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Wednesday, September 14, 2011

Beware of Disqualifying Conflict of Interest

Government conflicts of interest are usually governed by state constitutions, statutes, or the common law, or in some states a combination of all three.  While these laws provide some general guidance, this area of the law often turns on specific facts and legal interpretations.  So, when does an “interest” become a disqualifying conflict of interest, requiring the official to take some action (such as disclosure, recusal, or even resignation of office)?

As a general rule, a financial or pecuniary interest in a transaction before a local government body of which an official is a member will be a disqualifying conflict of interest.  Depending on state rules, this may require the official to disclose his or her interest or recuse him or himself from discussion and voting on the matter, or both.  In Illinois, certain financial interests in a contract with the governmental body will require the official to resign from office.  For example, if a local government official owns a company that is proposing to contract with the local government body for services in excess of the statutory minimum amount, disclosure and recusal will not be enough to protect the official from a disqualifying conflict of interest.  Either the official must resign from office before any action is taken to approve a contract with the company, or the company must forego work for the local government. While some may see this as a harsh outcome, courts routinely hold that the public interest in ethical contracting outweighs any financial sacrifice a local government official must make during his or her term of office.

The United States Supreme Court recently addressed the issue of local government conflicts in Nevada Commission on Ethics v. Carrigan.  In that case, a city councilman voted in favor of a casino project that involved his friend and campaign manager.  Although the councilman had disclosed his relationship prior to his vote, the Nevada Ethics Commission censured him because state law prohibits elected officials from voting on matters that benefit family, close friends or business associates.  The United States Supreme Court upheld Nevada’s ethics law and rejected the Nevada Supreme Court’s holding that a legislator’s vote is protected speech under the First Amendment.

It can be difficult for a public official to determine whether he or she has a conflict of interest because these issues are fact-specific and require interpretation of constitution and statutory language and case law.  Moreover, many conflicts of interest laws involve criminal penalties.  When in doubt about a particular relationship or interest, a public official should contact the local government's attorney for advice on how to proceed. 


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