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.
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?
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.
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
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.
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 services, 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).
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 indicate that several policy
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.