On March 16, the Ohio Attorney General released Opinion No. 2018-006, which again addresses board member interests in public contracts. In this instance, a member of a board of education leased a building through a limited liability company to the school district for which the part-owner served as a member of a board of education. This action was determined to violate R.C. 3313.33, which provides that no member of the board shall have, directly or indirectly, any pecuniary interest in any contract of the board. When such a condition arises, the board member must resign their position with the board of education or divest themselves of the contract.
In such situations, the lease can be determined void, voidable, or unenforceable at the reasonable discretion of the board of education. The OAG stated that a board of education may reasonably conclude that the lease continues to be valid and enforceable after the part-owner of the limited liability company takes office as a member of the board of education if several conditions are met:
- At the time that the lease was executed, the lease did not constitute a violation of 3313.33 for any member serving on the board of education at execution;
- After the part-owner takes office as a member of the board of education, the board of education takes no action to alter the terms of the lease that was executed before the part-owner took office.
- The board member divests himself or herself of the prohibited interest in the lease within a reasonable period of time after taking office.
For condition 3, the OAG opined that the person must act “immediately” to divest himself from the contract as part-owner if he wishes to remain a board of education member. Moreover, going forward, the board cannot enter into a new lease with the limited liability company after the current lease expires as long as the board member has an impermissible pecuniary interest in the lease.
The OAG also found that this circumstance could fall within the criminal provision in R.C. 2921.42, which makes it a criminal act for a public official to have an unlawful interest in a public contract. The exceptions include the following:
- Contracts for necessary supplies or services
- Where supplies or services that are unobtainable elsewhere or are being furnished as part of a continuing course of business established prior to the officials association with the public entity
- The treatment accorded the public entity is preferential to or the same as to other customers
- The entire transaction was conducted at arm’s length, with knowledge by the public agency and where the official takes no part in deliberations or discussions about the contract.
In this case, none of the exceptions applied.
The full opinion is available here.