Can the president of a North Carolina telephone membership corporation also serve as a member of the state Rural Electrification Authority, or does that combination violate the state's dual-office-holding rule or its conflict-of-interest statute?
Plain-English summary
Aaron A. Hathcock, Administrator of the North Carolina Rural Electrification Authority (REA), asked the AG two related questions about a person who held both seats. Could the president of a telephone membership corporation's board of directors also serve on the REA board without violating the constitutional dual-office-holding limit? And if both seats were lawful, would the combination still create a conflict of interest under G.S. 14-234 because the REA reviews and approves applications affecting telephone membership corporations?
The 1983 AG answered no to both prohibitions; the combination was lawful.
Dual-office holding. Article VI, section 9 of the North Carolina Constitution prohibits a person from concurrently holding any combination of "appointive offices, places of trust or profit and elective office" except as the General Assembly provides. G.S. 128-1.1(a) is the legislative exception: a person who holds one appointive office, place of trust, or profit may concurrently hold one more appointive office, place of trust, or profit, plus an elective office. The REA position is unquestionably an appointive office (members are appointed by the Governor under G.S. 117-1). The telephone membership corporation board presidency is not an "appointive office" in the constitutional sense; the AG classified it as a "position of public trust" (the corporation being a public agency under G.S. 117-33 with the same rights as a political subdivision). Because the statute allows one of each, the combination is within the safe harbor of G.S. 128-1.1(a).
Conflict of interest. G.S. 14-234 prohibits a person appointed or elected to a public trust from contracting for his own benefit in the matters of that trust. The 1983 AG relied on Insulation Co. v. Davidson County (1955) and State v. Williams (1910) for the principle that the statute reaches corporate officers contracting with their public bodies. Here, however, the REA's role with respect to the telephone membership corporation is regulatory and facilitative (it investigates applications, grants formation authority, acts as agent for loans and grants, reviews service rules) rather than contractual. The REA does not "contract" with the telephone corporation, and its approval of federal loan and grant applications does not generate "pecuniary profit" to the corporation's officers. The contracting-with-yourself harm that animates G.S. 14-234 is therefore absent.
The opinion also noted that the differences between telephone membership corporations and electric membership corporations under Chapter 117 do not change the conclusion. The conflict analysis is the same regardless of which type of cooperative is at issue.
Currency note
This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. North Carolina's dual-office-holding framework and conflict-of-interest statutes have been substantially updated, most notably with the State Government Ethics Act and the various local government ethics provisions, which add disclosure, recusal, and registration requirements layered on top of G.S. 14-234. The Rural Electrification Authority itself has been restructured, and the telecommunications regulatory environment has shifted from membership cooperatives toward a more complex telecom marketplace. A modern dual-service question should be referred to current state ethics counsel.
Historical context: what the AG concluded
The 1983 opinion is a clean example of how the AG read three different state-law constraints together to clear a particular dual-service arrangement.
The constitutional question turned on classification. Article VI, section 9 prohibits combinations of three types of position: appointive offices, places of trust or profit, and elective offices. The classification matters because G.S. 128-1.1(a) carves out one-of-each-plus-elective as permissible. The REA seat is clearly appointive. The telephone-coop presidency is harder to classify; the AG put it in the "place of trust" bucket because the cooperative is a public agency under G.S. 117-33 but its directors are elected by member-users, not by the political electorate (so it is not "elective office" within G.S. 128-1.1(d)'s narrow definition).
G.S. 128-1.1(d) limits "elective office." The definition reaches only offices "filled by election by the people when the election is conducted by a county or municipal board of elections under the supervision of the State Board of Elections." Telephone coop director elections are member elections, not public elections, so the seat does not consume the elective-office quota in the safe harbor.
The 14-234 analysis avoids the contracting trap. The AG was careful to distinguish the Insulation Co. and Williams pattern (a corporate officer who is also on the public body that the corporation contracts with) from the REA pattern (a regulator or facilitator whose actions do not produce direct contractual benefit to the corporation's officers personally). Without contracting-for-benefit, the 14-234 statutory hook is missing.
The cited prior AG opinions. The opinion cited 25 NCAG 275 (1939) for the proposition that REA membership is an appointive office, and 33 NCAG 106 (1956) for the dual-office-holding analysis. Those are old internal AG references that confirm the classification work the 1983 opinion did was consistent with the office's longstanding view.
Background and statutory framework
The North Carolina Rural Electrification Authority is established by G.S. 117-1 et seq. as a state agency whose members are appointed by the Governor. Its statutory mission, set out in G.S. 117-31, is to investigate applications to form telephone and electric membership corporations, grant formation authority, act as agent for cooperatives in securing federal loans and grants, and review service rules.
Telephone membership corporations are organized under Chapter 117. G.S. 117-33 designates them as public agencies of the State, with the rights of any other political subdivision. Their board members are elected by the corporation's members (the customers who receive telephone service). The board, in turn, elects a president and secretary from among its own number (G.S. 117-30 incorporating G.S. 117-13 and 117-16).
Article VI, section 9 of the North Carolina Constitution prohibits the concurrent holding of appointive offices, places of trust or profit, and elective office except as the General Assembly may provide. The legislative grace is in G.S. 128-1.1(a), which allows the combination of one appointive office or place of trust, one other appointive office or place of trust, and one elective office. G.S. 128-1.1(d) defines "elective office" narrowly as offices filled by election conducted by a county or municipal board of elections under State Board of Elections supervision.
G.S. 14-234 is the public-officer self-dealing statute. It prohibits a person appointed or elected to discharge a trust in which the State, county, city, or town is interested from undertaking or contracting for his own benefit in that authority.
Common questions
Could a director of the telephone corporation also serve in another appointive office, beyond just the REA?
G.S. 128-1.1(a) permits one appointive office or place of trust plus one more appointive office or place of trust. The two-position cap matters: adding a third appointive office or place of trust would push past the safe harbor. The opinion addresses only the two-position REA-plus-coop scenario.
What if the REA actually contracted with the telephone corporation for goods or services?
That would change the analysis. The 1983 opinion specifically distinguished the REA's regulatory and facilitative role from a contracting role. If the REA bought equipment from, or sold services to, the telephone corporation, the Insulation Co. v. Davidson County and State v. Williams line of authority would apply to bar the dual seat or to void the contract.
Does the analysis change for electric membership corporations?
No. The opinion explicitly says the differences between telephone and electric membership corporations in Chapter 117 are not material to the G.S. 14-234 analysis. The same logic would apply to an REA seat plus an electric coop board position.
Could the same person also vote on REA matters affecting his own corporation?
The opinion does not impose a recusal requirement, because it found no G.S. 14-234 conflict at the threshold. But ordinary good-government practice (and any applicable later-enacted recusal rules) might counsel abstention from REA votes on matters directly affecting the person's home cooperative. The 1983 opinion does not analyze that issue.
What is a "place of trust" in North Carolina law?
The term reaches positions of public responsibility that are not formally "offices" in the constitutional sense. The contours are developed in case law and prior AG opinions. The telephone coop presidency fit the bucket because the coop is a statutorily designated public agency with the rights of a political subdivision, and the president holds a position of leadership and responsibility within that public agency.
Source
Citations
- N.C.G.S. § 14-234
- N.C.G.S. § 117-1
- N.C.G.S. § 117-13
- N.C.G.S. § 117-16
- N.C.G.S. § 117-30
- N.C.G.S. § 117-31
- N.C.G.S. § 117-33
- N.C.G.S. § 128-1.1(a)
- N.C.G.S. § 128-1.1(d)
- N.C. Const. art. VI, § 9
- Insulation Co. v. Davidson County, 243 N.C. 252, 90 S.E.2d 496 (1955)
- State v. Williams, 153 N.C. 595, 68 S.E. 900 (1910)
- 25 NCAG 275 (1939)
- 33 NCAG 106 (1956)
Original opinion text
Requested By: Aaron A. Hathcock, Administrator, Rural Electrification Authority
Questions: Whether serving as President of the Board of Directors of a telephone membership corporation and on the Board of the Rural Electrification Authority is prohibited dual office holding?
- Whether a conflict of interest under N.C.G.S. § 14-234 would arise from the President of the Board of Directors of a telephone membership corporation serving on the Board of the Rural Electrification Authority?
Conclusions: No
- No
The North Carolina Constitution in Article VI § 9 prohibits concurrent office holding of any combination of appointive offices, places of trust or profit and elective office except as the legislature should provide. N.C.G.S. § 128-1.1(a) allows a person who holds an appointive office, place of trust or profit in State or local government to concurrently hold one other appointive office, place of trust or profit or elective office in either State or local government. Elective office is defined in N.C.G.S. § 128-1.1(d) as
"any office filled by election by the people when the election is conducted by a county or municipal board of elections under the supervision of the State Board of Elections."
The Rural Electrification Authority (hereinafter REA) is an agency of the State whose members are appointed by the Governor. N.C.G.S. § 117-1. A telephone membership corporation is a public agency of the State with the same rights (within the limits for which it is formed) as any other political subdivision of the State. N.C.G.S. § 117-33. The board members of a telephone membership corporation are elected by the members of the corporation entitled to vote. Members of the corporation are those persons who are supplied telephone service by the corporation and have complied with the terms and conditions regarding membership set forth in the corporation's bylaws. The board of directors then elect a president and secretary from their own number.
N.C.G.S. § 117-30 incorporating by reference N.C.G.S. §§ 117-13 and 16.
Membership on the REA is clearly an appointive office. 25 NCAG 275 (1939). Membership on the board of directors of a telephone membership corporation is not appointive office. It would be more in the category of a position of public trust. This office is of the opinion that N.C.G.S. § 128-1.1(a) permits membership on both the board of the REA and a telephone membership corporation board of directors. See also 33 NCAG 106 (1956).
N.C.G.S. § 14-234 prohibits a person appointed or elected to discharge any trust in which the State, county, city or town is in anyway interested from undertaking or contracting for his own benefit in that authority. Basically this makes it the public policy of the State to prohibit a public official from taking advantage of his position in letting contracts to himself or to firms or corporations in which an official has an interest. The REA is empowered to investigate applications for the creation of telephone membership corporations; and to grant authority to form such a corporation; to act as agent for a corporation in securing loans and grants; to secure whatever assistance is available from the federal government; to review service rules and regulations and do whatever else may be necessary in securing telephone service in rural communities. N.C.G.S. § 117-31.
In Insulation Co. v. Davidson County, 243 N.C. 252, 254, 90 S.E.2d 496, 498 (1965), the court found that the prohibition of N.C.G.S. § 14-234 extended to the officer of a corporation who made contract with the board of which he was a member. The court quotes with approval State v. Williams, 153 N.C. 595, 68 S.E. 900 (1910) that
"he who is entrusted with the business of others cannot be allowed to make such business an object of pecuniary profit to himself." Supra.
The REA approves loan and grant applications of telephone membership corporations for federal funds, but such action does not result in profit to the president, directors and other members of the telephone membership corporations. This office is of the opinion that N.C.G.S. § 14-234 does not disqualify a president of a telephone membership corporation organized pursuant to Chapter 117 from also serving as a member of the REA by reason of the statutory duties of the REA as they relate to telephone membership corporations. We have considered the differences in Chapter 117 between telephone membership corporations and electric membership corporations, but we do not believe the distinction is material as it relates to the application of N.C.G.S. § 14-234.
Rufus L. Edmisten
Attorney General
Evelyn M. Coman
Assistant Attorney General