Ethics for Board Members, Part 2

Last fall, Kirk Strang presented at the Wisconsin Technical College System’s Legal Issues Conference, speaking on the topic of ethics for board members.

In Part 1 of the series, we focused on the authority of individual board members, board member ethical considerations, and the code of ethics for state public officials.

In Part 2, we continue the discussion on ethics for board members turning our attention to:

• Criminal Statutes Governing Board Member Ethics
• Conflicts of Interest
• District Board Codes of Ethics

CRIMINAL STATUTES GOVERNING BOARD MEMBER ETHICS

1. Private Interest in Public Contracts. Wis. Stat. § 946.13.

   1. Wis. Stat. § 946.13(1)(a) is violated when a public officer or public employee:

      In the officer's or employee's private capacity, negotiates or bids for or enters into a contract in which the officer or employee has a private pecuniary interest, direct or indirect, if at the same time the officer or employee is authorized or required by law to participate in the officer's or employee's capacity as such officer or employee in the making of that contract, or to perform in regard to that contract, some official function requiring the exercise of discretion on the officer's or employee's part.

      Wis. Stat. § 946.13(1)(a).

      The Attorney General has suggested that it may not be possible to avoid liability by merely abstaining from voting on a matter where he/she has a private pecuniary interest. Thus, the public officer or public employee should avoid making proposals in areas in which he/she is financially interested. 

      60 Op. Att’y Gen. 98 (1971).

   2. Wis. Stat. § 946.13(1)(b) is violated when a public officer or public employee: 

      In the officer's or employee's capacity as such officer or employee, participates in the making of a contract in which the officer or employee has a private pecuniary interest, direct or indirect, or performs in regard to that contract some function requiring the exercise of discretion on the officer's or employee's part.

      Wis. Stat. § 946.13(1)(b).

      • Wis. Stat. § 946.13(1)(b) applies to those with final authority to approve a contract, i.e., board members, as well as those who make recommendations regarding a contract, i.e., an administrator.
      • It is not clear whether a public officer or public employee may avoid liability by remaining “totally aloof” from the contracting process. 
      • The Attorney General has suggested that the statute is not violated if the public officer or public employee refrains from voting or discussing a contract or any matter relating to the contract and if the public officer or public employee does not personally or by agent negotiate or enter into the contract. 52 Op. Att’y Gen. 367 (1963).
      • This provision does not apply to a public officer or public employee by reason of his/her holding not more than 2% of the outstanding capital stock of a corporate body involved in such contract.

      Exceptions: This statute does not apply to the following:

      1. Contracts that do not involve receipts and disbursements by the governmental body aggregating more than $15,000 in any year. Wis. Stat. § 946.13(2).
      2. Contracts involving the deposit of public funds in public depositories.
      3. Contracts for the publication of legal notices required to be published, provided such notices are published at a rate not higher than that prescribed by law.
      4. Contracts for the issuance to a public officer or employee of tax titles, tax certificates, or instruments representing an interest in, or secured by, any fund consisting in whole or in part of taxes in the process of collection, provided such titles, certificates, or instruments are issued in payment of salary or other obligations due such officer or employee.

      Strict Liability: Wis. Stat. § 946.13 is a strict liability crime, meaning that there is no obligation to prove criminal intent. 

      • The public officer or public employee may be convicted even if he/she did not intend to violate the statute and if he/she did not know that his/her conduct violated the statute.
      • A defense of good faith will likely not be sufficient to avoid conviction.

      Penalties:

      1. A contract entered into in violation of Wis. Stat. § 946.13 is void and the governmental entity on whose behalf the contract is made incurs no liability for the contract, unless the contract creates a public debt.
      2. Any public officer or public employee who violates the statute is guilty of a Class I felony, which is punishable by a fine not to exceed $10,000 or imprisonment not to exceed 3 years and 6 months, or both. Wis. Stats. §§ 946.13, 939.50(3)(i).
      3. If the governmental entity declares the contract void, other parties to the contract may attempt to hold the public officer or public employee personally liable for damages. Reetz v. Kitch, 230 Wis. 1 (1939).

2. Misconduct in Public Office. Wis. Stat. § 946.12.

   A public officer or public employee is prohibited from:

   1. Intentionally failing or refusing to perform a known mandatory, nondiscretionary, ministerial duty of the officer’s or employee’s office or employment within the time or in the manner required by law. 
   2. In the officer’s or employee’s capacity as such officer or employee, doing an act which the officer or employee knows is in excess of the officer’s or employee’s lawful authority or which the officer or employee knows the officer or employee is forbidden by law to do in the officer’s or employee’s official capacity. 
   3. Whether by act of commission or omission, in the officer’s or employee’s capacity as such officer or employee exercises a discretionary power in a manner inconsistent with the duties of the officer's or employee's office or employment, or the rights of others, and with intent to obtain a dishonest advantage for the officer or employee or another. 
   4. In the officer’s or employee’s capacity as such officer or employee, makes an entry in an account or record book or return, certificate, report or statement which in a material respect the officer or employee intentionally falsifies.
   5. Under color of the officer’s or employee’s office or employment, intentionally solicits or accepts for the performance of any service or duty anything of value which the officer or employee knows is greater or less than is fixed by law.

   Penalties: Any public officer or public employee who violates the statute is guilty of a Class I felony, which is punishable by a fine not to exceed $10,000 or imprisonment not to exceed 3 years and 6 months, or both. Wis. Stats. §§ 946.12, 939.50(3)(i). 

3. Bribery of Public Officers and Public Employees. Wis. Stat. § 946.10(2).

   A public officer or public employee is prohibited from taking any of the following actions:

   1. Whoever, with intent to influence the conduct of any public officer or public employee in relation to any matter which by law is pending or might come before the officer or employee in the officer's or employee's capacity as such officer or employee or with intent to induce the officer or employee to do or omit to do any act in violation of the officer's or employee's lawful duty transfers or promises to the officer or employee or on the officer's or employee's behalf any property or any personal advantage which the officer or employee is not authorized to receive.
   2. Any public officer or public employee who directly or indirectly accepts or offers to accept any property or any personal advantage, which the officer or employee is not authorized to receive, pursuant to an understanding that the officer or employee will act in a certain manner in relation to any matter which by law is pending or might come before the officer or employee in the officer's or employee's capacity as such officer or employee or that the officer or employee will do or omit to do any act in violation of the officer's or employee's lawful duty.

   Penalties: Any public officer or public employee who violates Wis. Stat. § 946.10 is guilty of a Class H felony, which is punishable by a fine not to exceed $10,000 or imprisonment not to exceed 6 years, or both. Wis. Stats. §§ 946.10, 939.50(3)(h).

   This statute is not a strict liability offense; it is necessary to prove criminal intent. State v. Alfonsi, 33 Wis.2d 469 (1967).

CONFLICTS OF INTEREST

1. Common Law Conflict of Interest.

   Public officers are also subject to conflict of interest doctrines developed under the common law, i.e., the law that results from court decisions, instead of by statute or administrative code. 

   1. “The principle upon which public officers are denied the right to make contracts in their official capacity with themselves, or to be or become interested in contracts thus made, is evolved from the self-evident truth … that no person can, at one and the same time, faithfully serve two masters representing diverse or inconsistent interests.” Heffernen v. Green Bay, 266 Wis. 534 (1954).
   2. As a general rule, no public official may vote on any question (as well as any contract) in which he/she has a direct, personal, financial interest. Board of Supervisors of Oconto County v. Hall, 47 Wis. 208 (1879).
   3. As a trustee of the public, a public officer owes an undivided duty to the public he/she serves, and is not permitted to place himself/herself in a position which will subject him/her to conflicting duties or expose him/her to the temptation of action in any manner other than the best interests of the public. 58 Wis. Op. Att’y. Gen. 247 (1969).
   4. When it is proven that a public officer had a conflict of interest with regard to a matter upon which he/she voted, a court is likely to set aside the tainted vote and/or allow the governmental entity to declare the action void.
2. Incompatibility of Offices Doctrine.
   1. The Attorney General has stated: “two offices are incompatible if there is a conflict of interest or duties, so that the incumbent of one office cannot discharge with fidelity and proprietary the duties of both. Incompatibility is not simply a physical impossibility to discharge the duties of both offices at the same time, but is an inconsistency in the functions of the two offices.” 58 Wis. Op. Att’y. Gen. 247 (1969).
   2. Incompatibility is generally understood to mean a conflict or inconsistency in the function of two offices. It is almost always found to exist where one office is subordinate to another or subject to its supervision or control; where one office has the power of appointment or removal from the other; or where the exercise of authority in one office creates a conflict of interest related to the other office (i.e., salary negotiations, supervision and evaluation, auditing, etc.).
   3. When substantial conflicts of interest between two offices (or an office and employment) exist, the individual holding both cannot avoid incompatibility by abstaining from voting in certain areas. The doctrine of incompatibility of office is designed to avoid requiring an individual to make such decisions. Otradovec v. City of Green Bay, 118 Wis.2d 393 (Ct. App. 1984).

DISTRICT BOARD CODES OF ETHICS

Technical college boards may create their own Code of Ethics for board members and administration. 

1. Board Member Ethics.

   A local ethics policy can create more restrictions than those in Wisconsin law. However, technical college boards have little recourse for violations of a local policy. The board can censure a member that violates a policy, but it cannot impose monetary sanctions or remove a board member from his/her position.

2. Administrator Ethics.

   Since the board has control over administrative positions, it has more enforcement capabilities for an ethical code for administrators. Thus, a technical college board could impose discipline for ethical violations.

This brings us to the end of our series on ethics for board members. If you liked this series, you may also be interested in these articles …

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