CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION

MEMORANDUM To:

Members of the Red Wing City Council

Kay Kuhlmann, Council Administrator

From:

Jay T. Squires
John P. Edison

Re:

Conflict of Interest Issues Related to Mayor' s Employment with the Minnesota

Industrial Sand Council Our File No. 4001( 1) - 0712

Date:

February 8, 2013

INTRODUCTION

The purpose of this memorandum is to provide legal advice on the question of whether Red Wing Mayor Dennis Egan' s employment as the Executive Director of the
Minnesota Industrial Sand Council ( "Sand Council ") creates a conflict of interest in

violation of Minnesota law, the Red Wing City Charter, or any other applicable City
policy.

Mayor Egan' s work with the Sand Council appears to involve primarily lobbying
activities. It appears his lobbying activities will primarily address matters presented to

the Minnesota legislature. The Sand Council is a consortium of aggregate and trucking companies with interest in the silica sand industry. At this time, we do not have facts
related to how Mayor Egan will be compensated for his work with the Sand Council.

Ultimately, it may be necessary to obtain a copy of his employment agreement.

Minimally, we need to sit down with him and discuss his duties and activities with the
Sand Council in detail.

While the City Council is actively discussing ongoing issues involving truck and barge traffic related to silica sand mining operations, there are no frac sand facility
applications currently pending before the City. Late last fall, the City Council took action to address zoning issues related to silica sand mining and adopted a comprehensive Frac
Ordinance.

As discussed in detail below, there does not appear to be a conflict of interest at

the present time. Instead, the issue is primarily a public relations matter at this point.

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ANALYSIS I.

Statutory Conflict of Interest Analysis.

Under the circumstances, it does not appear the Mayor' s employment with the

Sand Council would create a statutory conflict of interest. The applicable statutory
conflict of interest provisions are outlined in Section 471. 87 of the Minnesota Statutes,
which provides:

Except as authorized in section 471. 88, a public officer who is authorized to

take part in any manner in making any sale, lease, or contract in official capacity shall not voluntarily have a personal financial interest in that sale,
lease, or contract or personally benefit financially therefrom. Every public officer who violates this provision is guilty of a gross misdemeanor.
Minn. Stat.

471. 87 ( emphasis added). As noted in the underlined language, a key inquiry is

whether a public officer would derive a personal financial interest or financial benefit from a
proposed sale, lease, or contract.

Based on the information we have at this time, it does not appear Mayor Egan would

derive the type ofpersonal financial benefit prohibited by statute through acting as Mayor while working for the Sand Council. There are a number of Attorney General opinions on this point. For example, the Attorney General determined that there was not a statutory
conflict of interest in a situation where a city entered into a contract with an architectural

firm that employed a member of the city council because the council member was paid on a salaried basis and did not stand to benefit financially from his firm' s contract with

the city. Op.Atty.Gen. 90 -E -5 ( Nov. 13, 1969). In another opinion, the Attorney General
opined that there was no statutory conflict of interest in a situation where a city purchased gasoline, oil, grease and anti -freeze from a tilling station that purchased products from
the mayor of the city who acted as an agent for an oil company. Op.Atty.Gen. 90e -5

March 6, 1959). The basis for this opinion was that the mayor' s dealings with the filling
station were separate and distinct from the city' s dealings with the filling station. Id.; see

also Op.Atty.Gen. 90B ( Jan. 23, 1956) ( indicating that the government entity must be a
party to a transaction in order for a statutory conflict of interest to exist).

In addition, by its terms, this statute only applies in situations when there is a sale, lease, or contract" at issue. According to the Attorney General, Section 471. 87 does not operate to bar a city council member from voting on the enactment or
amendment of a zoning ordinance that affects the council member' s property.

Op.Atty.Gen. 59a -32 ( Sept. 11, 1978). In issuing that opinion, the Attorney General also noted " to hold a city council is powerless to act whenever an ordinance will affect the individual interests of any member would render the police power wholly ineffectual in

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Id. At this point, it appears unlikely that the Minnesota Industrial Sand Council would be involved in any " sale, lease or contract" with the City.
many situations."

There are also conflict of interest provisions contained in Minnesota' s campaign

finance and public disclosure statutes. For example, certain public officials must comply
with specific reporting requirements if their official duties would require them to take an action or make a decision that would substantially affect the official' s financial interests or those of an associated business, unless " the effect on the official is no greater than on other members of the official' s business classification; profession, or occupation." Minn.

10A.07, subd. 1. Under this statute, a " financial interest" means "any ownership or control in an asset which has the potential to produce a monetary return." Minn. R. 4515. 0100, subp. 5. In addition, lobbyists are generally prohibited from giving gifts to officials and officials are likewise generally prohibited from accepting gifts from
lobbyists. Minn. Stat. 10A.071, subd. 2.

Stat.

Upon review of the definitions used in Chapter 10A, however, the provisions of

Sections IOA.07 and 10A.071 do not appear to apply in this case. The conflict of interest
provisions of Section l 0A.07 apply to a " public official" and a " local official elected to or appointed by a metropolitan governmental unit." Minn. Stat. 10A.07, subd. 1. The

term " public official" is defined in a way that would not include the Mayor of Red Wing.
Minn. Stat.

10A.01, subd. 35. In addition, the City of Red Wing would not fall within

the definition of a " metropolitan governmental unit." Minn. Stat. 10A.01, subd. 24.

Similarly, the Mayor of Red Wing is not an " official" for the purposes of interpreting
Section 10A.07 because the statute defines " official" as a " public official [ as defined in Section 10A.01, subd. 35], an employee of the legislature, a judge, or a local official of a
metropolitan governmental unit." Minn. Stat. 10A.071, subd. l ( c).

Based on the foregoing, it does not appear that Mayor Egan has a conflict of interest under Section 471. 87 or Chapter l0A simply due to his role as Mayor and his
position with the Sand Council. II.

Common Law Conflict of Interest Analysis.

In addition to the requirements of Section 471. 87; Minnesota courts have developed a separate common law conflict of interest analysis that is broader than the

statutory analysis. The critical distinction between the two is that a statutory conflict of interest is not cured when the interested public official abstains from voting, while a common law conflict of interest is. See, e.g., Op.Atty.Gen. (Dec. 5, 2002); Op.Atty.Gen.
90 -E -5 ( Nov. 13, 1969).

A common law conflict of interest exists when a public official has any " direct

interest" in the outcome of a matter before the governing body. See, e.g., Lenz v. Coon Creek Watershed Dist., 153 N.W.2d 209, 219 ( Minn. 1967); E.T.O. v. Town ofMarion,

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375 N.W.2d 815 ( Minn. 1985). Courts determine whether a conflict of interest exists by considering the following factors: ( 1) the nature of the decision being made; ( 2) the nature of the pecuniary interest; ( 3) the number of officials making the decision who are interested; (4) the need, if any, to have interested persons make the decision; and ( 5) the other means available, if any, such as the opportunity for review, that serve to ensure that the officials will not act arbitrarily to serve their own interests. Id. There is no settled
general rule as to when a public official with a direct interest is disqualified from

participating in a particular matter. Lenz, 153 N.W.2d at 220. A "direct interest" generally means some kind of financial interest. See, e.g., Twp. Bd. ofLake Valley Twp.
Traverse County v. Lewis, 234 N.W.2d 815, 819 ( 1975).
The case of State ex rel. Friends of the Riverfront v. City ofMinneapolis is

generally analogous to the issue currently facing the City. 751 N.W.2d 586 ( Minn. App. 2008). The case involved a proposed athletic facility on Nicollet Island in Minneapolis
intended for a private school. Id. at 588. The project required city approval, which was

granted following a hearing before the Minneapolis City Council. Id. One ofthe parties
in the case alleged the council decision was invalid because the council president was also on the private school' s board of trustees. Id. at 591 The Court of Appeals ruled the

council proceedings were not invalidated by the alleged conflict of interest, noting there were sufficient safeguards, such as the possibility of appealing the decision to the Courts,

to eliminate any concerns over improper bias. Id. at 592. Essentially, this case stands foi
the proposition that a public official' s involvement with an entity that takes one side of a

contentious issue, standing alone, does not create a conflict of interest. There must be additional facts showing the official has a " direct interest" in the outcome of a particular
proceeding or matter.

As discussed above, it does not appear that Mayor Egan would have a financial

interest in any matters pending before the City through his work with the Sand Council. Similarly, it does not appear that Mayor Egan, by virtue of his work with the Sand Council, would have a " direct interest" in any matter currently pending before the City
because the Sand Council has no direct dealings with the City at this time. See

Op.Atty.Gen. 59a -32 ( Sept. 11, 1978) ( city council member could not participate in
consideration of a zoning ordinance of narrow applicability that specifically affected the

member' s property under the common law conflict of interest analysis). However, since
courts analyze common law conflict of interest questions on a case -by -case basis, we
would need to examine specific proposed dealings between the Sand Council, or a

member of the Sand Council, and the City to offer an opinion on an individual future
dealing.
Even if a common law conflict existed, Mayor Egan would not be prohibited

outright from continuing to hold the position of Mayor and working for the Sand Council because a common law conflict of interest may be cured if the interested public official abstains from participating in the matter that gives rise to the conflict of interest.
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III.

City Regulations.

There are a variety of City regulations also potentially at play in this case. Based

on the facts described to us, we do not believe Mayor Egan is in violation of any of these
provisions. However, if the Council believes there are unanswered questions about the

nature of Mayor Egan' s work with the Sand Council, it may initiate an investigation under its power to make investigations " into the City' s affairs." See Charter Section
2. 09.

A. City Charter Provisions.

Section 9. 03 of the City Charter contains prohibitions on having a " direct personal
financial interest" or deriving a personal financial benefit from a contract or transaction. This provision largely parallels the state statute on conflicts of interest. This provision of
the Charter is also not, in our judgment, an issue because, as discussed above, we are not

aware of any anticipated dealings between the Sand Council and the City that would
result in a personal financial benefit to Mayor Egan.

Section 2. 05 of the Charter allows for an elected officer to be removed from office

by a two -hirds vote of the City Council, but such removal must be " for cause." t

Prior to

removal, the elected official must be furnished with a written statement of the reasons for

the proposed removal and must be given a reasonable opportunity to be heard. The
Charter does not define what " for cause" means. However, the Minnesota Supreme

Court has ruled that a city charter may not deviate from the provisions of the Minnesota
Constitution with respect to the removal of public officials. Jacobsen v. Nagel, 255
Minn. 300, 96 N.W.2d 569 ( Minn. 1959). Article VII; Section 5 of the Constitution
provides: "

The legislature ofthis state may provide for the removal of inferior officers

for malfeasance or nonfeasance in the performance of their duties." While Chapter 410 of the Minnesota Statutes authorizes governance pursuant to a home rule charter, the

provisions of Chapter 410 may not deviate from constitutional requirements and " any
removal of a public official from office must be in conformity with [the] constitution." Hedstrom v. Cook County Bd. ofCom' rs, Case No. C5 -00 -208, 2000 WL 1281138 at * 4 Minn. App. Sept. 12, 2000).
Under the constitutional standards, malfeasance or nonfeasance must involve conduct that " affects the performance of official duties rather than conduct which affects the official' s personal character as a private individual." Jacobsen, 255 Minn. at 304, 96
N.W.2d at 573. "

Malfeasance" is not exactly defined, but it must touch on the

performance of an act by an officer in his official capacity that is wholly illegal and
wrongful." Id. " Nonfeasance" is the " neglect or refusal, without sufficient excuse, to do

that which is the officer' s legal dut[ y] to do." Id. Based on the facts currently available, it would appear to us that these high standards would not likely be met because there is
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no evidence at this time that Mayor Egan has acted illegally or failed to perform any of
his official duties.

Another consideration is the Charter provision related to recalling an elected

official. Section 410. 20 of the Minnesota Statutes allows a city charter to provide for the

recall of any elected municipal officer. However, Section 6. 13 of the City Charter
requires the recall process to be initiated by a committee of five registered voters, not the City Council itself. The committee must then collect the signatures of 20 percent of the

City' s registered voters in order to move forward with a recall election. We are not

currently aware of an attempt by a group of citizens to form a committee for the purposes
of seeking a recall election. In addition, case law indicates the basis for recall must also
comport with the constitutional standards of "malfeasance or nonfeasance." See

Jacobsen, 255 Minn. at 303 -04, 96 N.W.2d at 572 ( indicating that charter provisions

outlining the recall process of a public official is " another method of removal" and must
comport with the Minnesota Constitution). While the recall process is largely a citizen driven process, we thought it pertinent that you be aware of the procedure and grounds

for recall.

B. City Code of Conduct.

The " City of Red Wing City Council and City Advisory Boards and Commissions
Code of Conduct" also contains prohibitions and limitations on the conduct of elected

officials. In relevant part, it provides that no elected official may:

Participate in a matter that is before the city council or relevant board that
affects the person' s financial interests or those of a business with which the person is associated, unless the effect on the person of business is no greater than on other members of the same business classification,
profession, or occupation.

Use the person' s public position to secure special privileges or exemptions for the person or for others.

Disclose to the public, or use for the person' s or another person' s personal

gain, information that was gained by reason of the person' s public position
if the information was not public data or was discussed at a closed session

of the city-council or committee.

At this point, we cannot say whether facts might exist to suggest any of these provisions

are being violated by Mayor Egan' s dual role as mayor and an employee of the Sand
Council. Even if such facts existed, the Code of Conduct suggests the Mayor would be in

full compliance with the Code of Conduct if he publicly disclosed any conflict and

refrained from participating in any City decisions giving rise to the conflict.
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IV.

Criminal Statutes Related to Public Officials.

Chapter 609 of the Minnesota Statutes contains several criminal provisions related

to crimes affecting public officers and employees. Minn. Stat. 609.415- 609. 475. A

situation where an elected official becomes employed by a trade group that represents one side of a contentious issue within a given community, standing alone, does not appear to be conduct that would be barred by the criminal code. Instead, there must be a separate allegation of specific misconduct, such as bribery. See Minn. Stat. 609.42.
Under the circumstances facing the City, the closest applicable statute in the
criminal code is titled " Misconduct of Public Officer or Employee." Minn. Stat.
609. 43. The statute reads:

A public officer or employee who does any of the following, for which no

other sentence is specifically provided by law, may be sentenced to

imprisonment for not more than one year or to payment of a fine of not more
than $ 3, 000, or both:

1) intentionally fails or refuses to perform a known mandatory, nondiscretionary, ministerial duty of the office or employment within the
time or in the manner required by law; or

2) in the capacity of such officer or employee, does an act knowing it is in excess of lawful authority or knowing it is forbidden by law to be done in
that capacity; or

3) under pretense or color of official authority intentionally and unlawfully injures another in the other' s person, property, or rights; or
4) in the capacity of such officer or employee, makes a return, certificate, official report, or other like document having knowledge it is false in any
material respect.

Id. Given the facts presently available to us, it would not appear Mayor Egan' s acceptance of a position with the Sand Council would invoke any of the provisions of this statute.
CONCLUSION

From a legal standpoint, Mayor Egan does not appear to have a legal conflict of

interest that would prevent him from simultaneously acting as Mayor and an employee of the Sand Council based on the facts currently available. Certainly this matter seems to present political issues for the Council and Red Wing citizens to grapple with. If the Council

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believes additional fact -finding is necessary, it does have the authority to investigate the
matter pursuant to Section 2. 09 of the Chaster.
RASW: 823