Can a councilman's wife bid on a catering contract to provide a Christmas Dinner to
employees? Can a city employee who is not a director work for a catering contractor
who bids to provide a Christmas Dinner to employees?
You always ask such good questions. In order to give you the best response, I
discussed this matter with our Middle Tennessee MTAS attorney. The following includes
the "letter of the law" and a recommendation.
1. Let's talk about the situation with the councilman's wife first. The letter of the law is
as follows:
TCA 12-4-101 Personal interest of officers prohibited which states:
(a)(1) It shall not be lawful for any officer, committeeman, director, or other
person whose duty it is to vote for, let out, overlook, or in any manner to superintend any
work or any contract in which any municipal corporation, county, state, development
districts, utility districts, human resource agencies, and other political subdivisions
created by statute shall or may be interested, to be directly interested in any such
contract. "Directly interested" means any contract with the official himself or with any
business in which the official is the sole proprietor, a partner, or the person having
controlling interest.
TCA 6-54-107 Interest of officer in municipal contracts prohibited which also states:
(a) No person holding office under any municipal corporation shall, during the
time for which he or she was elected or appointed, be capable of contracting with such
corporation for the performance of any work which is to be paid for out of the treasury.
Nor shall such person be capable of holding or having any other direct interest in such a
contract. "Direct interest" means any contract with any business in which the official is
the sole proprietor, a partner, or the person having the controlling interest.
As stated in these two sections of the TCA, the councilman is prohibited from contracting
with the city to do work during the time for which he was elected. This prohibition,
however, does not necessarily extend to the catering business owned by the
councilman's wife. As I understand the interpretation of this statute, the wife of the
councilman may bid on the contract to cater the Employee Christmas Dinner for the
employees of the City as long as her catering business keeps books and checking
account(s) separately and apart from the family checking account(s). In other words, if
she has a "company checking account" completely separate from her home checking
account and she periodically writes herself a pay check from the business as household
income, there should be no problem.
To further insure that no conflict exists, the councilman and the wife would probably want
separate personal checking accounts themselves so they could more easily make the
case that there was no commingling of funds.
The explanation given above assumes that the councilman has no ownership in his
wife's business. Should the councilman, own part of the business, there may a direct or
indirect conflict depending on how great an interest he owns.
Penalties for violating these statutes are severe.
TCA 12-4-102 states that violators will forfeit all pay and compensation received
regarding the contract, be dismissed from office, and be ineligible to hold the same or
similar office for a period of ten (10) years.
TCA 6-54-108 further states that "Every officer of the corporation who shall unlawfully be
concerned in making such contract, or who shall unlawfully pay money upon the same to
or for any person declared incapable in TCA 6-54-107, shall forfeit the amount so paid;
and such officer shall be jointly and severally liable to an action for the same, which
action may be prosecuted by any citizen of the corporation in its name." This means that
every councilman who voted to accept the contract may be sued to pay the city back in
the event the councilman with whom the contract was made cannot.
RECOMMENDATION:
If the business arrangement of the councilman's wife satisfies the letter of the law, there
is no legal reason to prohibit her company from bidding for the Employee Christmas
Dinner. However, there is no guarantee against a citizen filing a lawsuit against the city,
the board, and the councilmen individually for supposed impropriety. Defending a
lawsuit is expensive, frivolous or not. I would recommend that the councilman's wife not
bid catering services on a city function.
2. The next question asked if there were any prohibitions against a company bidding
and being awarded a city contract if a city employee worked for that company.
There is no legal statute prohibiting a company from bidding and being awarded a city
contract just because a city employee works for the company.
Thank you for asking these questions. I'll fax you the applicable TCA sections for your
files.
Have a great day!