Beychok, In re

• Decision Date: 20 October 1986
• Docket Number: No. 86-C-0523,86-C-0523
• Citation: 495 So.2d 1278
• Parties: 35 Ed. Law Rep. 892 In re Sheldon D. BEYCHOK and Wolf Baking Company, Inc.
• Court: Louisiana Supreme Court

Page 1278

495 So.2d 1278

35 Ed. Law Rep. 892

In re Sheldon D. BEYCHOK and Wolf Baking Company, Inc.

No. 86-C-0523.

Supreme Court of Louisiana.

Oct. 20, 1986.

R. Gray Sexton, Peter Wright, La. Ethic Admin., Baton Rouge, for applicant.

Charles McCowan, Jr., Kean, Miller, Hawthorne, Darmond, McCowan & Jarman, Baton Rouge, Leslie Schiff, Sandoz, Sandoz & Schiff, Opelousas, for respondent.

DIXON, Chief Justice.

Sheldon D. Beychok has served on the Board of Supervisors of Louisiana State University since his appointment in 1978. Beychok also serves as president, chief executive officer and is a majority stockholder in Wolf Baking Company, Inc., a Louisiana corporation engaged in the production and sale of bread and bakery products. As an employee of Wolf Baking Company Beychok receives compensation from the corporation for services rendered. The Board of Supervisors on which Beychok serves has general authority to oversee the operation of the Louisiana State University System even though routine purchases of supplies and services are handled by designated purchasing agents on the respective individual campuses.

Between January 1, 1981 and December 31, 1984 Wolf Baking Company entered into a series of contracts with LSU for the sale of food products to the university. These contracts were awarded after receipt of sealed competitive bids, and they authorized purchases of $219,088.00 by the university during the contract periods. Some of the contracts were renewed in January 1985 and as a result the university purchased additional products costing an estimated total of $27,758.00.

By correspondence dated August 23, 1984 Beychok and other members of the Board of Supervisors sought from the Commission on Ethics for Public Employees an advisory opinion as to the propriety of members of the board entering into contracts for the sale of goods and services to LSU.

The commission considered this request and concluded that R.S. 42:1111C(2)(d), ¹ 1112B(2) and (3) ² and 1113B ³ prohibit members of the board from entering into business transactions with LSU.

After a public hearing the commission determined that Beychok had violated R.S. 42:1111C(2)(d) and 1112B(2) and (3) by virtue of his having received compensation (his salary) from Wolf Baking Company during the time that these transactions took place and having participated, by operation of law, in the food service contracts. The commission also concluded that Wolf Baking Company had violated R.S. 42:1113B by entering into contracts with LSU. The action taken by the commission was limited to ordering the discontinuation of the existing contracts between Beychok's company and the university and mandating that the university refrain from entering into future contracts with members of its governing authority.

Beychok and Wolf Baking Company then appealed to the court of appeal which reversed the commission's decision ⁴ and held that R.S. 42:1123(4) establishes an exception to R.S. 42:111C(2)(d), 1112B(2) and (3) and 1113B by allowing an entity controlled by a public servant to contract with the public servant's agency when the contract has been awarded by sealed competitive bid. The holding of the court of appeal did not decide whether a violation of the codal provisions discussed above had in fact occurred. In re Sheldon D. Beychok and Wolf Baking Co., Inc., 484 So.2d 912 (La.App 1 Cir.1986). The commission applied for writs assigning as error the application of R.S. 42:1123(4) as an exception to R.S. 42:1113.

The Code of Governmental Ethics was adopted by the legislature in accordance with Art. 10, § 21 of the Louisiana Constitution. ⁵ R.S. 42:1101B states that the primary purpose of the code is to assure that decisions are made in an impartial manner free from the influence of private gain. In order to accomplish this goal, the Declaration of Policy found in R.S. 42:1101B emphasizes the need to enact ethical standards protecting against conflicts of interest which may give rise to the appearance of impropriety. A conflict of interest arises when an official is torn between serving two masters: his private interest and the public's. Since a conflict of interest increases the danger of wrongdoing, the code's primary objective is to prevent their occurrence. Glazer v. Commission on Ethics for Public Employees, 431 So.2d 752 (La.1983).

The primary objective of the code is to prevent not only the actuality of conflicts of interest, but also to prevent the occurrence of those situations that tend to create a perception of conflict of interest. It does this by delineating situations that present too great a danger of a conflict of interest occurring.

Beychok and Wolf Baking Company were charged with violating R.S. 42:1111C(2)(d), 1112B(2) and (3) and 1113B:

(1) R.S. 42:1111C(2)(d) prohibits a public servant from receiving "anything of economic value" for services rendered to any person who (1) "[h]as or is seeking to obtain contractual or other business or financial relationships with the public servant's agency" or (2) who "[h]as interests which may be substantially affected by the performance ... of the public employee's official duty." R.S. 42:1115A(1) and B(2). Because Beychok draws a salary for his services to Wolf Baking Company, he is in violation of this section if Wolf Baking Company does business with the Board of Supervisors.

(2) R.S. 42:1112B(2) and (3) prohibit a public servant from "participating" in transactions in which "any person" of which the public servant is an officer, director, trustee, partner, or employee "has a substantial economic interest." Since Beychok has an ownership interest in Wolf Baking Company he is within the prohibitions of these subsections if he has "participated" in the transactions involving the bread contracts. R.S. 42:1102(15), which defines "participation," provides that participation occurs not only when a public servant acts affirmatively in his official capacity, but also when the public servant has or shares responsibility for some actions.

(3) Except for legislators, R.S. 42:1113B prohibits bidding on, or any interest in, any contract under the jurisdiction or supervision of the board member's agency by the board member, or by the member's family or by a legal entity in which the board member has an economic interest. Under Art. 8, § 7 of the Louisiana Constitution, the Board of Supervisors has general jurisdiction of and is charged with the overall supervision of LSU. It is undisputed that Beychok is the majority stockholder and has an economic interest in Wolf Baking Company and that Wolf Baking Company entered into contracts with LSU to provide food products. Since the acquisition of goods and services by LSU is a transaction which is under the board's general supervision and jurisdiction, Wolf Baking Company violated this section by entering into the contracts to provide its products.

Beychok and Wolf Baking Company have engaged in conduct prohibited by the sections of the code described in 1, 2 and 3 above. However, the statute contains exceptions to the prohibited business activities described in 1, 2 and 3 above. R.S. 42:1123 ⁶ lists them, describing several categories of activity which the statute "shall not preclude," as paraphrased below:

"This Part shall not preclude:"

(1) uncompensated civic or charitable activities.

(2) awards for public service.

(3) "Sharing ... compensation received from the governmental entity by a person of which such public servant ... controls less than ten percent" if the public servant did not participate in the procurement, "except as otherwise specifically prohibited by R.S. 42:1113."

(4) sharing proceeds from the "lowest sealed competitive bid ... except as otherwise specifically prohibited by R.S. 42:1113."

(5) campaign contributions.

(6) certain activity by employees of higher educational institutions required by professional accreditation organizations.

(7) employment of certain physicians by the office of mental health.

(8) maritime employment of board members of the Port of New Orleans commission.

42:1113B prohibits board members from bidding on or having any interest in contracts with his board. Therefore, § 1123(3) provides that the code "shall not preclude," except for board members, sharing in compensation from the governmental entity if the board member controls less than ten percent interest in the contractor. Board members cannot share in contracts with their agencies even if the board member controls less than ten percent of the contractor. R.S. 42:1112B(2) and (3), R.S. 42:1113.

And 1123(4) provides that the code "shall not preclude," except for board members, sharing proceeds from sealed bid contracts. Board members cannot share in contracts with their boards, even if the contract was obtained because it was the "lowest sealed competitive bid." R.S. 42:1113, R.S. 42:1123(4). The commission's interpretation of the statutes was correct.

The court of appeal concluded that the board's interpretation of § 1113B would result in an unconstitutional denial of the equal protection of the law to Beychok, in violation of Art. 1, § 3 of the La. Const.

This court provided the basic framework for the analysis of an equal protection claim in Bazley v. Tortorich, 397 So.2d 475, 483 (La.1981):

" ... We must decide, first, whether the legislation operates to the disadvantage of some suspect class or impinges on a fundamental right explicitly or implicitly protected by the constitution, thereby requiring strict judicial scrutiny. If not, the legislative scheme must still be examined to determine whether it rationally furthers some legitimate, articulated state purpose and therefore does not constitute an invidious discrimination. Maher v. Roe, 432 U.S. 464, 97 S.Ct. 2376, 53 L.Ed.2d 484 (1977); San Antonio School District v. Rodriguez, 411 U.S. 1, 93 S.Ct. 1278, 36 L.Ed.2d 16 (1973); Burmaster v. Gravity Drainage Dist. No. 2, 366 So.2d 1381, 1387-88 (La.1978); ...