Can members of the North Carolina Marine Fisheries Commission, their family members, or members of the Commission's advisory committees receive grants from the state Fishery Resource Grants Program that the Commission itself awards?
Plain-English summary
The General Assembly funded a new Fishery Resource Grants Program in Chapter 769, § 27.17 of the 1993 Session Laws. Under 15A NCAC 3I .0017, the Marine Fisheries Commission awarded grants for research projects assessing coastal fisheries equipment and techniques, environmental impacts on marine and estuarine fisheries, and ways to enhance state fisheries resources. The Commission's chairman asked the AG whether several categories of potential applicants posed conflict-of-interest problems: (1) Commission members themselves, (2) family members of Commissioners, (3) Commission Advisory Committee members, (4) family members of Advisory Committee members, and (5) organizations in which Commissioners served as officers or directors.
Senior Deputy Attorney General Daniel C. Oakley and Assistant Attorney General Timothy D. Nifong answered in layers.
Commissioners themselves. A clean no. G.S. § 14-234(a) prohibits a public officer ("commissioner or director to discharge any trust wherein the State . . . may be in any manner interested") from making "any contract for his own benefit, under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof." A fishery resource grant from the Marine Fisheries Commission to one of its own members is exactly that kind of contract. Lexington Insulation Co. v. Davidson County, 243 N.C. 252 (1955), described the statute's purpose: "the General Assembly . . . made the condemnation of the transactions embraced within the terms thereof a part of the public policy of the State so as to remove from public officials the temptation to take advantage of their official positions to 'feather their own nests.'"
The harder question was whether a Commissioner could cure the conflict by recusing from the vote on the Commissioner's own grant application. The answer is no. State v. Williams, 153 N.C. 595 (1910), explains that "the application of the rule may in some instances appear to bear hard upon individuals who have committed no moral wrong; but it is essential to the keeping of all parties filling a fiduciary character to their duty, to preserve the rule in its integrity." The statute prohibits the contract, not just the participation in the vote.
The opinion paired this with Kendall v. Stafford, 178 N.C. 461 (1919), a case where a city council voted itself a pay raise. The Supreme Court there held: "The public policy of the State, found in the statutes and judicial decisions, has been pronounced against permitting one to sit in judgment on his own cause, or to act on a matter affecting the public when he has a direct pecuniary interest, and this is a principle of the common law which has existed for hundreds of years." Section 14-234 codifies that common-law rule.
Family members of Commissioners. The statute technically does not reach them directly. The grant of a fishery resource grant to a Commissioner's spouse, child, or sibling is not "the Commissioner making a contract for the Commissioner's own benefit" in the literal sense. But the opinion called the practice "at best . . . at odds with the common law's treatment of conflicts" and emphasized the appearance-of-self-interest concern. A grant to a family member could ride the line between technical compliance and structural impropriety. The opinion stops short of declaring it unlawful but flags it as a serious issue.
Advisory Committee members. Lower stakes. Advisory Committee members do not vote on final grant awards; only the Commission does. So the structural worry that drives § 14-234(a) is largely absent. Advisory Committee members can receive grants, but the Commission should be informed of the Advisory Committee member's interest in a specific proposal before the Commission votes. The disclosure is the point.
Family members of Advisory Committee members. Even less concern, for the same reason. Disclosure to the Commission is still good practice.
Organizations in which Commissioners are officers or directors. Tricky. Commissioners who hold leadership positions in applicant organizations face a fiduciary conflict that runs parallel to the § 14-234 conflict. The opinion's advice: disclose the affiliation and abstain from voting on the affected grant. This is conservative practice; the opinion does not affirmatively declare such grants unlawful but treats abstention as the prudent response.
The timing rule. No § 14-234 violation occurs until the Commission actually awards a grant to a person within the statute's reach. The opinion is forward-looking guidance; it does not retroactively condemn prior awards.
Currency note
This opinion was issued in 1995. 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.
G.S. § 14-234 has been amended significantly since 1995. The State Government Ethics Act, enacted in 2006 and codified in Chapter 138A, now sets parallel standards for public officers' financial disclosures, recusals, and conflicts. Anyone analyzing a current Marine Fisheries Commission or other state-board conflict should pull both Chapter 138A and the current version of § 14-234. The 1985 NC Board of Ethics interpretive memo on actual vs. potential conflicts cited in this opinion has been superseded by later guidance from the State Ethics Commission.
Common questions
Q: What is the difference between an 'actual' and a 'potential' conflict?
A: The opinion quoted the NC Board of Ethics's 1985 definitions. An actual conflict is "a very narrow situation in which the subject . . . has a financial interest whose very existence poses a conflict with the public interest." A potential conflict is broader: a situation in which the subject "can make specific decisions to benefit personal interests at the public expense, is in a position to use confidential information for private use, or can use influence to benefit personal interests at the public expense." Both warrant attention; the actual conflict triggers § 14-234, while the potential conflict triggers disclosure and recusal practices.
Q: Why doesn't recusal save the day?
A: Because § 14-234(a) prohibits the contract itself, not just the officer's participation in approving it. State v. Williams makes the point explicit: the statute is structural. A Commissioner cannot transform a forbidden contract into an allowed one by stepping out of the room. The contract is forbidden whether or not the Commissioner votes.
Q: How does this opinion treat family members?
A: With caution. The literal text of § 14-234(a) does not reach them. But the common-law conflicts framework and the public-policy concerns of Kendall v. Stafford and Lexington Insulation strongly disfavor grants to family members. The opinion does not formally prohibit them but treats them as practically equivalent to direct conflicts in terms of appearance.
Q: What about a Commissioner who is also a board member of an applicant nonprofit?
A: Disclose and abstain. The opinion does not declare those grants unlawful, but it strongly recommends abstention. The structural problem is dual fiduciary duty: the Commissioner owes a duty to the state through the Commission and a duty to the nonprofit through the board seat. Abstention removes the Commissioner from one side of the conflict.
Q: Are there exceptions to § 14-234(a)?
A: Yes. The statute has exceptions for transactions with banks, banking institutions, savings and loan associations, and public utilities in the regular course of business. There is also a provision allowing certain contracts authorized by specific resolution on which the public official did not vote. The fishery resource grant scenario does not fit any of these exceptions.
Q: Could the legislature have written § 14-234 differently to allow grants to Commission members?
A: Yes. The General Assembly could create an express exception for fishery research grants, similar to the bank and utility carve-outs. Absent that, the general prohibition controls.
Background and statutory framework
NC's public-officer conflict-of-interest framework rests primarily on G.S. § 14-234, a criminal statute that dates to the 19th century. State v. Williams and its progeny have given the statute a structural reading: it prohibits self-dealing contracts at the formation step, regardless of personal participation in approval. That reading prevents officers from curing conflicts through procedural maneuvers.
The common-law tradition reinforces the statute. Kendall v. Stafford, decided nine years after Williams, traced the rule against self-dealing back through "hundreds of years" of common law. NC courts and the AG have consistently applied the principle across local government, state boards, and quasi-public bodies.
The 1985 NC Board of Ethics interpretive memo introduced the actual/potential conflict framework. That framework gave public officers a practical tool: actual conflicts are nonnegotiable; potential conflicts require disclosure and case-by-case judgment. Subsequent state ethics legislation built on this framework, culminating in the State Government Ethics Act of 2006.
The fishery resource grants problem in this opinion was a recurring NC issue: how to allow agency members with real subject-matter expertise (and therefore real research credentials) to participate in agency-administered grant programs without violating self-dealing rules. The opinion's answer is conservative and structural: Commissioners themselves cannot receive grants from their own Commission, period. Family members raise serious appearance problems even if technical compliance might be possible. Advisory Committee members can receive grants with disclosure. Organizations with Commissioner officers or directors should be handled with disclosure and abstention.
Citations
- N.C.G.S. § 14-234(a) (public officer self-dealing prohibition)
- 1993 N.C. Session Laws, Chapter 769, § 27.17 (fishery resource grants appropriation)
- 15A NCAC 3I .0017 (fishery resource grants program rules)
- Kendall v. Stafford, 178 N.C. 461 (1919)
- Lexington Insulation Co. v. Davidson County, 243 N.C. 252 (1955)
- State v. Williams, 153 N.C. 595 (1910)
- N.C. Board of Ethics, Interpretive Memo #1 (April 5, 1985)
Source
Original opinion text
March 7, 1995
Mr. Robert Lucas, Chairman Marine Fisheries Commission
P. O. Box 309 Selma, North Carolina 27576
Re: Advisory Opinion: Fishery Resource Grants Program; N.C.G.S. 14-234(a); 1993 N.C. Session Laws, Chapter 769, §27.17
Dear Chairman Lucas:
You have asked for guidance from this office concerning the potential conflict of interest if members of the Marine Fisheries Commission (or their families), or persons appointed to Commission Advisory Committees (or their families), were to receive fishery resource grants pursuant to 15A NCAC 3I .0017 and Chapter 769 of the 1993 N.C. Session Laws. The grants are to be awarded by the Marine Fisheries Commission for research projects that will assess new coastal fisheries equipment, techniques and trends, examine environmental impacts on marine and estuarine fisheries, or otherwise enhance state coastal fisheries resources.
There are many legal principles at issue involving conflicts of interest when members of the public serve on state boards and commissions. Generally, the questions that arise regarding conflicts of interest involve the application of the judgment of the individual members to Commission matters that involve a member's private pecuniary interests. In order to guide commissioners in avoiding conflicts, our office generally directs public officers to the following definitions:
Actual Conflict: A very narrow situation in which the subject (e.g. a state agent) has a financial interest whose very existence poses a conflict with the public interest that he or she has an official duty to protect.
Potential Conflict: A situation in which the subject (e.g. a state agent) can make specific decisions to benefit personal interests at the public expense, is in a position to use confidential information for private use, or can use influence to benefit personal interests at the public expense. (Excerpt from April 5, 1985, Interpretative Memo #1, N.C. Board of Ethics.)
Your Commission members should keep these definitions in mind as they face decisions in the fishery resource grant program. What those definitions mean, in practical terms, is that public policy generally requires that self-interest, the appearance of self-interest, or pecuniary gain be avoided. In Kendall v. Stafford, 178 N.C. 461, 464 (1919), a case involving a pay raise for themselves voted on by a city council, the N.C. Supreme Court held, "The public policy of the State, found in the statutes and judicial decisions, has been pronounced against permitting one to sit in judgment on his own cause, or to act on a matter affecting the public when he has a direct pecuniary interest, and this is a principle of the common law which has existed for hundreds of years."
In addition, as the Commission considers grant applications and recommendations, we direct your attention to the specific provisions of N.C.G.S. 14-234(a), which reads, as follows: If any person appointed or elected a commissioner or director to discharge any trust wherein the State or any county, city or town may be in any manner interested shall become an undertaker, or make any contract for his own benefit, under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof, either privately or openly, singly or jointly with another, he shall be guilty of a misdemeanor. Provided, that this section shall not apply to public officials transacting business with banks or banking institutions or savings and loan associations or public utilities regulated under the provisions of Chapter 62 of the General Statutes in regular course of business: Provided further, that such undertaking or contracting shall be authorized by said governing board by specific resolutions on which such public official shall not vote.
The N.C. Supreme Court has interpreted this provision, stating: "The General Assembly …, in adopting this Act, … made the condemnation of the transactions embraced within the terms thereof a part of the public policy of the State so as to remove from public officials the temptation to take advantage of their official positions to 'feather their own nests' …." Lexington Insulation Co. v. Davidson County, 243 NC 252, 254 (1955).
In our opinion, the situation with which you have your principle concern, the potential grant of fishery resource funds to members of the Marine Fisheries Commission, falls within the coverage of N.C.G.S. 14-234(a). Further, the conflict which we perceive in a Commission member so contracting with the Marine Fisheries Commission to his benefit cannot be avoided by removing himself from the Commission consideration or vote on such a grant proposal. State v. Williams, 153 NC 595, 599 (1910). As stated in Williams, "[t]he application of the rule may in some instances appear to bear hard upon individuals who have committed no moral wrong; but it is essential to the keeping of all parties filling a fiduciary character to their duty, to preserve the rule in its integrity …." Of course, no violation exists under this statute unless or until the Commission actually awards contracts to persons who fall within the ambit of that provision.
Having addressed your central concern as to members of the Marine Fisheries Commission receiving fishery resource grants, we turn to the several other categories of potential grantees you have mentioned. While the awarding of fishery resource grants to family members of Commissioners may technically not violate N.C.G.S. 14-234, it would, at best, seem to be at odds with the common law's treatment of conflicts as set out in relevant North Carolina case law, in having the appearance of self-interest. The award of fishery resource grants to Commission Advisory Committee members or their families would appear to be less of a problem, because those persons have no vote as to the final award decision. However, where relevant, the full Commission should be apprised of the interest of an Advisory Committee member in a specific grant proposal prior to the Commissions' voting on the proposal. Similarly, Commissioners who are members of organizations that have submitted fishery resource grant proposals, should fully disclose that interest during the discussion preceding the vote on an affected grant proposal. In those cases where Commissioners are officers or directors in an organization applying for a grant, it would be wise for the Commissioner not only to disclose that fact, but to abstain from voting on award of the grant.
We hope this is responsive to your question. Please advise if you feel clarification is necessary.
Daniel C. Oakley Senior Deputy Attorney General
*Timothy D. Nifong *
Assistant Attorney General