STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6151

May 12, 1983

CONFLICT OF INTEREST:

Interest of legislator in automobile dealership doing business with the State

Interest of legislator in the contract of an automobile dealership doing business with the State where wife of the legislator has an ownership interest in dealership

A legislator having less than 1% of interest in an unlisted corporation or less than $25,000.00 interest in a listed corporation does not have a substantial conflict of interest in a contract between such automobile dealership corporation and the State, provided that the legislator does not solicit the contract, takes no part in negotiations for approval of or amendment to the contract, does not in any way represent either party in the transaction, and the contract is not with the Legislature.

An automobile dealership corporation in which the wife of a legislator has a separate interest may do business with the State provided that the legislator does not solicit the contract, takes no part in negotiations for approval of or amendment of the contract, and in no way represents either party in the transaction.

Honorable Robert A. Welborn

State Senator

The Capitol

Lansing, Michigan

Stating that you intend to become a minority stockholder in a corporation which will be operating a new automobile dealership in Michigan, you have requested my opinion whether such a corporation will be able to do business with the State of Michigan in light of Const 1963, art 4, Sec. 10 and 1968 PA 318; MCLA 15.301 et seq; MSA 4.1700(21) et seq.

Const 1963, art 4, Sec. 10 provides:

Under the common law, public officers were not permitted to be interested in contracts with a governmental unit which they represent. Const 1963, art 4, Sec. 10 prohibits a legislator or state officer from having a direct or indirect interest in a contract with the state, which causes a 'substantial conflict of interest.' That term means a legislator or state officer has a material, pecuniary or beneficial interest. OAG, 1965-1966, No 4492, p 216, 226-230 (March 10, 1966). A 'substantial conflict of interest' may be present where a state legislator or officer participates in the negotiation of or in the performance of the contract. See, Woodward v City of Wakefield, 236 Mich 417; 210 NW 322 (1926); and OAG, 1967-1968, No 4646, p 253, 259-260 (June 18, 1968).

The Legislature is empowered to implement Const 1963, art 4, Sec. 10 and has done so in 1968 PA 318, supra. Under that Act, whether a substantial conflict of interest exists must be decided on a case-by-case basis. OAG, 1973-1974, No 4799, p 116, 120 (February 1, 1974).

Certain situations have been defined in 1968 PA 318, supra, Sec. 4, as involving no substantial conflict of interest. Subsection (a) indicates that when a legislator has 1% or less of the total stock of an unlisted corporation or not in excess of $25,000.00 interest in stock of a listed corporation, then there is no substantial conflict.

Under subsection (b), when a legislator or state officer has more than a 1% interest in an unlisted corporation, when he or she is a director, officer partner, member or employee of a firm or corporation, or when the firm or corporation is indebted to a legislator or state officer, then a contract with the government is valid only:

Subsection (c) indicates contracts between governmental units are not prohibited. Subsection (d) excepts contracts awarded to the lowest bidder on sealed bids, but if a legislator or state officer has an interest in the firm or corporation, bid contracts cannot be amended or renegotiated and no additional payments can be authorized after the bid is awarded. Subsection (e) excepts contracts for regulated, public utility services.

You have also indicated that it is possible that you would hold no stock in the car agency, but your wife would be a majority shareholder. Generally, a spouse's separate interests do not create a conflict of interest. OAG, 1933-1934, p 316 (August 26, 1933); and OAG, 1975-1976, No 4869, p 95 (June 4, 1975). However, as stated earlier, a legislator or the state officer must avoid involvement in any such contractual relationship. See, Woodward v City of Wakefield, supra.

It is my opinion, therefore, that a legislator having less than 1% of interest in an unlisted corporation or less than $25,000.00 interest in a listed corporation does not have a substantial conflict of interest in a contract between such automobile dealership corporation and the State, provided that the legislator does not solicit the contract, takes no part in negotiations for approval of or amendment to the contract, does not in any way represent either party in the transaction, and the contract is not with the Legislature.

It is further my opinion that an automobile dealership corporation in which the wife of a legislator has a separate interest may do business with the State provided that the legislator does not solicit the contract, takes no part in negotiations for approval of or amendment of the contract, and in no way represents either party in the transaction.

Frank J. Kelley