What gifts can a Texas state board member take from companies that might win a state contract?

TX AG Opinion GA-0679: What does the DIR conflict-of-interest gift ban actually prohibit?

Plain-English summary

The executive director of the Texas Department of Information Resources asked the Attorney General to construe a conflict-of-interest statute, Government Code section 2054.022(a)(7). That provision says a board member or the executive director "may not ... accept or receive money or another thing of value from an individual, firm, or corporation to whom a contract may be awarded, directly or indirectly, by rebate, gift, or otherwise." In the director's view, the words "contract" and "may" were so broad that board members could not tell what was prohibited.

The opinion answered three points. First, on "contract": although six of the seven conflict-of-interest provisions in section 2054.022(a) expressly concern information resources technologies, subsection (a)(7) has no such limit. Reading it in light of the board's statutory duties, the opinion concluded it reaches contracts that may be awarded by the department or by state agencies subject to the department's review, oversight, and reporting responsibilities, whether or not those contracts involve information technology.

Second, on "may": the opinion held the word does not include every conceivable possibility. An entity "to whom a contract may be awarded" is one with a practical possibility of being awarded a contract by the department or by a covered state agency.

Third, on what kinds of transfers are barred: the phrase "by rebate, gift, or otherwise" limits the ban to transfers in the nature of a gift or rebate, that is, a conveyance suggesting a lack of quid pro quo. Subsection (a)(4), which permits up to 25 percent of a member's income from a covered industry, signals that not every financial dealing is a conflict. Whether a specific conveyance is prohibited depends on the circumstances, a determination the members and director make in the first instance.

Currency note

This opinion was issued in 2008. 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.

Government Code chapter 2054 has been amended since 2008. Confirm the current text of section 2054.022 before relying on this analysis.

Who this opinion affected (as of 2008)

DIR board members and the executive director: The opinion described the gift ban as covering money or things of value, by rebate or gift, from any entity with a practical chance of a contract from the department or a state agency the department oversees.

Vendors and contractors dealing with state IT procurement: The opinion treated the ban as reaching firms positioned to win covered contracts, not only those in the information-technology field.

The board, applying the statute: The opinion left the case-by-case judgment of whether a particular conveyance is prohibited to the individual members and the executive director, citing section 2054.025(c).

Common questions

Does the ban only cover information-technology contracts?
No. The opinion concluded subsection (a)(7), unlike the other six provisions, is not limited to information resources technologies. It reaches any contract within the department's responsibilities or the responsibilities of state agencies the department oversees.

What does "to whom a contract may be awarded" mean?
The opinion read "may" to require a practical possibility, not every conceivable one. The entity must have a realistic chance of being awarded a covered contract.

Are all gifts and payments from such a company off limits?
The opinion read the ban to cover transfers "by rebate, gift, or otherwise," meaning conveyances in the nature of a gift, with no return consideration. It also pointed to subsection (a)(4), which allows up to 25 percent of a member's income from a covered industry, as a sign that not every transaction is a conflict.

Who decides whether a particular gift crosses the line?
The opinion said that determination is made in the first instance by the individual board members and the executive director, depending on the particular circumstances.

Background and statutory framework

Section 2054.022(a) lists seven conflicts of interest for a board member or executive director of the Department of Information Resources; six expressly concern "information resources technologies," but subsection (a)(7) does not (Tex. Gov't Code Ann. § 2054.022(a)(1)-(7) (Vernon Supp. 2008); see id. § 2054.003(8) (defining the term)). Courts construe a statute first from its language and intended purpose (Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 19 (Tex. 2007); Univ. of Tex. Sw. Med. Ctr. v. Loutzenhiser, 140 S.W.3d 351, 358-60 (Tex. 2004)). The word "may" tied to uncertain events is applied reasonably, not to every possibility (Europak, Inc. v. Hunt County, 507 S.W.2d 884, 887 (Tex. Civ. App.-Dallas 1974, no writ)); the Code Construction Act's general definition of "may" does not apply here (Tex. Gov't Code Ann. § 311.016(1) (Vernon 2005)). General words follow the particular ones they accompany (Hilco Elec. Coop. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003)), and a "gift" ordinarily implies a lack of return consideration (Long v. Long, 234 S.W.3d 34, 40 (Tex. App.-El Paso 2007, pet. denied) (citing Hilley v. Hilley, 342 S.W.2d 565, 569 (Tex. 1961))). The statute is construed consistently with all its provisions (Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004)), and undefined terms get their common meaning (Tex. Gov't Code Ann. § 311.011 (Vernon 2005)). The first-instance judgment rests with the members and director (id. § 2054.025(c) (Vernon 2000)).

Citations

Statutes:

• Tex. Gov't Code Ann. § 2054.022(a)(1)-(7) (Vernon Supp. 2008)
• Tex. Gov't Code Ann. § 2054.003(8)
• Tex. Gov't Code Ann. § 2054.025(c) (Vernon 2000)
• Tex. Gov't Code Ann. § 311.016(1); § 311.011 (Vernon 2005)

Cases:

• Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 19 (Tex. 2007)
• Univ. of Tex. Sw. Med. Ctr. v. Loutzenhiser, 140 S.W.3d 351, 358-60 (Tex. 2004)
• Europak, Inc. v. Hunt County, 507 S.W.2d 884, 887 (Tex. Civ. App.-Dallas 1974, no writ)
• Hilco Elec. Coop. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003)
• Long v. Long, 234 S.W.3d 34, 40 (Tex. App.-El Paso 2007, pet. denied)
• Hilley v. Hilley, 342 S.W.2d 565, 569 (Tex. 1961)
• Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0679
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2008/ga0679.pdf

Original opinion text

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

November 5, 2008

Mr. Brian S. Rawson, Executive Director
Texas Department of Information Resources
Post Office Box 13564
Austin, Texas 78711-3564

Opinion No. GA-0679

Re: Construction of a conflict of interest statute, Government Code section 2054.022(a)(7), which prohibits a board member or executive director of the Department of Information Resources from accepting or receiving "money or another thing of value from an individual, firm, or corporation to whom a contract may be awarded" (RQ-0706-GA)

Dear Mr. Rawson:

You ask about the construction of a conflict of interest statute, Government Code section 2054.022(a)(7), which applies to a board member or executive director of the Department of Information Resources (the "department" or "DIR"). Section 2054.022(a)(7) of the Government Code provides that a board member or the executive director "may not ... accept or receive money or another thing of value from an individual, firm, or corporation to whom a contract may be awarded, directly or indirectly, by rebate, gift, or otherwise." TEX. GOV'T CODE ANN. § 2054.022(a)(7) (Vernon Supp. 2008) (emphasis added). In your view, the words "contract" and "may" are so broad or vague that department board members cannot determine what actions are prohibited as a conflict of interest. Request Letter, supra note 1, at 2.

Courts construing a statute "begin with its language, and when possible, ... determine what the Legislature intended from its own words." Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 19 (Tex. 2007). Section 2054.022(a) contains seven provisions describing conduct, relationships, employment, and ownership interests that constitute a conflict of interest. TEX. GOV'T CODE ANN. § 2054.022(a)(1)-(7) (Vernon Supp. 2008). While six of the provisions expressly concern contracts or entities involving "information resources technologies," subsection (a)(7) contains no such reference. Id. Section 2054.022(a)(7) does not contain any qualifying or limiting language that would illuminate the meaning of the phrase "to whom a contract may be awarded."

However, in construing a statute we may also consider its intended purpose. Univ. of Tex. Sw. Med. Ctr. v. Loutzenhiser, 140 S.W.3d 351, 358-60 (Tex. 2004). Section 2054.022's manifest purpose is to enumerate conduct that poses a conflict of interest for a department board member or the executive director. TEX. GOV'T CODE ANN. § 2054.022 (Vernon Supp. 2008). From that purpose, we may reasonably presume that subsection (a)(7) concerns only contracts pertinent to the official functions of a department board member or its executive director. The board's responsibilities include promulgating department rules and policies, and preparing various reports about state government's use of information resources technologies to the Legislature and others. Id. §§ 2054.029(c), .055, .094, .102(b), .118(b) (Vernon 2000 & Supp. 2008). The DIR has responsibilities concerning department and state agency contracts, in addition to its advisory, coordinating, and support roles. And the board, as the governing body for the DIR, exercises authority impacting the DIR's contract responsibilities. Id. §§ 2054.021(a), .029(c) (Vernon Supp. 2008). Thus, when viewed in light of the board's statutory responsibilities, section 2054.022(a)(7) pertains to contracts that may be awarded by the DIR or by state agencies that are subject to the DIR's review, oversight, and reporting responsibilities. And while the majority of such contracts likely will pertain to information resource technologies, any other kinds of contracts within the scope of the DIR's responsibilities would also be included within subsection (a)(7)'s prohibition.

You also ask about subsection (a)(7)'s use of "may" in the phrase "to whom a contract may be awarded." Request Letter, supra note 1, at 3. Chapter 2054 does not define "may." Generally, when statutes use the word "may" in connection with uncertain events, "the significance of the word 'may' or 'might' is not to be taken as including every conceivable possibility, but must be reasonably applied, having in mind the purpose of the statute and the injury or possible wrong which it was designed to prevent." Europak, Inc. v. Hunt County, 507 S.W.2d 884, 887 (Tex. Civ. App.-Dallas 1974, no writ) (quoting Lewiston Milling Co. v. Cardiff, 266 F. 753, 759 (9th Cir. 1920)). Section 2054.022(a)(7) is manifestly intended to insulate board decision making from the potential for influence by entities that stand to benefit from the decisions of the board and the DIR. We conclude, then, that in section 2054.022(a)(7), an entity "to whom a contract may be awarded" is an entity having a practical possibility of being awarded a contract by the DIR or by a state agency that is subject to the review, oversight, or reporting responsibility of the DIR or the board.

Finally, while you focus on the meaning of the phrase "to whom a contract may be awarded," you also ask about the kinds of transactions prohibited by subsection (a)(7) when they occur between a board member or the executive director and an entity "to whom a contract may be awarded." Request Letter, supra note 1, at 2-3. Under subsection (a)(7), a board member or executive director may not "accept or receive money or another thing of value ... directly or indirectly, by rebate, gift, or otherwise" from certain entities that may contract with state government. TEX. GOV'T CODE ANN. § 2054.022(a)(7) (Vernon Supp. 2008). While the prohibition is broadly worded, other provisions of subsection (a) suggest that not all financial transactions with an entity that may contract with state government represent a conflict of interest. In particular, subsection (a)(4), which provides that a board member or executive director may not receive more than "25 percent of the individual's income from a business entity that has a substantial interest in the information resources technologies industry and that may contract with state government," suggests that income from such resources that does not exceed that amount is not, per se, a conflict of interest. Id. § 2054.022(a)(4).

Moreover, in subsection (a)(7) the phrase "accept or receive money or another thing of value" is modified by the phrase "by rebate, gift, or otherwise." Generally, "when words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation." Hilco Elec. Coop. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003). Applying that rule of construction, subsection (a)(7) concerns the acceptance or receipt of money or other thing of value only when the conveyance is in the nature of a gift, rebate, or similar transaction. While "gift" and "rebate" are not defined, the word "gift" ordinarily implies a lack of return consideration. Long v. Long, 234 S.W.3d 34, 40 (Tex. App.-El Paso 2007, pet. denied) (citing Hilley v. Hilley, 342 S.W.2d 565, 569 (Tex. 1961)). And in broad terms, a "rebate" is "a return of a part of a payment." MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 1037 (11th ed. 2005). Construing subsection 2054.022(a) as a whole, we conclude that subsection (a)(7) concerns the acceptance or receipt of money or other thing of value in the nature of a gift or other conveyance suggesting a lack of quid pro quo. See Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004) (holding that a statute's language should be construed consistently with all of its provisions).

In sum, section 2054.022(a)(7) prohibits a DIR board member or the executive director from accepting or receiving money or a thing of value by rebate, gift or otherwise, from an individual, firm, or corporation if there is a practical possibility that such entity will be awarded a contract by the department or by a state agency that is subject to the board's review, oversight, or reporting responsibilities. Whether a specific conveyance is prohibited by subsection (a)(7) will depend on the particular circumstances, a determination to be made in the first instance by the individual members and the executive director. TEX. GOV'T CODE ANN. § 2054.025(c) (Vernon 2000).

SUMMARY

Government Code section 2054.022(a)(7) prohibits a board member or the executive director of the Department of Information Resources from receiving money or a thing of value, by rebate, gift, or otherwise, from an individual, firm, or corporation when there is a practical possibility that such entity will be awarded a contract by the department or by a state agency that is subject to the review, oversight, or reporting responsibilities of the department or its board. Whether a specific conveyance is prohibited by subsection (a)(7) will depend on the particular circumstances, a determination to be made in the first instance by the individual members and the executive director.

KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

Footnotes:

1 See Letter from Brian S. Rawson, Executive Director, Texas Department of Information Resources, to Honorable Greg Abbott, Attorney General of Texas (Apr. 24, 2008) (on file with the Opinion Committee, also available at www.texasattorneygeneral.gov) [hereinafter Request Letter].

2 "Information resources technologies" is defined as "data processing and telecommunications hardware, software, services, supplies, personnel, facility resources, maintenance, and training." TEX. GOV'T CODE ANN. § 2054.003(8) (Vernon Supp. 2008).

3 See, e.g., id. §§ 2054.1015, 2157.068 (requiring DIR to negotiate the price of certain information technologies commodity items that state agencies may purchase through DIR), 2054.252 (requiring DIR to implement the Texas Online Project), 2054.351-.353, .375-.391 (requiring the DIR to administer a common electronic system for occupational licensing transactions and to establish statewide technology centers). See generally Dep't of Information Resources, Overview of Agency Scope and Functions, available at http://www.dir.state.tx.us/dir_overview/index.htm (last visited Oct. 31, 2008).

4 From context, it is clear that the Code Construction Act's definition of "may" as generally meaning authority, permission or power does not apply. See TEX. GOV'T CODE ANN. § 311.016(1) (Vernon 2005).

5 See TEX. GOV'T CODE ANN. § 311.011 (Vernon 2005) (providing that undefined terms are ordinarily given their common meaning).