Can a Mississippi county refuse to contract with a company owned by someone who has been convicted of embezzling public funds?
Plain-English summary
A Sunflower County supervisor asked the AG whether § 25-1-113's bar on hiring people convicted of felonies involving public funds also extends to contracts with companies owned by such people. The AG answered no. § 25-1-113 prohibits employment, not contracting.
Section 25-1-113(2) reads:
From and after July 1, 2014, the state and any county, municipality or any other political subdivision shall not employ or continue to employ a person who has been convicted or pled guilty in any court of this state, another state, or in federal court of any felony in which public funds were unlawfully taken, obtained or misappropriated in the abuse or misuse of the person's office or employment or money coming into the person's hands by virtue of the person's office or employment.
The AG looked to a 2014 Hines opinion that worked through this question and provided three reasons:
- The Legislature placed § 25-1-113 in Title 25, Chapter 1, dealing with public officers and employees, not contracts. The text speaks of "employ" and "continue to employ." If the Legislature wanted to cover contracts and contractors, it could have said so.
- Reading the statute to cover contracts could impair existing contracts in a way that runs into the U.S. Constitution (Article I, Section 10) and Mississippi Constitution (Section 16). Both forbid laws impairing the obligation of contracts. Those prohibitions are not absolute, but the strongest impairment exception is for police-power legislation involving non-government contracts, which doesn't fit § 25-1-113.
- A 2014 Austin opinion clarified that "employ" means a W-2 employer/employee relationship, not a contractor relationship.
So contracting with a corporation or LLC controlled or wholly owned by someone otherwise barred from employment is not prohibited by § 25-1-113.
The AG did not say county officials should ignore concerns about hiring or contracting with people who have embezzled public funds. The opinion is about what the statute requires, not about what is wise or politically advisable.
What this means for you
If you are a county attorney advising a board of supervisors
§ 25-1-113 is not your tool for blocking a contract with a corporation owned by a convicted embezzler. The county can decline to award a contract for other lawful reasons (best value, responsibility determinations under purchasing law, evidence of ongoing risk), but the statute's plain text does not bar the contract.
If the county wants to discourage these arrangements, consider:
- Bid responsibility criteria. Most public purchasing frameworks require bidders to be "responsible." A bidder corporation whose principal embezzled public funds may not meet a credible responsibility standard.
- Disclosure requirements in RFPs that ask about principals' criminal history, especially for public-funds offenses.
- Performance bonds and bonding insurance that the bidder may struggle to obtain due to the principal's record.
These tools work within existing law and do not stretch § 25-1-113 beyond its text.
If you are a board member or supervisor
Don't assume that the law automatically blocks every conceivable arrangement that looks like a way around the embezzlement employment bar. The statute is narrower than people often expect. If you face a specific scenario and your gut tells you it's improper, ask your county attorney to identify the actual legal hook (responsibility, ethics, contracts clauses) rather than relying on § 25-1-113.
If you are a state auditor or oversight investigator
§ 25-1-113 violations involve W-2 employment, not contracting. If you are investigating a county that has hired a barred individual through a corporate intermediary that the individual controls, the legal analysis depends on whether the relationship is in substance employment (W-2-like) or contracting. Document the relationship carefully. Look at indicia of employment: control over hours and tasks, integration into the county workforce, payment of FICA, fringe benefits, supervision.
If you are a corporation or LLC bidding on a Mississippi county contract and your principal has a public-funds felony
§ 25-1-113 itself does not bar the contract. But the responsibility determinations in public purchasing law, bonding requirements, and RFP disclosure obligations may still apply. Be prepared to explain the situation, demonstrate strong internal controls, and address the legitimate concerns the procuring entity will have.
If you advocate for stricter ethics laws
The AG's opinion is a marker for what § 25-1-113 covers and what it doesn't. If the policy goal is to prevent convicted embezzlers from doing business with the state through corporate intermediaries, that requires a separate statute. Mississippi's existing ethics law (§§ 25-4-101 et seq.) addresses some related concerns, but a specific contracting bar would be a legislative project.
Common questions
Q: What does § 25-1-113 actually prohibit?
A: From July 1, 2014 onward, the state and any county, municipality, or political subdivision cannot employ or continue to employ a person convicted (or who pled guilty) of any felony in which public funds were unlawfully taken or misappropriated in the abuse or misuse of the person's office or employment or money coming into their hands by virtue of office or employment.
Q: Why doesn't this apply to contracts?
A: Three reasons from the AG opinions: (1) the statute uses "employ," which the AG interprets as a W-2 employer/employee relationship; (2) the statute is in the public-officers-and-employees chapter, not in a contract chapter; (3) reading it to cover contracts would create constitutional contract-impairment issues with existing public contracts.
Q: Can a county still refuse to contract with such a corporation?
A: Yes, on grounds other than § 25-1-113. Public purchasing law typically allows or requires consideration of bidder "responsibility," which can include the integrity and reliability of the bidder's principals. State Auditor guidance and local procurement rules may add to this.
Q: What is the difference between "employee" and "contractor"?
A: Generally, an employee is paid via W-2, has taxes withheld, is supervised by the employer, and works integrated with the employer's operations. A contractor is paid via 1099, has more autonomy, supplies their own tools or methods, and runs their own business. The IRS, the Department of Labor, and Mississippi state agencies all have multi-factor tests. Calling someone a contractor when the substance is employment doesn't legally make them a contractor.
Q: Can the county look behind a corporate veil to block a contract because of the owner's record?
A: § 25-1-113 doesn't authorize that. But responsibility determinations in procurement law often consider principals. The county should consult bond and ethics counsel before declining a contract on these grounds.
Q: What about a sole proprietor (no LLC, no corporation) who was convicted?
A: The opinion is specifically about corporations and LLCs. A sole proprietor doing business with the county is closer to the line; whether the relationship is employment or contracting depends on the facts. If the substance is employment, § 25-1-113 applies regardless of how the parties label it.
Q: Did the AG say the underlying policy is wrong?
A: No. The AG read the statute as written. If the Legislature wants to extend the disqualification to contracts, it can.
Background and statutory framework
§ 25-1-113 is a relatively recent statute (effective July 1, 2014) and reflects Mississippi's response to high-profile cases of public-funds embezzlement. The Legislature wanted to ensure that people convicted of misappropriating public funds couldn't quietly return to public payrolls.
Two AG opinions shaped the contracts question:
- Hines (Oct. 10, 2014) addressed the contracts question shortly after the statute took effect. The AG cited statutory placement, the impossibility of retroactive application without contract-impairment problems, and the structure of the relevant chapter to conclude that contracts are outside the statute's reach.
- Austin (Oct. 10, 2014) clarified that "employ" means a W-2 relationship.
The 2023 Gaston opinion follows both. The AG did not revisit or modify them.
The constitutional concern in Hines is worth noting. Article I, Section 10 of the U.S. Constitution prohibits states from passing laws impairing the obligation of contracts; Section 16 of the Mississippi Constitution does the same. These clauses are not absolute, but the strongest authority for impairment is when (1) it is an exercise of police power and (2) the contract is between private parties. Neither prong is well-satisfied for a § 25-1-113 application that retroactively voids public contracts. So even if the Legislature wanted contracts covered, the implementation would have to either be prospective only or risk constitutional challenge.
Citations and references
Statute:
- Miss. Code Ann. § 25-1-113 (prohibition on public employment of persons convicted of felonies involving public funds)
- Miss. Code Ann. § 25-1-113(2) (text effective July 1, 2014: state and political subdivisions shall not employ or continue to employ such persons)
Constitution:
- U.S. Const. art. I, § 10 (no state shall pass any law impairing the obligation of contracts)
- Miss. Const. § 16 (a law impairing the obligation of contracts shall not be passed)
Prior AG opinions referenced:
- MS AG Op., Hines (Oct. 10, 2014): § 25-1-113 does not apply to contracts or contractors; statutory placement, contract-clause concerns, and absence of any reference to contracts in the statute support this reading.
- MS AG Op., Austin (Oct. 10, 2014): "employ" in § 25-1-113 contemplates a W-2 employer/employee relationship.
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/B.Gaston-November-3-2023-Prohibition-from-Hiring-Convicted-Embezzlers-for-Public-Employment.pdf
Original opinion text
November 3, 2023
The Honorable Ben Gaston
District 3 Supervisor, Sunflower County
100 Dogwood Circle
Indianola, Mississippi 38751
Re: Prohibition from Hiring Convicted Embezzlers for Public Employment
Dear Mr. Gaston:
The Office of the Attorney General has received your request for an official opinion.
Question Presented
If a county is prohibited from hiring or contracting with a person convicted of a felony under Mississippi Code Annotated Section 25-1-113, is this county also prohibited from hiring or contracting with a corporation or limited liability company that is controlled or wholly owned by a person convicted of a felony?
Brief Response
Section 25-1-113 prohibits a county from employing a person convicted of embezzlement. It does not prohibit a county from contracting with a corporation or limited liability company that is controlled or wholly owned by a person who would otherwise be prohibited under Section 25-1-113 from being employed by the county.
Applicable Law and Discussion
Section 25-1-113(2) provides:
From and after July 1, 2014, the state and any county, municipality or any other political subdivision shall not employ or continue to employ a person who has been convicted or pled guilty in any court of this state, another state, or in federal court of any felony in which public funds were unlawfully taken, obtained or misappropriated in the abuse or misuse of the person's office or employment or money coming into the person's hands by virtue of the person's office or employment.
This office previously opined that the prohibition in Section 25-1-113 does not apply to contracts or contractors. MS AG Op., Hines at *1 (Oct. 10, 2014). Explaining further, Hines states, in pertinent part:
Section 25-1-113 is found in Title 25 which is entitled "Public Officer and Employees; Public Records" and in Chapter 1 which is entitled "Public Officers; General Provisions." The Legislature could have applied Section 25-1-113 to contracts and contractors by specifically including such references. It did not. Moreover, as your opinion request points out, Section 25-1-113, if applied to contracts, would have to be read to avoid existing contracts with public entities which could be contracts of specific terms. In other words, application of Section 25-1-113 would, under certain circumstances, have to be read to require public entities to breach otherwise valid contracts. Article I, Section 10 of the United States Constitution states that "[n]o State shall . . . pass any . . . law impairing the obligations of contracts . . . ." Furthermore, Section 16 of the Mississippi Constitution states that a "law impairing the obligation of contracts, shall not be passed." These prohibitions are not absolute, and a state's ability to pass a law that does impair a contract is at its strongest when the legislation is an exercise of police power and when the contracts at issue do not involve a governmental entity. These circumstances are inapplicable to the application of Section 25-1-113.
Hines at 1. Moreover, this office has previously opined that with respect to Section 25-1-113, "the term 'employ' contemplates an employer/employee relationship wherein the employee's compensation is reported for tax purposes on a W-2." MS AG Op., Austin at 2 (Oct. 10, 2014). Accordingly, it is the opinion of this office that Section 25-1-113 does not prohibit a county from contracting with a corporation or limited liability company that is controlled or wholly owned by a person who would otherwise be prohibited under Section 25-1-113 from being employed by the county.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General