Pecuniary Interest FAQ 1
What laws govern public officials in ethical matters?
The state statutes contain minimum standards of ethical conduct by local government officials. The statutes relating to ethics and conflicts of interest are interrelated and can be complicated. Because of the legal technicalities involved, many public officials may not, without additional training, fully understand all the intricate details of the various laws. However, public officials need to be able to recognize potential conflict situations.
Problems in this area can be avoided primarily by using common sense and applying the “smell test.” Stated broadly, when an official, a member of the official’s family or a business organization with whom the official is associated is involved in a municipal matter, the official needs to step back and question whether there are problems concerning his or her involvement in the matter. The official may want to discuss the situation with the municipal attorney. Local officials may also contact the League’s attorneys to discuss ethics issues.
Sometimes the law does not clearly prohibit an official from taking action but the public may perceive a conflict. In such situations, the official needs to balance the benefits of involvement (e.g., representing the electors, using the official’s expertise) against the drawbacks (e.g., how it would look, the risk of violating a law). Sometimes, even if it may be legal to act on a matter, you may not feel comfortable doing so or it may not look good to do so.
State Code of Ethics for Local Government Officials
A. Prohibited Conduct. The state ethics law for local officials, sec. 19.59, Stats., prohibits the following conduct:
1. Use of Office for Private Gain. Public officials are prohibited from using their offices to obtain financial gain or anything of substantial value for the private benefit of themselves, their immediate families, or organizations with which they are associated.
2. Offering or Receiving Anything of Value. No person may give and no public official may receive “anything of value” if it could reasonably be expected to influence the local public official’s vote, official action or judgment, or could reasonably be considered as a reward for any official action or inaction.
3. Taking Action Affecting a Matter in Which Official Has Financial Interest. Local officials may not take official action substantially affecting a matter in which the official, an immediate family member, or an organization with which the official is associated has a substantial financial interest. Additionally, an official may not use his or her office in a way that produces or assists in the production of a substantial benefit for the official, immediate family member or organization with which the official is associated.
The prohibitions under no. 3 above do not apply to lawful payments of expenses, benefits, or reimbursements, or prohibit an official from taking action “to modify” an ordinance.
1. "Immediate Family" means an official’s spouse or relative by marriage, lineal descent or adoption who receives, directly or indirectly, more than one-half of his or her support from the official or contributes, directly or indirectly, that amount for the official’s support. Sec. 19.42(7), Stats.
2. "Associated" with an Organization. An official is “associated” with an organization for purposes of the state ethics law when the individual or a member of the individual’s immediate family is an officer, director or trustee, or owns at least 10 percent of the organization. An individual is not associated with an organization merely because the individual is a member or employee of an organization or business. Sec. 19.42(2), Stats.
C. Abstaining from Official Action. The Government Accountability Board’s (GAB’s) Ethics Division suggests that when a matter in which a local official should not participate comes before a board, commission or other body which the official is a member, the official should leave that portion of the body’s meeting involving discussion, deliberations, or votes related to the matter. When an official withdraws from the body’s discussion, deliberation, and vote because of a potential conflict of interest, the body’s minutes should reflect the absence.
D. Local Ordinances. Municipalities can adopt ethics ordinances that:
require disclosure of economic interests
establish ethics boards
prescribe standards of conduct
establish forfeitures not exceeding $1,000
E. Ethics Opinions. Local officials may request advisory ethics opinions from the municipal ethics board or, if there is none, from the municipal attorney.
The local ethics board or attorney may issue a written advisory opinion. If the official follows the advice in the opinion, it is evidence of intent to comply with the law.
F. Penalties & Enforcement. Any person who violates the state ethics law may be required to forfeit up to $1,000. The law is enforced by the district attorney.
G. Interpretation. The GAB has issued guidelines that are available on its web site, http://gab.wi.gov/guidelines. They address the following topics.
1. Participating in General Policy Decisions. An official may participate in an action in which he or she has a personal interest as long as: (a) the action affects a class of similarly-situated interests; (b) the interest of the official, an immediate family member or an organization with which the official is associated is not significant when compared to other members of the class; and (c) the effect of the action on the interests of the official, an immediate family member and an organization with which the official is associated is not significant when compared to other members of the class.
2. Receipt of Goods & Services. Under the state ethics code, local officials may receive: (a) items and services that are unrelated to their public service; (b) payment or reimbursement for costs relating to their work as public officials; and c) items of insubstantial value.
Under the state ethics code, local officials may not: (a) receive items or services offered because of their public position, unless the value of such items or services is insubstantial; (b) receive items or services that could reasonably be expected to influence their judgment or could reasonably be considered a reward for official action or inaction. See Eth 219.
3. Seminars & Conferences. Generally, officials attending such functions may accept the meals and refreshments provided or approved by the event’s organizer and approved by the local governmental unit. An official should generally not accept food, drink or entertainment offered outside of the conference or activities at hospitality suites, receptions or similar activities.
Private Interests in Public Contracts (Pecuniary Interest)
A. General Prohibition. To protect against self dealing by public officials, sec. 946.13, Stats., generally prohibits public officials from having a private financial interest in a public contract. Thus, local officials are generally prohibited from entering into a contract for goods, services, construction or employment with the municipality.
1. Prohibition Against Official Action. A public official may not participate in the making of a contract in his or her official capacity if the official has a direct or indirect financial interest in the contract. Sec. 946.13(1)(b).
Since this is a prohibition on official action, abstaining from voting on the contract will prevent violation.
2. Prohibition Against Private Action. A public official may not in his or her private capacity negotiate or bid for or enter into a contract in which the public official has a direct or indirect financial interest if the official is “authorized or required by law to participate” in his capacity as such officer or employee in the making of that contract. Sec. 946.13(1)(a).
This latter provision is a prohibition on private action and a public official cannot avoid violating it merely by abstaining from voting because all that is necessary for a violation to occur is that the official be authorized to vote on or exercise discretion with regard to a contract in which the official has a private financial interest.
a. $15,000. Contracts in which receipts and disbursements do not, in the aggregate, exceed $15,000 in any one year.
b. Bankers. Bankers who receive less than $10,000 per year for serving on the city council or village board are exempted, unless the banker’s compensation is directly dependent on procuring public business.
c. Attorneys. Partners in a law firm that serves as legal counsel to the municipality who receive less than $10,000 per year for serving on the city council or village board are exempted, unless the individual has an interest in the law firm greater than 2 percent of its net profit or loss; the individual participates in the making of a contract between the municipality and the law firm; or the individual’s compensation from the law firm is directly dependent on procuring public business.
d. 2 percent of stock. There is an exception from sub. (l)(b), the prohibition on official action, for persons who own no more than 2 percent of the stock of the corporation involved.
4. Penalty: Violation of the statute is a Class E felony and subjects the person to a fine of not more than $10,000, imprisonment for not more than 2 years, or both.
A. Common Law Prohibition. The same person cannot hold two offices or an office and a position where one post is superior to the other or where, from a public policy perspective, it is improper for one person to discharge the duties of both posts. For example, in Otradovec v. City of Green Bay, 118 Wis.2d 393 (Ct. App. 1984), the court held that a council member could not work as assistant appraiser in the city assessor’s office.
1. Result. If a second office is taken that is incompatible with an existing office, the first office is vacated. In the case of office/position incompatibility, the outcome is unclear — person runs risk of losing first post, but court might allow choice.
2. General Rule of Thumb: Municipal governing body members may not hold other municipal offices or positions, unless specifically authorized by statute. This is because the governing body exercises control over such matters as the salaries, duties, and removal or discipline of most other municipal officers and employees.
3. Statutory Exception. Elected city, village and town officers can serve as volunteer firefighters or EMTs when annual compensation as an EMT or firefighter, including fringe benefits, does not exceed $15,000. Sec. 66.0501(4). Also, a county supervisor can serve on a common council or village board. Wis. Stat. sec. 59.10(4).
B. Related Statutory Prohibition. Section 66.0501(2) generally prohibits governing body members from taking municipal jobs. Under the statute:
1. Governing body members are prohibited, during the term for which the member is elected, from taking new municipal jobs created during their term of office even if they resign.
2. A governing body member may be appointed to an office or position which was not created during the member’s term in office as long as the member resigns first .
3. Governing body members may run at any time for new or existing elective office, but incompatibility doctrine applies if elected. Individuals may run for two elected local offices at the same time. Sec. 8.03(2m).
4. Governing body members may be appointed to serve on local boards and commissions (e.g., library board, and plan commission) where no additional remuneration other than a per diem is paid to such officers if other commission or board members receive such a per diem.
Other Statutory Prohibitions
A. Misconduct in Office. Section 946.12 is a criminal statute that prohibits public officers and employees from intentionally performing, or refusing to perform, certain acts. A violation of sec. 946.12 is punishable by up to two years in prison, a fine of up to $10,000, or both.
1. Section 946.12(1) prohibits a public official from intentionally failing or refusing to perform a “known mandatory, nondiscretionary, ministerial duty of his office or employment within the time or in the manner required by law.”
2. Section 946.12(2) prohibits a public official from doing an act which he or she knows is forbidden by law to do in an official capacity.
3. Section 946.12(3) provides that a public official may not, by an act of commission or omission, exercise a discretionary power in a manner inconsistent with the duties of office or the rights of others, with an intent to obtain a dishonest advantage for himself or another.
B. Bribery. Section 946.10(2) prohibits public officials from taking bribes. Section 12.11 prohibits public officials from promising an official appointment or anything of value to secure votes.C. Sale to Employees Prohibited. No municipal department or member of a municipal governing body may sell or procure for sale any municipal article, material or product to city or village employee, except meals, public services and special equipment necessary to protect the employee’s safety and health. Sec. 175.10. This statute is designed to prohibit governmental acquisition of products for resale to government employees.