From: Bluestein, Frayda S [mailto:bluestein@sog.unc.

edu]
Sent: Monday, May 02, 2011 02:43 PM
To: Danish, Julia
Subject: Conflict of Interest Question

Hi Rita:
I've set out below the facts you provided and my analysis. As you know, my colleague Eileen Youens also gave
an opinion on this matter to the newspaper, but apparently, based on a slightly different set of facts. I've sent
her my opinion and her response to you is pasted in below so you'll have this all in one place. I hope this is
helpful.

Facts Provided by City Attorney:

The City is considering awarding a solid waste management contract to several firms, one of
which is Gate City Waste Services. MRR Southern, LLC is a principal partner in Gate City
Waste Services. MRR Southern, LLC is partly owned by D.H. Griffin and David Griffin, Jr. The
two of them are officers and part owners of D.H. Griffin Companies. D.H. Griffin Companies
has business relationships with firms that are connected to Council member ZackMatheny and
Robbie Perkins. D.H. Griffin Companies is not an investor in orconducts business with Gate City
Waste Services.

Council member Zach Matheny is employed by Bell Partners, Inc. Prior to his employment, Bell
Partners, Inc. and D.H. Griffin Companies entered into a partnership for a redevelopment project
in Atlanta, Georgia. Councilmember Matheny is not involved in the project, nor does he receive
any income from or the project. Council member Matheny is a salaried employee with bonus
possibility of Bell Partners, Inc. None of Council member Matheny’s compensation is derived
from the project. Neither Council member Matheny, his spouse nor his employer is an investor
or does business with Gate City Waste Services, or MRR Southern, LLC,. Last week, Council
member Matheny sought a legal opinion from the City Attorney’s office concerning whether he
was prevented from participating or voting in this matter due to a financial conflict of interest. In
the interim Council member Matheny concluded that due to multiple contacts his company has
with D. H. Griffin, he had a financial interest in Gate City Waste Services. Council member
Matheny issued a statement regarding his conflict and indicated that he would refrain from
participating in this matter. There is a News and Recordarticle with his statement on April 29,
2011.

Council member Robbie Perkins is President and 50% part owner of Piedmont Triad
Commercial Properties, Inc. Piedmont Triad Commercial Properties, Inc. has contracted with
Henry Carrison. Mr. Carrison is a former employee of D.H. Griffin Companies and is currently
an independent contractor for Mr. Perkins. Mr. Carrison performs property sales, leasing and
management services for Piedmont Triad Commercial Properties, Inc. Mr. Carrison receives a
commission for performing these services. Mr. Carrison performs these services for D.H. Griffin
Companies among others. Piedmont Triad Commercial Properties, Inc. receives the remainder of
the payments for work performed by Mr. Carrison. In 2010, the total payments received by
Piedmont Triad Commercial Properties, Inc. were less than $400.Neither Council member
Perkins, his spouse, nor Piedmont Triad Commercial Properties, Inc. is an investor or does
business with Gate City Waste Services, MRR Southern, LLC. There are currently multiple
signs for D.H. Griffin properties listed by Piedmont Triad. Carrison anticipates an ongoing
relationship with D. H. Griffin. Mr. Perkins when asked states that any financial interest that
may exist is neither a detrimental or persuasive one.

Analysis of conflict of interest question:

There are several state laws that address conflicts ofinterest in public contracting. G.S. 14-234
makes it a misdemeanor for a public official to derive a direct benefit from contracts with the
units of government they represent. The statute is very specific about what types of benefit will
result in a violation of the statute. Based on the fact presented, it appears that neither of the
situations here involves a direct benefit to the board members as defined in the statute.

Another statute, G.S. 160-75, involves the question of whether a board member may be excused
from voting due to a conflict of interest. It’s important to understand the effect of this statute. It
is often described as creating a “duty to vote.” The assumption is that if a person is present at a
meeting, the person must vote unless he or she is excused. Thepresumption is sufficiently strong,
that the statute itself says that if a person is present and has not been excused but fails to vote, the
vote counts as an affirmative vote. The statute creates only two grounds for a person to be
excused from voting: matters involving the consideration of the member's own financial interest
or official conduct.

It’s important to note that “financial interest” under the voting statute is broader than “direct
benefit” under the criminal statute. A financial interest may be either beneficial or detrimental.
Although in most cases, the concern is that the board member will stand to gain from his or her
vote, a potential financial loss can also create a conflict. For example, in a case where a matter
before the board involves the employer of a board member, it is possible that it can create a
conflict for that board member. This is the case even if the board member has no authority over
or involvement in the issue in his or her capacity with the company. The purpose of the statute is
to ensure that public officials are free to consider the greater public interest, rather than their
personal interest, when voting on public issues.

Applying these considerations to the two council members you describe, it’s clear that the
considerations are different for each of them. In the case of Council member Perkins, the issue is
whether the relationship with a contractor who also contracts with the company seeking business
with the city is significant enough to influence Perkins’ vote. It’s unclear whether a vote either
way on this contract would affect the relationship; one must speculate on a series of intervening
events to come up with a scenario involving benefit or detriment to the councilmember, and even
then, it does not appear that the amounts involved would be significant enough to influence the
member in voting. The facts presented do not seem to involve a financial interest that is
sufficiently extensive or likely to occur to warrant that Perkins be excused.

Council member Matheny, on the other hand is in the position of an employee whose employer
may have a significant interest in the success of its business partner. In this situation, he might
reasonably be concerned that a vote against D.H. Griffin’s interest would be viewed negatively
by his employer. As noted earlier, the issue is not whether he is personally involved in the joint
venture between the two companies, but instead, whether he might be personally at risk
financially if his vote displeases his employer. Of course, there may be no way of knowing
whether this risk is present, but the possibility that it could exist seems, in my view, to present a
conflict as a matter involving the member’s own financial interest.

I believe there has been reference to a city policy onconflicts of interest. Although many policies
encourage or even require board members to avoid even “the appearance” of a conflict, when it
comes to voting, the statute overrides these policies and imposes an obligation to vote which may
only be avoided for one of the reasons listed in the statute. The analysis is whether the matter
actually involves a member’s financial interest, not whether the vote would appear to be
inappropriate. Each specific case involves judgments about the extent and likelihood of a
financial impact, weighed against the strong public policy of requiring board members to vote,
and preventing them from either voting when they have something to gain from the outcome, or
avoiding voting, when they would simply rather avoid taking a position. I have done my best to
assess the extent and likelihood of a financial interest in each situation, based on the facts
available. Obviously, a change in those facts or the disclosure of additional or different facts
could affect the analysis.

As to the process for excusing board members and related issues, I would refer you to my blog
post, which is here: http://sogweb.sog.unc.edu/blogs/localgovt/?p=765

Frayda Bluestein

Frayda S. Bluestein
Professor of Public Law and Government
Associate Dean for Faculty Development
School of Government
The University of North Carolina at Chapel Hill
Campus Box 3330, Knapp-Sanders Building
Chapel Hill, NC 27599-3330
T: 919.966.4203 F: 919.962.2370
www.sog.unc.edu

Rita,
I've reviewed Frayda's email and attachment, as well as the N&R article. When
speaking with the reporter, I did not understand the facts as set out in your memo
(whether because I misunderstood the reporter or made improper assumptions--I'm
not sure which). With the more complete picture provided by your memo, however,
I agree with what Frayda says. As Frayda points out, it is difficult to know with
certainty that this vote will "involv[e] the consideration of [Councilmember
Matheny]'s own financial interest," but the fact that the possibility is there suggests
that it may be better for the Councilmember to be excused from voting on this
matter. I will be out of the office tomorrow, but I'd be happy to follow up with you
later in the week if you'd like.
Sincerely,
Eileen
Eileen R. Youens
Assistant Professor of Public Law and Government
School of Government
The University of North Carolina at Chapel Hill
Campus Box 3330, Knapp-Sanders Building
Chapel Hill, NC 27599-3330
T: 919.962.0942 F: 919.962.0654
www.sog.unc.edu