Ethics Advisory Opinion No. 68
September 17, 2002
Issued By: City Attorney’s Office
May a former Director of the
Company (SALDC) sell a business to a buyer who seeks financing
for the purchase from SALDC?
I. Factual Background
San Antonio Local Development Company (SALDC) is a corporation created by the City to package and service Small Business Administration loans. Its objective is to promote the economic development of the City by providing financial assistance to small businesses. A board of eleven (11) directors governs SALDC. An individual who formerly served as a Director of SALDC owns a small business that she would like to sell. The potential buyer anticipates applying for a loan to fund the purchase through SALDC. The former director asks whether the San Antonio Code of Ethics would preclude her from selling her business under this proposed financing arrangement.
II. Applicable Authority – Prohibited Interest in Contracts
Within one (1) year of the termination of official duties, a former city officer or employee shall neither have a financial interest, direct or indirect, in any discretionary contract with the City[.]
Section 4(c) defines a "contract" as any discretionary contract other than a contract for the personal services of the former city official or employee. It also defines a "city officer" to include the Mayor or member of City Council, a Municipal judge or magistrate or a member of any board of commission which is more than advisory in nature.
SALDC is more than an advisory board. It is an agency that makes decisions regarding how City funds are distributed. Therefore, the former SALDC board member is a "City officer" for purposes of Part C of the Ethics Code. Because of this status, she is prohibited from having any financial interest, direct or indirect, in any discretionary contract with the City for one year after leaving City service.
According to the inquiry, the former director hopes to sell the business to a buyer who intends to obtain financing through SALDC. Since the buyer would be borrowing funds from SALDC funds to make the purchase, the former director would be the recipient of City money. This gives the former director a financial interest in this proposed financing contract.
As a former city official as the term is used in Part C,the former director cannot acquire a financial interest in a contract with the City for one year after leaving office. Accordingly, the former board member may not accept payment for the property in question if the buyer obtains the financing through SALDC within one year after terminating her service with the City.