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Official Opinion 95-36

Official Opinion 95-36

August 14, 1995
To: 

Chairman

Board of Regents of the University System of Georgia

Re: 

The statutory proviso negating a "conflict of interest" situation for Board of Regents' employees who serve on the governing boards of the various private, nonprofit, educational, athletic and research foundations and associations affiliated with University System institutions is both express, and contained in legislation dealing specifically with "conflicts of interests" in government. This specific proviso in public sector legislation is in no way affected, limited or modified by a more recent amendment of Georgia's general corporation code placing certain "conflict of interest" disclosure requirements upon the directors and officers of private non-profit corporations.

This is in response to the Board of Regents' May 16, 1995 request, through its Associate Vice Chancellor for Legal Affairs, Elizabeth E. Neely, for an official opinion relating to college and university affiliated research foundations. The question posed concerns [*2]  the statutory proviso which expressly negates what would otherwise be a "conflict of interest" situation for Board of Regents' employees and administrators serving on the governing boards of the various foundations and associations which have been organized to support and further the interests of University System institutions. See O.C.G.A. § 45-10-23. The exceptive proviso is contained in public sector legislation dealing specifically with "conflicts of interests" in governmental service. You want to know whether it has been repealed, modified, or limited, or is in any way affected, by a more recent amendment of Georgia's general corporation code which operates in the private sector to place certain "conflict of interest" disclosure requirements upon the directors and officers of private nonprofit corporations generally.

By way of prefatory comment, it is well to observe at the outset that although typically organized as nonprofit corporations under this amended "Georgia Nonprofit Corporation Code," O.C.G.A. § 14-3-101, et seq., the various educational, athletic and research foundations and associations organized to support and further the interests [*3]  of the various University System colleges and universities with which they are affiliated, were never designed or intended to function as the more usual independent nonprofit or charitable organization which operates in the private sector in pursuance of its own independent charitable or beneficial ends. To the contrary, while these college and university related foundations and associations are indeed private corporations and not state agencies, they customarily function in a completely symbiotic relationship with the college or university whose interests they serve. The president and other top administrative officials of the college or university commonly serve on the governing boards of these affiliated foundations and associations. The reason usually given for this is the efficiency achieved through synchronization of operations and effort. Thus in Macon Telegraph Publishing Co. v. Board of Regents of the University System of Georgia, 256 Ga. 443, 444 (1986), where the chairman of the association was the University of Georgia's president, and its treasurer the University's vice-president of business and finance, the Supreme Court of Georgia found the evidence [*4]  to show that the University of Georgia Athletic Association was in fact operated as "the management tool" which Dr. Davison used to carry out his responsibilities in his Regents' position of President of the University of Georgia.

This symbiotic relationship between University System institutions and their educational, athletic and research foundations and associations has been given express recognition and protection in Georgia's legislation dealing with "conflicts of interest" in governmental service (i.e. on the part of public officers and employees). As amended in 1985, O.C.G.A. § 45-10-23(a), which in general prohibits state employees from transacting business with their own state agency, reads as follows:

"It shall be unlawful for any full-time employee, for himself or on behalf of any business, or for any business in which such employee or member of his family has a substantial interest to transact any business with the agency by which such employee is employed; provided, however, that neither this Code section nor any other provision of law shall prevent full-time employees of the Board of Regents of the University System of Georgia from serving as members  [*5]  of the governing boards of private, nonprofit, educational, athletic, or research related foundations and associations which are organized for the purpose of supporting institutions of higher education in this state and which in furtherance of this purpose may transact business with such institutions or with the Board of Regents of the University System of Georgia." O.C.G.A. § 45-10-23(a) (emphasis added).

As already stated, the question is whether this express statutory exceptive proviso which negates what would otherwise be a "conflict of interest" situation for Board of Regents' employees serving on the governing boards of these affiliated foundations and associations, set forth in legislation dealing specifically with "conflicts of interest" in governmental services, has been in any way repealed, superseded, limited or modified, by the referred to amendment of Georgia's general corporation code which places certain " conflict of interest" disclosure requirements upon the directors and officers of private nonprofit corporations in general. As amended in 1991, Part VI of the Georgia Nonprofit Corporation Code defines a "conflicting interest transaction"  [*6]  as one where the director of a corporation, his or her spouse, or certain other specified relatives:

"is a party to the transaction or has a beneficial financial interest in or so closely linked to the transaction and of such financial significance to the director or a related person that it would reasonably be expected to exert an influence on the director's judgment if the director were called upon to vote upon the transaction." O.C.G.A. § 14-3-860(1)(A) (emphasis added).

Under the Nonprofit Corporation Code, the director possessed of such a "conflict" is supposed to disclose his interest, including all of the facts known to him about the proposed transaction as would reasonably be necessary for the formation of a judgment by the other directors as to whether or not to proceed with a transaction. O.C.G.A. §§ 14-3-860(4); 14-3-862, 14-3-863. Under certain prescribed circumstances the nondisclosure of conflicting interest transactions may cause the transaction to be declared void. See generally O.C.G.A. §§ 14-3-861 to 14-3-865.

Obviously nothing in this amendment of Georgia's general nonprofit corporation code expressly repeals,  [*7]  limits, modifies, or so much as hints that it was designed or intended to affect the specific proviso of O.C.G.A. § 45-10-23(a) respecting Board of Regents employees who serve on the governing boards of institutionally affiliated foundations and associations. Is there any conflict between the two enactments from which it reasonably could be said that the two cannot harmoniously stand, and that the latter, by some undefined " implication," repeals, supersedes, limits or modifies the former? Absent the existence of this sort of "conflict," there obviously is no need to resort to the customary rules of statutory construction about harmonizing apparent conflicts if at all possible, and if this isn't possible, to determine which of the two irreconcilably conflicting provisions prevails. n1

n1 Repeals " by implication" are not favored. Where two statutes are seemingly in conflict, they are to be harmonized if at all possible, precisely to prevent the latter from operating as a repeal of the former "by implication." See State v. Gill, 173 Ga. App. 848, 850 (1985).

In this case, I do not see any "irreconcilable" conflict. I indeed see no conflict at all between the two [*8]  statutes. To trigger the application of the nonprofit corporation code, the director must be either (1) a party to the transaction, or (2) have a beneficial financial interest in, or be so closely linked to the transaction financially as would reasonably be expected to exert an influence on the director's judgment if called upon to vote on the transaction. O.C.G.A. § 14-3-860(1)(A). With respect to your critical concern about transactions between the foundation or association "and the Board of Regents," the Board's employee who is a member of a foundation or association's "governing body" would not be a "party" to the transaction. The parties would be the Board of Regents and the specific foundation or association involved. Nor would the employee/director have any discernible personal "beneficial financial interest" in the transaction.

A Regents' employee who is a member of the governing board of a foundation or association could, of course, have a personal financial interest in some other outside corporation or organization with which the foundation or association could be contemplating doing business. The "disclosure" requirements of the Georgia nonprofit corporation  [*9]  code obviously would apply in that situation and nothing in this opinion is to be taken as suggesting otherwise.  It is solely transactions between the foundation or association on one hand, and the Board of Regents (or its educational institution) on the other, to which your inquiry relates and this response is given. While I think the factual absence of any conflict in the language, not to mention thrust and purposes, of the two statutory enactments eliminates the need to go into the usual rules of construction which would be applied if any conflict in fact existed, I might mention in passing that the following rules would lead to precisely the same conclusion were any irreconcilable conflict found to exist:

 

(1) A statute which specifically relates to the very conduct in question (in this instance O.C.G.A. § 45-10-23(a)), controls over more generalized legislation, such as we have in this case of broad legislation about nonprofit corporations in general (i.e., O.C.G.A. § 14-3-860(1)(A)). See Georgia Mental Health Institute v. Brady, 262 Ga. 591, 592 (1993).

(2) The State and its agencies, inclusive of their governmental functions and operations, are not bound by the [*10]  passage of general legislation unless the State, its agencies, or their operations and functions are so plainly, clearly and unmistakably intended to be included in the general legislation as to leave no doubt as to the legislative intent. See O.C.G.A. § 1-3-8.

(3) The cardinal rule in construing statutes is that one tries to ascertain the intent of the General Assembly. O.C.G.A. § 1-3-1(a). In its express proviso concerning Board of Regents' employees serving on the governing boards of institutionally affiliated foundations and associations, in law dealing specifically with "conflict of interest" in government, the General Assembly stated its intent to be that neither this Code section "nor any other provision of law" would prevent full-time employees of the Board of Regents from so serving. O.C.G.A. § 45-10-23(a). The General Assembly is deemed to be aware of existing law when it enacts new legislation in the subject area. There is not so much as the slightest hint or suggestion that our General Assembly ever "intended," in amending general corporate law, to in any way affect the mandates and exceptions of O.C.G.A. § 45-10-23(a).

 

For all of the above [*11]  reasons, it is my official opinion that the statutory proviso negating a "conflict of interest" situation for Board of Regents' employees who serve on the governing boards of the various private, nonprofit educational, athletic and research foundations and associations affiliated with University System educational institutions, an exceptive proviso which is both express and contained in legislation dealing specifically with " conflicts of interest" in government, has nowise been repealed, limited or in any modified or affected by a more recent amendment of Georgia's general nonprofit corporation code so as to place certain "conflict of interest" disclosure requirements upon directors and officers of private nonprofit corporations generally.

Prepared by:

Alfred L. Evans, Jr.,

Senior Assistant Attorney General