October 9, 1989
Ms. Lynn B. Polson Opinion No. JM-1107
Acting Executive Director
Department of Information Re: Construction of conflict
Resources of interest provisions of
P. 0. Box 13564 article 4413(32j), V.T.C.S.,
Austin, Texas 78711 which creates the Department
of Information Resources
(RQ-1802)
Dear Ms. Polson:
On behalf of the Department of Information Resources
you request an interpretation of the conflict of interest
PrOViSiOnS in section 8 of article 4413(32j), V.T.C.S. This
statute, enacted by the 71st Legislature as House Bill 2736,
establishes the Department of Information Resources, grants
it powers and duties formerly vested in the Automated
Information and Telecommunications Council, and abolishes
the council. See Acts 1989, 71st Leg., ch. 788, § 1, at
3569. You are concerned about the following two conflict of
interest provisions:
(a) A member of the board or an employee
of the department may not:
. . . .
(3) own, control, or have, directly or
indirectly, more than a 10 percent interest
in a business entity that has a substantial
interest in the information resources tech-
nologies industry and that may contract with
state government;
(4) receive more than 25 percent of the
person's income from a business entity that
has a substantial interest in the information
resources technologies industry and that may
contract with state government . . . .
V.T.C.S. art. 4413(32j), 5 8. "Information resources
technologies" is defined as "data processing and tele-
communications hardware,. software, services, supplies,
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Ms. Lynn B. Polson - Page 2 (JM-1107)
personnel, facility resources, maintenance, and training."
Id. 5 3(4).
The Department of Information Resources was established
to coordinate and direct the use of information resources
technologies by state agencies and to ensure that the most
cost effective and useful methods are implemented. L!L § 1.
To carry out these goals, you state that you must employ
highly trained professionals with expertise in various areas
of computer technology. Many of these individuals have
worked in the private sector.
you are concerned about the effect of section 8(a)(3)
on your employment of persons who may have acquired stock in
their former employers through pension and stock ownership
plans. YOU also ask whether this section prohibits the
department from employing individuals whose parents have
partial ownership in such businesses.
Section 8(a)(3) applies if an employee owns more than a
10 percent interest in a business entity that has **a sub-
stantial interest in the information resources technolosies
industryn and that "may. contract with state government."
Your questions relate only to the person's ownership
interest in a business entity, and not to the magnitude of
the entity's interest in the industry or the possibility
that it may contract with the state. Nor do we address
these aspects of sections 8(a)(3) and 8(a)(4), except to
point out that these conditions must also exist for an
individual's employment to be barred.
Section 8(a)(3) applies to persons who "own. control,
gr have. directly or indirectly, more than a 10 percent
interest" in the described business entity. V.T.C.S. art.
4413(32j), 5 8 (emphasis added). This is expansive
language, and in our opinion it includes stock acquired by
the person through an employees' pension or stock ownership
plan. The individual's interest in the stock gives him a
personal stake in the former employer's economic welfare,
and creates a risk of divided loyalties if he were employed
by the department. Accordingly, when you determine whether
an applicant or employee has more than a 10 percent interest
in a business entity under section 8(a)(3), you must count
stock in former employers acquired through pension and stock
ownership plans.
We find no provision of law that attributes to an indi-
vidual a parent's ownership interest in a business entity.
Prior opinions of this office dealing with an analogous
question indicate that the parent's interest should not be
attributed to a child. Attorney General Opinion H-354
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Ms. Lynn B. Polson - Page 3 (JM-1107)
(1974) determined that the commissioners court of a county
could purchase fuel from a corporation owned by a brother of
one of the commissioners. The county was prohibited by law
from entering into a contract in which a commissioner had a
direct or indirect pecuniary interest, but, the opinion
stated, "the mere relationship of two brothers is not, in
and of itself, sufficient to establish the prohibited
interest." Attorney General Opinion H-354 at 3. See also
Attorney General Opinion O-2856 (1940); Letter Opinion 88-44
(1988). The fact that an applicant's or employee's parent
owns an interest in a business does not mean that the
applicant or employee would "own, control, or have" that
interest. In the absence of other facts showing that a
person actually owns or controls a parent's interest in a
business entity, the parent's interest should not be
included in determining whether the person owns, controls or
has more than a 10 percent interest in a particular business
entity.
You ask whether section 8(a)(3) prohibits the depart-
ment from employing individuals whose spouses have partial
ownership in a business entity with a "substantial interest
in the information resources technologies industry and
that may contract with state government." With respect to
section 8(a)(4), you ask whether community property laws
apply in determining whether an individual receives more
than 25 percent of his income from this kind of business
entity.
Prior opinions of this office have considered com-
munity property laws in addressing questions of conflict of
interest under particular statutes or common law rules. See
Attorney General Opinion JM-817 (1987) (university regent
has a personal pecuniary interest in spouse's salary from
corporation and income from his ownership interest):
Attorney General Opinion JM-126 (1984) (state officer's
community interest in her husband's salary does not
constitute a "substantial pecuniary interest" in the
facility that employs husband). On the basis of these
opinions, we conclude that you should consider community
property laws in applying sections 8(a)(3) and 8(a)(4).
You have not asked us about the application of the
conflict of interest provisions to a particular case
involving community property interests. Whether specific
individuals are barred from working for the department
must be resolved on a case-by-case.basis, by applying the
community property laws to the facts of each case. See.
e.s., Fam. Code ch. 5.
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Ms. Lynn B. Polson - Page 4 (JM-1107)
You do not ask, and we do not address, any constitu-
tional issue, either with respect to composition or to
duties. You inquire only about statutory construction. See
Attorney General Opinion JM-872 (1988).
SUMMARY
In applying the conflict of interest pro-
visions found in sections 8(a)(3) and 8(a)(4)
of article 4413(32j), V.T.C.S., the Depart-
ment of Information Resources should consider
an employee's community property interest in
his spouse‘s interests in or income from 'Ia
business entity that has a substantial in-
terest in the information resources tech-
nologies industry and that may contract with
state government." Whether specific indivi-
duals are barred from working for the depart-
ment must be determined on a case-by-case
basis. An applicant's or employee's stock in
a business entity acquired while an employee
of the business through a pension or stock
ownership plan should also be counted in
determining that individual's ownership
interest. A parent's interest in a business
entity should not be attributed to
individual, unless the facts show that ki
actually controls it.
J htJ&
Very truly yo
AA
JIM MATTOX
Attorney General of Texas
MARYKELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
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