April 18, 2024
To all interested persons:
Chris White
Klass Law Firm, LLP
4280 Sergeant Rd., Suite 290
Sioux City, IA 51106
Sent via email to white@klasslaw.com
Mr. White,
The following is in response to your request for an advisory opinion from the Iowa Ethics and Campaign Disclosure Board pursuant to Iowa Code section 68B.32A(12) and Iowa Administrative Code rule 351-1.2(1).
We note at the outset that the Board’s jurisdiction is limited to the application of Iowa Code chapters 68A, 68B, Iowa Code section 8.7, and rules in Iowa Administrative Code chapter 351. Advice in a Board opinion, if followed, constitutes a defense to a subsequent complaint based on the same facts and circumstances.[1]
BACKGROUND
You have been hired by Cherokee County for a matter involving a road vacation concerning Little Sioux Corn Processors, an Iowa limited liability company. Member(s) of the Cherokee County Board of Supervisors own stock in the company, but no supervisor owns more than 5% of total outstanding shares. Furthermore, no supervisor is an employee of the company, nor are they a member of the company’s board of directors or otherwise involved in company management.
QUESTION POSED
May a public official take official action concerning an urban renewal project that is subject to the official’s “control, inspection, review, audit, or enforcement authority” concerning an entity in which they own less than 5% of outstanding stock and where the official action would create a benefit for the entity?
OPINION
As noted in your request, the Iowa Supreme Court has ruled on comparable matters concerning public officials’ conflicts of interest. In 1969, the court held that “any ownership interest, no matter how small, disqualified the vote of a [city] council member.”[2] Following that decision, the state legislature took action to clarify the law as it applied to minority ownership interests, specifically for urban renewal projects. Iowa Code section 403.16(5) states:
Stock ownership in a corporation having such an interest shall not be deemed an indicia of an interest, or of ownership or control by the person owning such stocks, proscribed by this section when less than five percent of the outstanding stock of the corporation is owned or controlled directly or indirectly by such person.
In 1988, the court issued a ruling in Helmke clarifying that Iowa Code section 403.16(5) was an exemption to the prohibition on taking official action on matters of personal interest.[3] The justices also cited Iowa Code section 362.5, which applies the same standard for conflicts of interest to city officials who own less than 5% of stock in a company.[4]
However, the more expansive Iowa Code section 68B.2A was subsequently enacted in 1993, prohibiting three types of conflicts. Among those include “Outside employment or an activity that is subject to the official control, inspection, review, audit, or enforcement authority of the person, during the performance of the person’s duties of office or employment.”[5] In the event of the aforementioned conflict, public officials must cease the outside employment/activity or “publicly disclose the existence of the conflict and refrain from taking any official action or performing any official duty that would detrimentally affect or create a benefit for the outside employment or activity.”[6]
Ownership of less than 5% of a company, while largely passive in nature, qualifies as an activity for the purposes of Iowa Code section 68B.2A. Furthermore, the section does not provide any exemptions which would allow a public official to take official action in a way that would create a benefit for an outside activity of theirs. However, the following section states, “unless otherwise specifically provided the requirements of this section shall be in addition to, and shall not supersede, any other rights or remedies provided by law.”[7](emphasis added)
It is apparent that the plain language of Iowa Code section 403.16(5) does not regard stock ownership of less than 5% as an interest in a company. Because Iowa Code section 68B.2A “shall be in addition to, and shall not supersede” the right provided by Iowa Code section 403.16(5), action taken regarding urban renewal projects concerning companies in which public officials hold less than 5% of total outstanding shares is not prohibited by Iowa Code section 68B.2A.
For the aforementioned reasons, we read the conflict of interest statutes under our jurisdiction “in addition to” code sections providing guidance in other code chapters. The provisions of Iowa Code section 68B.2A do not supersede any other rights provided by law, and therefore, supervisors would be allowed to take official action on this matter if it falls under the provisions of Iowa Code chapter 403. However, we do not offer an opinion as to what projects are considered urban renewal and thus governed by Iowa Code chapter 403.
BY DIRECTION AND VOTE OF THE BOARD:
James Albert, Chair
Elaine Olson, Vice Chair
Jonathan Roos
Daniel Jessop
Leah Rodenberg
SUBMITTED BY:
Zachary S. Goodrich, Executive Director and Legal Counsel
ISSUED ON:
April 18, 2024
Pursuant to Iowa Administrative rule 351-1.3(3), a person who has received a board opinion may, within 30 days after the issuance of the opinion, request modification or reconsideration of the opinion. A request for modification or reconsideration shall be deemed denied unless the board acts upon the request within 60 days of receipt of the request. Pursuant to Iowa Administrative rule 351-1.3(6), a person who has received a board opinion or advice may petition for a declaratory order pursuant to Iowa Code section 17A.9. The Board will refuse to issue a declaratory order to a person who has previously received a board opinion on the same question, unless the requestor demonstrates a significant change in circumstances from those in the board opinion.
[1] Pursuant to Iowa Code section 68B.34A, any complaints against county officials for violations of Iowa Code chapter 68B shall be filed with the county attorney.
[2] Wilson v. Iowa City, et al., 165 N.W.2d 813, Iowa (1969).
[3] Helmke v. Board of Adjustment, City of Ruthven, 418 N.W.2d 346, Iowa (1988).
[4]Id at 349.
[5] Iowa Code section 68B.2A(1)(c).
[6]Iowa Code section 68B.2A(2)(b).
[7] Iowa Code section 68B.2A(3). e Iowa Ethics and Campaign Disclosure Board issues this Advisory Opinion sua sponte pursuant to Iowa Code section 68B.32A(12) and Iowa Administrative Code rule 351-1.2(1).
We note at the outset that the Board’s jurisdiction is limited to the application of Iowa Code chapters 68A, 68B, and rules in Iowa Administrative Code chapter 351. Advice in a Board advisory opinion, if followed, constitutes a defense to a subsequent complaint based on the same facts and circumstances.