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

The Rural Electrification Authority (REA) asked whether a telephone membership corporation board president could also serve on the REA board. The Attorney General concluded that this combination violated neither North Carolina's dual-office rule nor N.C.G.S. § 14-234's conflict-of-interest restriction, on the duties described in the opinion.

Article VI, § 9 of the state constitution generally restricts concurrent office holding, subject to legislative exceptions. The opinion quotes N.C.G.S. § 128-1.1(a) as allowing someone who holds an appointive office, place of trust or profit in state or local government to hold “one other appointive office, place of trust or profit or elective office.” The alternative is or, not an extra elective office in addition to two other positions. The REA seat is an appointive office because its members are appointed by the Governor. The telephone corporation board seat is not an appointive office; the opinion treats it as a position of public trust. Those two positions fit the statutory allowance.

On conflicts, the opinion says § 14-234 prevents public officials from using their role to arrange contracts for their own benefit or for firms in which they have an interest. The REA approves federal loan and grant applications for telephone membership corporations, but the opinion says those approvals do not produce profit for the corporation's president, directors, or other members. It therefore concludes that § 14-234 does not disqualify this president from REA service by reason of the REA duties discussed. It does not analyze a particular contract or future vote.

Currency note

This opinion was issued in 1983 and applies the constitutional and statutory provisions it quotes. Check current North Carolina office-holding and ethics law for a present appointment.

Historical context: what the AG concluded

The opinion describes the REA as a state agency with members appointed by the Governor. It describes telephone membership corporations as public agencies whose directors are elected by corporation members, and whose directors then select their president. It classifies the REA seat as an appointive office and the corporation board seat as a position of public trust. N.C.G.S. § 128-1.1(a) allows the holder of one covered position to hold one other covered position or an elective office.

The opinion also considers § 14-234. It quotes the principle that someone entrusted with another's business cannot make it a source of personal profit. Its answer rests on the statement that REA approval of loan and grant applications does not result in profit for the telephone corporation's officers or members. The opinion says differences between telephone and electric membership corporations are not material to that § 14-234 analysis.

Background and statutory framework

N.C.G.S. § 128-1.1(d) defines “elective office” as one filled by election by the people through a county or municipal board of elections under State Board of Elections supervision. The opinion says telephone corporation directors are elected by corporation members; the board then elects its president. It does not treat that board position as an elective public office under the statutory definition.

For the conflict question, the opinion lists REA duties under § 117-31, including investigating applications to form telephone membership corporations, assisting with loans and grants, and reviewing service rules. It addresses the effect of those described duties on dual service, not every possible financial transaction involving either entity.

Common questions

How many additional positions did the statute allow a covered officeholder?

As quoted in the opinion, the holder of one appointive office or place of trust or profit may concurrently hold one other appointive office, place of trust or profit or elective office. The opinion approves the two positions it was asked about; it does not approve a third position.

Why was the telephone corporation board seat treated differently from the REA seat?

REA members are appointed by the Governor. Telephone corporation directors are elected by the corporation's members, and their board chooses its president. The opinion calls the REA seat an appointive office and the telephone corporation board seat a position of public trust.

Did REA review of a corporation's loan application automatically create a § 14-234 conflict?

The opinion says no on the facts it described. It states that REA approval of federal loan and grant applications did not result in profit to the telephone corporation's president, directors, or other members.

Did the opinion resolve future contracts or recusal on particular votes?

No. It answered whether the combination of positions was prohibited under the cited provisions because of the REA's stated duties. It did not decide a specific contract or vote.

Source

• Landing page: https://ncdoj.gov/opinions/telephone-membership-corporations-double-office-holdings/

Citations

• N.C.G.S. § 14-234
• N.C.G.S. § 117-1
• N.C.G.S. § 117-13
• 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 (1965)
• 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