City of San Antonio, Texas

 

Ethics Advisory Opinion No. 14

 

March 17, 1999

Issued By: City Attorney’s Office

 

Whether the City of San Antonio may enter into a contract with a company which employs the stepson of a Department Director and related question.

 

A Director of a City Department has asked whether the City of San Antonio may contract with a company that employs his stepson or with a company that employs his spouse. The following facts are presented:

A Department Director for the City of San Antonio is responsible for overseeing a number of divisions. His stepson is employed as the Manager of ABC Company ("ABC"). He does not have any ownership interest in ABC.

Additionally, his spouse is employed by XYZ Company ("XYZ") in a sales position. To his knowledge, the City has no formal contract with XYZ and few or limited informal contracts. XYZ does, however, have a contract sales division that is responsible for conducting business with the City.

The issue is whether a conflict of interest exists under the Ethics Code of the San Antonio if the City contracts with either ABC or XYZ, given his employment and relationship to the above individuals. The Ethics Code defines "city official" to include, among others, all department heads. As a city official, a Department Director is required to follow the standards of conduct as set out in the Ethics Code.

Improper Economic Benefit. As a general rule, a City official may not take any official action that he knows is likely to have an effect on, among others, his economic interest or the economic interest of his child or spouse that is distinguishable from the effect on the public in general. Should such occur, the City official is required to recuse himself immediately, refraining from any further participation in the matter, and disclose in writing to the City Clerk the economic benefit. Therefore, if the Director is required to take official action on a matter that has a direct effect on the economic interest on his stepson and/or his spouse, he must recuse himself from the matter and file the appropriate form with the City Clerk.

Unfair Advancement of Private Interests. Part B. Section 2[1] of the Code prohibits all City officials from using their position "to unfairly advance or impede private interests, or to grant or secure, or attempt to grant or secure, for any person (including himself [ ]) any form of special consideration, treatment, exemption, or advantage beyond that which is lawfully available to other persons." Under this section, the Director must not use his position as a City official to advance the interests of ABC and/or XYZ or give the impression of such. Failure to abide by this standard of conduct is a violation of the Ethics Code and subject to the penalties therein. If ABC or XYZ were to be awarded a contract through the competitive process, and the Director did not have any input on the selection and his staff brings the matter forward for Council consideration, then there would be no violation of the Ethics Code.

Prohibited Financial Interest. Part B, Section 10[2] of the Ethics Code prohibits city employees from having a financial interest in a contract with the City or its agencies, including SAWS. Under this section, a City employee is "any employee of the city who is required to file a financial disclosure statement pursuant to Section 1(a) of Part G[3]." As a Department Director, he is required to file such statement, and therefore is a City employee for purposes of this section.

However, to be in violation of this section, the employee must have a financial interest in a contract with the City. A financial interest includes, but is not limited to, a contract in which a party to the contract is a business entity in which the child and/or spouse owns 10% or more of the voting stock or shares of ABC and/or XYZ, respectively, or owns 10% or more of the fair market value of the business. The Director has stated that his son does not have an ownership interest in ABC and his spouse also does not have such interest in XYZ. Therefore, provided neither individual obtains such ownership interest, there would be no violation of this section.

 

SUMMARY

 

A department director must abide by the standards as set forth in the Ethics Code including recusal and disclosure should an economic benefit that is distinguishable from the public in general be conferred on his stepson or spouse. There is, however, no conflict of interest where the companies of a department director’s stepson or spouse contract with the City provided that neither individual owns 10% or more of the voting stock or shares or 10% or more of the fair market value of ABC Company ("ABC") or XYZ Company, respectively.

 

 

FRANK J. GARZA

City Attorney



[1]   Currently codified in Ethics Code Section 2-44

[2]   Currently codified in Ethics Code Section 2-52

[3]   Currently codified in Ethics Code Section 2-73(a)(1)