Can county agencies and employees stay at a hotel owned by one of the county commissioners without putting that commissioner at risk of criminal liability for self-dealing?

Plain-English summary

A North Carolina county faced a recurring practical problem: a commissioner owned a hotel, and county agencies and employees wanted to know whether they could book rooms, meetings, or county events at that hotel without putting the commissioner at risk under N.C.G.S. § 14-234, the state's criminal self-dealing statute.

The AG drew a clean line based on Board involvement.

Scenario one (safe). A county agency or employee on its own picks the hotel for a meeting or event and pays with county funds. The Board of Commissioners is not consulted, does not vote, and does not approve the booking. In that situation, § 14-234 does not apply, because the statute targets contracts made or approved by the public body of which the official is a member.

Scenario two (risky). The Board of County Commissioners votes (or otherwise acts as a body) to hold the meeting at the hotel and pay with county funds. Even if the commissioner-owner abstains from the vote, the Board itself is making or approving the contract. In that situation, § 14-234 may apply.

The statute carves out two narrow exceptions: where the public official owns 10% or less of the business, and where the transaction is in a small county (no city with more than 7,500 people) and the official-owner abstains. Neither applied to the commissioner here, so the statute could not be avoided through those carve-outs.

The AG was careful to say the statute "may apply," not "does apply." Section 14-234 is a criminal statute, and only the local district attorney can decide whether to charge a violation. The AG's role was to mark the legal hazard, not to make a prosecutorial judgment.

Currency note

This opinion was issued in 1996. 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. Section 14-234 has been amended multiple times in the decades since this opinion, including substantial reorganization. The ownership-percentage threshold and small-county exception may have different parameters now. Anyone facing a real self-dealing question should look at the current text of § 14-234 and consult county counsel.

Background and statutory framework

N.C.G.S. § 14-234 is a longstanding criminal prohibition on public officials self-dealing through contracts with the public body they serve. The North Carolina Supreme Court explained its purpose in Lexington Insulation Co. v. Davidson County, 243 N.C. 252 (1955): to remove from public officials the temptation to take advantage of their official positions to "feather their own nests," by letting to themselves or to firms or corporations in which they are interested contracts for services, materials, supplies, or the like.

Subsection (a) of the statute makes it a misdemeanor for a public official to make any contract for his own benefit, or be in any manner concerned or interested in making such a contract, or in the profits thereof. The AG opinion read this language as targeting the act of the public body making or approving a contract, not the unilateral choice of an agency or employee outside the public body's decision-making process.

The statute's exceptions tell us the legislature understood that public officials sometimes have legitimate business relationships with their own governments. Subsection (c1) (the 10%-or-less exception) addresses the case where a public official has a minor interest in a larger business doing business with the public body. Subsection (d1) (the small-county exception) addresses the practical reality that in very small counties, the same handful of business owners often hold both elected positions and the only businesses able to supply local goods and services. Neither exception was a free pass; both required the official-owner to abstain from deliberation and vote.

The AG's case-by-case approach was practical. Counties could not always avoid every transaction with every commissioner-owned business, particularly in small counties. The AG's clean division between Board-driven decisions (statute applies) and agency-level decisions (statute does not apply) gave counties a workable rule: route the decision to a level below the Board to avoid the self-dealing problem entirely.

Common questions

Could the commissioner-owner just abstain from the vote and avoid the problem?

Not under § 14-234 as the AG read it. Abstention works inside the two narrow exceptions in (c1) and (d1), but those exceptions also require either small ownership or a small-county location. For a commissioner who held a majority interest in a hotel in a county with a city of more than 7,500, neither exception applied. Once the Board itself was involved in the contract, § 14-234 was triggered regardless of whether the owner-commissioner personally voted.

What about competitive bidding?

The opinion did not turn on bidding procedures. Even a properly-bid, lowest-price contract could trip § 14-234 if it ended up at a commissioner-owned business and the Board made or approved the contract. The self-dealing prohibition is a structural one, not a price-fairness one.

Why did the AG say "may apply" instead of "does apply"?

Section 14-234 is a criminal statute. AG opinions provide guidance to civil officials about how to avoid legal liability, but the actual prosecutorial decision rests with the local district attorney. Hedging the answer as "may apply" was the AG's way of saying: this is your warning to stay out of the danger zone, but only a DA can charge a violation.

Does the same rule apply to other elected boards (school boards, town councils)?

The opinion addressed county commissioners specifically, but § 14-234 by its terms applies to public officials generally. The Board-versus-agency division would likely apply by analogy: a school-board vote to contract with a board member's business runs into the statute, but a principal's unilateral choice of a vendor on her own authority probably does not.

Source

• Landing page: https://ncdoj.gov/opinions/use-by-county-agencies-and-employees-of-a-hotel-owned-by-a-member/

Citations

• N.C. Gen. Stat. § 14-234
• Lexington Insulation Co. v. Davidson County, 243 N.C. 252 (1955)

Original opinion text

(1) There is no Board of Commissioner involvement in planning the meeting or other activity from which the hotel space is used and which is paid for by county funds;

(2) The Board of County Commissioners vote, with or without Commissioner A's involvement, to hold a meeting or other county activity at the hotel and to pay for such meeting or other activity with county funds.

For reasons which follow, so long as the Board of County Commissioners is not involved in the making or approving of any contract or agreement to use the hotel, N.C.G.S. §14-234 does not present a problem. If the Board of County Commissioners is involved in any way, directly or indirectly, in making the decision to hold the meeting at the hotel owned by Commissioner A even though Commissioner A does not participate in the decision, N.C.G.S. §14-234 may present a problem.

As you know, the purpose of N.C.G.S. §14-234 is to remove from public officials the temptation to take advantage of their official positions to "feather their own nests," by letting to themselves or to firms or corporations in which they are interested contracts for services, materials, supplies, or the like. See, Lexington Insulation Co. v. Davidson County, 243 N.C. 252 (1955). Our office, in interpreting the statute, has consistently opined that in order for the statute to apply the public body must be directly or indirectly involved in the making of a contract or agreement, or the approval of a contract or agreement to use the company or business which is owned by the member of the public body. If the public body is not involved in the transaction in any way, nor in the approval of the transaction, our office believes that N.C.G.S. §14-234 is inapplicable. Therefore, where there is no Board of Commissioner involvement in planning the meeting or other activity for which the hotel space is used and which is paid for by county funds, it is our opinion that N.C.G.S. §14-234 is not applicable.

On the other hand, where the Board of County Commissioners vote, with or without Commissioner's A involvement, to hold a meeting or other county activity at the hotel and to pay for such meeting or other activity with county funds, we believe that N.C.G.S. §14-234 may present a problem. Subsection (a) of the statute makes it a misdemeanor for a public official to "make any contract for his own benefit . . . or be in any manner concerned or interested in making such contract, or in the profits thereof . . . ." Moreover, the statute specifically exempts from its coverage a situation where the public official owns 10% or less of the business or entity doing business with the public body or where the transaction is located in a county that has no city having a population of more than 7,500, and the public official-owner does not participate in the deliberation or vote of the public body. Therefore, it is clear that the General Assembly recognized that there would only be certain instances where the business owned by the public official could in fact do business with the public body. See, N.C.G.S. §14-234 (c1) and (d1). Since Commissioner A does not fall within any of the exceptions, N.C.G.S. §14-234 may apply.

We have been careful to say that the statute "may apply." We do so because this is a criminal statute, and only the appropriate district attorney responsible for prosecuting criminal violations can give a definitive answer to this question.

Should you require anything further, please advise.

Andrew A. Vanore, Jr.
Chief Deputy Attorney General