November 9, 1989

FACTS:


You were elected as a Town (Town) Selectman earlier this year.
You are also the sole stockholder and an officer (but are not
otherwise an employee) of an ambulance services company (Company),
a Massachusetts corporation which is engaged in providing various
types of ambulance services in the southern part of the
Commonwealth. Less than 50% of the Company's gross income and
business concerns a contract with the Town to provide emergency
ambulance service. That portion of the business serving the Town
consists of approximately two ambulance vehicles and approximately
ten employees. The remaining 50% or so of the Company's business
is otherwise engaged primarily in other towns offering services
pursuant to private contracts.

In April, 1989, Town Counsel wrote to this Commission seeking
advice on your behalf as to the best way to divest your ownership
and interest of that portion of the business "within the time
constraints of G.L. c. 268A, s.20." In response to Town Counsel's
request, a commission staff letter was sent on June 7, 1989
advising you that c. 268A, s.20 prohibits your contract with the
Town while simultaneously serving as a Selectman. As no s.20
exemption was deemed to apply based upon the facts presented, and
based upon your desire to retain your elected position, the letter
advised Town Counsel that your only alternative was divestment of
your interest in the Company. The letter advised that the
divestment could occur in one of two ways: (i) divestment of that
portion of the Company doing business with the Town by transferring
the assets used therefor (including the contract) to an independent
third party for adequate consideration, or (ii) divestment of all
but 1% of your interest in the Company. Either of these would be
permitted under s.20.

You have now requested a formal Commission opinion, by letter
dated October 10, 1989. You state that you disagree with the
conclusion of the staff letter primarily for policy reasons. You
state that the voters of the Town were aware of your involvement
with the Company before they elected you to the office of
Selectman. You also ask whether the s.20(f) (or some other)
exemption applies to you. You advise us that the Commission may
rely on the factual representations made in Town Counsel's request
letter of April 1989.


QUESTIONS:


1. Does G.L. c. 268A, s.20 require you to dispose of your
interest in the Company because of its contract with the Town while
you are also serving as a Town Selectman?

2. Does the G.L. c. 268A, s.20(f) exemption apply to your
situation permitting you to continue your ownership interest in the
Company while serving as a Selectman? Is there any other exemption
available?

3. How long do you have to terminate or dispose of your interest
in the Company?

4. Is that termination necessary if you received a special
exemption in light of the policy arguments advanced by you?

5. If you do divest your interest in the Company, may you,
consistent with s.20, hold a repurchase option for the portion of
the business divested?


ANSWERS:

1. Yes.

2. No to both questions.

3. Pursuant to c. 268A, s.20, you have thirty (30) days to
terminate your interest from the time you receive this opinion.

4. No special exemption can be granted to you without action by
the General Court.

5. No.


DISCUSSION:

Section 20


1. Section 20 prohibits a municipal employee from having a
financial interest, directly or indirectly, in a contract made by
a municipal agency of the same city or town, in which the city or
town is an interested

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party, of which financial interest be has knowledge or has reason
to know, unless some exemption applies.

The Company has a contract with the Town to provide ambulance
services. You are the sole stockholder of the Company. You
therefore have a direct financial interest in a contract with the
Town. As a Selectman, you are a municipal employee for purposes of
c. 268A. Therefore, unless some s.20 exemption applies, you are
prohibited from continuing your ownership in that portion of the
business contracting with the Town while you are also serving as
a Selectman.[1]

2. Section 20(f) would permit a municipal employee to have such
a financial interest if "the contract is for personal services
in a part time or volunteer capacity with the police, fire, rescue
or ambulance department of a town or any city with a population of
less than thirty-five thousand inhabitants" (emphasis added). As
your previous attorney acknowledged in March 1988, in a letter to
this Commission, you are not an employee of the Company. You are,
however, its sole stockholder. Accordingly, your financial interest
in the contract with the Town, through the Company, is not for
personal services but rather the provision of ambulance services.

You are not personally obligated to do anything, hence no personal
services contract exists that would permit the s.20(f) exemption.

Whether a contract is for personal services depends upon the
nature of the services to be provided. For example, a personal
service contract terminates upon the death of the person obligated
to perform. See, Corbin on Contracts s.1335, Volume 6, page 378
(1962). You, as a stockholder and as an officer of the Company,
are not obligated to perform any services to the Town under the
contract. The Company is the contractually obligated party. Your
death will not terminate the Company's obligation. Accordingly,
your services are not for personal services to the Town as
envisioned by the s.20(f) exemption. See also, Kowal v. Sportswear
by Revere, Inc.,
351 Mass. 541, 544 (1967) (contracts are generally
held to survive the death of one of the parties. Contracts which
involve acts and services which can only be performed personally
by the promisor or some other particular person, however, are an
exception to this general rule. Such contracts terminate when death
renders the personal performance impossible).

This conclusion is consistent with s.20(b)(1), another conflict
section which includes a "personal services" reference. The issues
addressed by that section indicate that the personal service
guidelines were established to permit employment services of
individuals only at certain specified times. Section 20(b)(1)
first sets apart personal service contracts from other potential
municipal contracts under s.20 generally and then requires that the
personal services be "provided outside the normal working hours of
the municipal employee." The services provided also must not be
"required as part of the municipal employee's regular duties."
These guidelines would be superfluous to a corporation or other
entity providing services to a town or city pursuant to a contract.
Although one may contend that s.20(f) only requires that someone
provide personal servces, and not necessarily the contracting party
(for example, it can be argued that the Company's employees provide
the required personal services to the Company which, in turn, holds
the contract), such a reading would effectively undercut the
meaning of the s.20(f) exemption and also does not seem justified
by the restrictions of s.20 or by the legislative history of
s.20(f). See 1983 House Doc. No. 6030 and 1983 House Doc. 6529. See
also EC-COI-87-2
(a narrow construction of s.20(f) is
appropriate).[2]

This personal service exemption would have been available to you
if you were providing your services to the ambulance department of
the Town, on a part-time, call or voluntary basis. For example,
actually driving the ambulance to or from a call would qualify
under exemption.

Other than the divestment exemption of which you have been
previously advised, no s.20 exemption applies to you. The contract
does not quality for a s.20(b) exemption because (i) there is no
indication that the contract was awarded pursuant to either public
notice or competitive bidding (neither your attorney's letter of
March 1988, Town Counsel's letter of April, 1989, nor your letter
of October 10, 1989, indicates that this exemption was met although
you had previously been made aware of its provisions), and (ii) as
a Selectman, you have official responsibility for the activities
of the contracting agency.

3. Section 20(a) indicates that both the disclosure
the termination of the interest must take place within thirty days
after learning of an actual or prospective violation of s.20.
Accordingly, you will have thirty days from the date of receiving
actual or constructive notice of this opinion to dispose of your
interest in the Company's contract or to resign as Selectman of the
Town.

4. Any special legislative exemption would necessarily have to
be granted by the General Court, regardless of the policy reasons
cited by you. Amendments to s.20 indlcate that several policy

Page 262

exemptions have already been built into its provisions. This
Commission cannot create additional exemptions without authority
from the General Court.

5. Consistent with s.20, you may not hold an option to
repurchase any portion of the Company once you have "disposed" of
your interest because s.20 also prohibits indirect financial
interests. The repurchase option would be an indirect financial
interest prohibited by s.20.

---------------

[1] For purposes of c. 268A, s.20, your ownership of the Company
does not also make you a "municipal employee" such that, as a
Selectman, you would be eligible for the s.20 Selectman's exemption
for additional municipal appointments. See EC-COI-82-107. That
exemption would permit a Selectman to hold an additional municipal
appointment provided that the additiopal appointment was held first
and provided ftther that the Selectman chooses only one
compensation. Assuming, for the sake of argument, that the Company
is considered a municipal employee because of its contract with the
Town (although that designation in itself is unlikely) you, as
owner of the Company, do not become a municipal employee solely
because of your ownership interest. See e.g., EC-COI-85-1 (an
employee of a vendor agency that contracts with the state is not
customarily considered a state employee. If however, the contract's
terms call for a particular individual's services, that individual
is a state employee). The Company's contract with the Town does not
indicate that your services were specifically contracted for.
Because the additional position must have been held first, the
Company cannot now retroactively amend the contract to provide for
your specific services. Accordingly, you do not hold an additional
municipal appointment as a result, of your ownership of the
Company. You are therefore not eligible for the s.20 Selectman's
exemption.

[2] In any event, even if the Company's services were somehow able
to fall within the definition of "personal services," s.20(f)
states that the contract must be with "the police, fire, rescue,
or ambulance department of a town or any city." The Company's
contract was made by and between the Company and the Town, not the
rescue or ambulance department of the Town. Accordingly, the intent
of s.20(f) (that is, to permit a person to provide personal
services directly to an individual rescue or ambulance department)
is not met here because a corporate entity is providing contractual
services to the Town as a whole.

End Of Decision