4. Conflict of Interest
The Board may contract with a business entity in which a Board member has a substantial interest if the Board member follows the disclosure and abstention procedure set out below:
B.4.01 –Substantial Interest Affidavit and Abstention From Vote:
If a board member or a person related to a board member in the first degree by either affinity or consanguinity has a substantial interest in a business entity or in real property, the board member, before a vote or decision on any matter involving the business entity or the real property, shall file an affidavit with the official Board record-keeper stating the nature and extent of the interest and shall abstain from further participation in the matter if:
a. In the case of a substantial interest in a business entity, the action on the matter will have a special economic effect on the business entity that is distinguishable from the effect on the public; or
b. In the case of a substantial interest in real property, it is reasonably foreseeable that an action on the matter will have a special economic effect on the value of the property, distinguishable from its effect on the public.
B.4.02 -Separate Vote:
The Board shall take a separate vote on any budget item specifically dedicated to a contract with a business entity in which a Board member has a substantial interest. The affected Board member shall not participate in that separate vote, but may vote on a final budget if he or she filed the affidavit, and the matter in which he/she is concerned has been resolved. A Board member may perform an otherwise “prohibited act” (see below) if a majority of the Board members are required to file affidavits of similar interests on the official action.
B.4.03 Conflicts Disclosure Statements:
Each board member and the Chancellor, as a local government officer of the System, shall file a conflicts disclosure statement, as adopted by the Texas Ethics Commission, with respect to an applicable vendor if the vendor enters into a contract with the System or the System is considering entering into a contract with the vendor; and the vendor has an employment or other business relationship with the local government officer or a family member of the officer that results in the officer or family member receiving taxable income, other than investment income, that exceeds $2,500 during the 12 month period preceding the date the Board member or Chancellor becomes aware that a contract with a vendor described above has been executed or the System is considering entering a contract with the vendor; or has given to the local government officer or a family member of the officer one or more gifts, other than gifts of food, lodging, transportation, or entertainment accepted as a guest, that have an aggregate value of more than $250 in the 12-month period preceding the date the officer becomes aware that such a contract has been executed; or the local governmental entity is considering entering into a contract with the vendor.
A Board member is not required to file a conflicts disclosure statement in relation to a gift accepted by the officer or a family member of the officer if the gift is:
a. given by a family member of the person accepting the gift;
b. a political contribution as defined by Title 15, Election Code; or
c. food, lodging, transportation, or entertainment accepted as a guest.
The Board member and the Chancellor shall file the conflicts disclosure statement with the records administrator of the System not later than 5:00 p.m. on the seventh business day after the date on which the officer becomes aware of the facts that require the filing of the statement.
The System shall provide access on the System’s Internet Web site to all filed conflicts disclosure statements and questionnaires.
The conflicts disclosure statement is required in addition to the substantial interest affidavit and interest in property affidavit referenced below.
B.4.04 - Prohibited Acts:
Except as provided above, a Board member shall not knowingly:
a. Participate in a vote or decision on a matter involving a business entity or real property in which the Board member has a substantial interest if it is reasonably foreseeable that an action on the matter would have a special economic effect on the business entity that is distinguishable from the effect on the public, or will have a special economic effect on the value of the property, distinguishable from its effect on the public.
b. Act as surety for a business entity that has a contract, work or business with the System.
c. Act as surety on any official bond required of an officer of the System.
B.4.05 - Definitions
a. “Business Entity” -
Business entity means a sole proprietorship, partnership, firm, corporation, holding company, joint-stock company, receivership, trust or any other entity recognized by law.
b. “Substantial Interest” -
A person has a substantial interest in a business entity if either of the following is the case:
i. The person owns at least:-
• 10% of the voting stock or shares of the business entity; or
• Either 10% or $15,000 of the fair market value of the business entity; OR
• Funds received by the person from the business entity exceed 10% of the person’s gross income for the previous year.
A person has a substantial interest in real property if the interest is an equitable or legal ownership with a fair market value of $2,500 or more.
A Board member is considered to have a substantial interest if a person related in the first degree by either affinity or consanguinity to the Board member, as determined under Government Code Chapter 573 (See “Nepotism” Section {below and}, Chapter IV - Human Resources, Board Policy Manual), has a substantial interest, as defined above.
If a Board member is required to file, and does file an affidavit, that Board member shall not be required to abstain from further participation in the matter or matters requiring such an affidavit if a majority of the Board members are likewise required to file, and do file, affidavits of similar interests on the same official action.
c. “Local Government Officer”-
A local government officer is a member of the governing body of a local governmental entity, such as the System; or a director, superintendent, administrator, president, or other person designated as the executive officer of the local governmental entity, such as the Chancellor.
d. “Records Administrator” -
“Records administrator” means the director, superintendent or other person responsible for maintaining the records of the System, such as the Chancellor, or designee.
B.4.06 –Prohibited Practices:
Each Board member is a public servant of the System and the State of Texas.
“Public servant” means a person elected, selected, appointed, employed, or otherwise designated as one of the following, even if the person has not yet qualified for office or assumed his or her duties:
a. An officer, employee, or agent of government; or
b. A candidate for nomination or election to public office.
The following practices are strictly prohibited and include, but are not limited to, the following activities:
a. Bribery -
A Board member shall not intentionally or knowingly offer, confer, agree to confer, solicit, accept or agree to accept a benefit:
i. as consideration for the Board member’s decision, opinion, recommendation, vote or other exercise of official discretion;
ii. as consideration for a violation of a duty imposed on the Board member by law;
iii. that is a political contribution as defined by Title 15 of the Election Code, or an expenditure made and reported as a lobbying expense in accordance with Government Code, Chapter 305, if the benefit was offered, conferred, solicited, accepted or agreed to pursuant to an express agreement to take or withhold a specific exercise of official discretion, if such exercise of official discretion would not have been taken or withheld but for the benefit.
“Benefit” means anything reasonably regarded as pecuniary gain or pecuniary advantage, including benefit to any other person in whose welfare the Board member has a direct and substantial interest.
b. Abuse of Office -
A Board member shall not, with intent to obtain a benefit or with intent to harm another, intentionally or knowingly violate a law relating to the office, or misapply anything of value, belonging to the System, that has come into his/her custody by virtue of his/her office.
“Law relating to the office” means a law that specifically applies to a person acting in the capacity of a public servant, and that directly or indirectly imposes a duty on the public servant or governs the conduct of the public servant.
c. Bank Relations -
A Board member who is a stock holder, officer, director or employee of a bank that has bid to become a depository for the System shall not vote on the awarding of a depository contract to said bank.
If a Board member has a substantial interest in a bank with which the System is considering entering into a loan or other transaction besides a depository contract, the Board member must comply with the affidavit of abstention requirements.
d. Incompatibility of Office -
A Board member may not occupy two legally incompatible offices. Offices are legally incompatible when the faithful and independent exercise of one would necessarily interfere with the faithful and independent exercise of the other. A person may not serve in one branch of government while exercising any powers properly attached to either of the other branches of government.
e. Gifts -
A Board member exercises discretion in connection with contracts, purchases, payments, claims, and other pecuniary transactions involving the System. As such, a Board member shall not solicit, accept, or agree to accept any benefit from a person the Board member knows is interested in or likely to become interested in any such transactions of the System.
A Board member who receives an unsolicited benefit that he or she is prohibited from accepting under this section may donate the benefit to a governmental entity that has the authority to accept the gift or may donate the benefit to a recognized tax exempt charitable organization formed for educational, religious, or scientific purposes.
f. Nepotism -
Except as otherwise allowed by law, no person shall be employed in the System who is related to a member of the Board by blood (consanguinity) within the third degree, or by marriage (affinity) within the second degree. (See Nepotism Chart in this Chapter).
The Board shall not hire as an independent contractor for personal services an individual who is related to a Board member by blood (consanguinity) within the third degree, or by marriage (affinity) within the second degree. (See Nepotism Chart in this Chapter).
g. Disclosure of Interest in Property -
If a Board member or candidate for a Board member position has legal or equitable interest in any real property or personal property acquired with public funds, either by purchase or condemnation, and has actual notice of the acquisition or intended acquisition of the property, the Board member or candidate shall file an affidavit as follows:
i. The affidavit shall be filed with the county clerk(s) of the county or counties in which the property is located, and of the county in which the Board member or candidate resides, within ten (10) days prior to the acquisition of the property.
ii. The affidavit shall include the following information:
• The name of the Board member or candidate and the public office held or sought;
• A full and complete description of the property;
• A full description of the nature, type and amount of interest in the property, including, but not limited to, the percent ownership interest in the property, and the date the interest was acquired;
• A verification, as prescribed by law, of the truth of the information in the affidavit;
• An acknowledgment of the same type as required for the recording of deeds in the deed records of the county clerk’s office.
NOTE: Special requirements exist when federal funds are involved.
h. Employment of a Former Trustee -
A former trustee of the System may not accept employment with the System until the first anniversary of the date the Trustee’s membership on the Board ends.