Can an attorney who sits on the local Area Mental Health Board be paid for legal services he renders to a private nonprofit group home that has a service contract with the Area Authority his board governs?

Plain-English summary

The 1979 Attorney General considered an attorney who served on an Area Mental Health Board and also provided paid legal services to a group home under contract with the Area Authority. The opinion concluded that a contract for remuneration "as described would appear to violate G.S. 14-234."

The AG explained the setting. An area authority commonly contracted with a nonprofit group home. The area board governed the authority and had duties to develop a services and spending plan and submit a budget report. In the arrangement described to the AG, the board would approve a transfer into a line item to pay the attorney for services. Even without improper motives, the AG said this would "present the appearance of evil" and appear to amount to a direct G.S. 14-234 violation.

The opinion distinguishes earlier situations involving board members who owned part of a contracting business from those involving a member who was only an employee of a contractor with no direct personal pecuniary benefit. It says this attorney's situation did not squarely fit either prior pattern. The opinion gives no approved restructuring, recusal, or other compliance option.

Currency note

This opinion was issued in 1979 under the statutes it cites. Check current North Carolina public contracting and mental-health authority law before applying it today.

What this means for you

Board members. The opinion warns about a board-approved funding transfer that would pay one of the board's own members for work for a contracted group home. It does not say whether abstaining from a vote would resolve the concern.

Area authorities and group homes. The AG's analysis depends on the described services, remuneration, board planning duties and proposed transfer. It does not provide a safe harbor for paying the attorney through another entity or for changing the contract structure.

Common questions

Did the AG find a definite violation in every paid-service arrangement with a contractor?

No. The conclusion says the contract for remuneration "as described would appear to violate" G.S. 14-234. The opinion analyzes the described group-home and board funding arrangement.

Why did the board's budget role matter?

The opinion cites G.S. 122-35.43 and G.S. 122-35.44 for the authority's plan and budget duties, then describes a transfer of specific funds to a line item to pay the attorney with board approval.

Could the attorney be paid by a different entity instead?

The opinion does not address that arrangement or say it would comply. It offers no alternative payment structure.

Did the AG discuss an ordinary employee of a contractor?

Yes, as a contrast from earlier authority. It says a board member who was merely an employee of another contracting party, with no pecuniary benefit flowing directly to the member, fell outside G.S. 14-234 in those prior settings. It said the present facts did not fit squarely into a prior category.

Background and statutory framework

G.S. 14-234, as summarized in the opinion, proscribed a public official from making a contract for personal benefit under the authority of the office. The AG cited Lexington Insulation Company v. Davidson County and earlier office opinions on contractor ownership and employment. Article 2F of Chapter 122 established the area authority setting. G.S. 122-35.43 and G.S. 122-35.44 supplied the planning and budget duties relevant to the anticipated board-approved payment transfer.

Citations

• G.S. 14-234
• Article 2F, Chapter 122
• G.S. 122-35.43
• G.S. 122-35.44
• Lexington Insulation Company v. Davidson County, 243 N.C. 252 (1955)
• State v. Debnam, 196 N.C. 740 (1929)
• State v. Weddell, 153 N.C. 587 (1910)

Source

• Landing page: https://ncdoj.gov/opinions/public-officers-and-employees-conflict-of-interest-2/

Original opinion text

Requested By: Sarah T. Morrow, M.D., M.P.H., Secretary, Department of Human Resources

Question: Is it allowable under the General Statutes for a member of an Area Mental Health Board to contract his services to a program which is under contract by the Area Authority?

Conclusion: Contract for remuneration for services as described would appear to violate G.S. 14-234.

This question appears to have arisen because of the specific method of operation of group homes under the auspices of area mental health authorities in this state. An area mental health authority is a local governmental entity responsible for the delivery of mental health, mental retardation, etc. services within its geographic situs, with an area mental health board serving as its governing body. See Article 2F, Chapter 122. In delivering some of these services, an area authority customarily contracts with a group home which is operated by a non-profit corporation. The situation under scrutiny involves remuneration of an attorney who is a member of the area mental health board, but has rendered services to the group home.

G.S. 14-234, in essence, proscribes any public official from making any contract for his own benefit under authority of his office. Lexington Insulation Company v. Davidson County, 243 N.C. 252 (1955). Thus, it is very clear that the attorney-board member could not contract with the board for his own services. 40 N.C.A.G. 566 (1969). However, the present situation is somewhat more complicated of resolution.

This Office has previously held to be forbidden contracts between governmental boards and a private business when a member of the board is also a partner of the business or an officer or stockholder in a corporation operating the business. See 44 N.C.A.G. 128 (1974); 42 N.C.A.G. 180 (1973); 42 N.C.A.G. 9 (1972), 40 N.C.A.G. 565 (1970); 40 N.C.A.G. 561 (1969); 41 N.C.A.G. 371 (1971). Conversely, where a board member is merely an employee of the other contracting party with no pecuniary benefit flowing directly to him as a person, the situation falls outside the ambit of G.S. 14-234. State v. Debnam, 196 N.C. 740 (1929); 44 N.C.A.G. 293 (1975); 40 N.C.A.G. 565 (1970). (It should be noted that one prior member of the Supreme Court of North Carolina has had occasion to describe even a case involving only an employee of a contracting party as ". . . not altogether seemly, nor to be commended. . . ." State v. Weddell, 153 N.C. 587, at page 590 (1910))

The situation presented does not squarely fall into any of the factual settings dealt with in prior opinions of this Office. However, G.S. 122-35.43 requires the Area Authority (through its board) to review and evaluate the area needs and programs and to develop the annual plan for utilization of facilities and resources; this plan must include the inventory of services to be provided and must set forth an indication of the expenditure of all funds by the Authority. G.S. 122-35.43. Consonant with these responsibilities, the Area Authority must submit a budget report indicating the receipts and expenditures for the total area mental health program. G.S. 122-35.44.

This particular situation, which has been characterized as a typical development if the question posed is answered in the affirmative, points up the probability of a conflict with the statute due to normal methods of operation. As described, what would be envisaged here is a transfer of specific funds into a proper line item in order to remunerate the attorney for services rendered, with the area board approving such transfer. Thus, in application, regardless of the absence of any improper motives on the part of any party, this type of transaction would indisputably present the appearance of evil and would appear to amount to a direct violation of G.S. 14-234.

Rufus L. Edmisten
Attorney General

William F. O'Connell
Special Deputy Attorney General