to report conflicts of interest.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our municipal law practice can be found here.