Rusch rules no conflict of interest exists on city council

Rusch rules no conflict of interest exists on city council by David Lias Circuit Court Judge Arthur Rusch ruled in a memorandum opinion Sept. 21 that the service of Roger Kozak, Frank Slagle and Barbara Yelverton on the Vermillion City Council and their employment with The University of South Dakota poses no conflict of interest.

The decision puts to rest an issue that has caused controversy in city government and the university for nearly three years.

The issue in part was resolved due to a new law approved by the South Dakota Legislature last year. The law was introduced by District 17 Rep. Judy Clark, Vermillion.

Concerns raised in 1998

Shortly after taking office in 1998, Alderman Leo Powell questioned whether Slagle, Kozak and Yelverton were involved in a conflict of interest whenever they vote on an issue that involves or benefits the university.

Powell is an employee of Clay-Union Electric who was elected in May 1998. He told the Plain Talk in July 1998 that he and former Alderman Dick Burbach,

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who also is employed by Clay-Union Electric, were told that there may be a conflict of interest if they voted on issues

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involving the electric cooperative.

Powell said he and Burbach then abstained from voting on such matters. "At that time, I wondered why university employees could vote on city matters relating to USD, but Clay-Union employees couldn't," Powell said in July 1998.

He eventually took his concerns to Clay County State's Attorney Tami Bern, who requested a declaratory judgement from Circuit Court Judge Arthur Rusch.

Political dispute…

Rusch noted in his memorandum opinion that this action was "part of an ongoing political dispute between various factions of the council over Clay-Union REA's electrical service territories which also resulted in litigation."

In July 1999, Kozak, Yelverton and Slagle filed a motion to dismiss, claiming that the state of South Dakota was a necessary party defendant to this action but had not been joined as a defendant.

A July 24, 1999 court decision held that Bern could not institute a declaratory judgment action on behalf of the state without the consent of the attorney general.

Subsequently, the attorney general joined in the litigation and filed an amended complaint for declaratory judgement.

Rusch noted that the state brought this action under the theory that there was a conflict of interest on the part of the three defendants in voting on issues concerning their employer and that voting on issues violated state law.

Requirements of court

Resolution of that issue, he added, would have required the court to determine whether council members are "interested" in a contract affecting their employer even though they would not personally benefit from the contract.

"In that respect, there is no evidence to support the state's claim of 'conflict of interest' on the part of either Yelverton or Slagle," Rusch wrote. "Yelverton and Slagle are instructors or professors. They have no administrative or governing duties at USD. Their duties at USD have nothing to do with the city."

Kozak, who is associate vice president at USD, "is in a different position due to his past negotiations with the city," Rusch wrote. He noted that in Kozak's case, there is an appearance of impropriety "when he wears two hats i.e. represents USD in negotiations and votes on the same issues with the city council.

State law resolves issue

Rusch's memorandum opinion states that the passage of HB 1215 by the state Legislature resolved this issue. A provision of the statute states that any contract or agreement between a governmental entity and a public postsecondary educational institution when an employee of the Board of Regents serves as an elected or appointed officer for the governmental entity, provided that the employee does not receive direct compensation or payment as a result of the contract or agreement.

Rusch noted that the council members who are defendants are employees of the Board of Regents and none of them received any direct compensation or payment as a result of the contracts or agreements. Despite any appearance of impropriety by Kozak, he added, the Legislature has specifically allowed precisely this sort of conflict of interest.

Rusch's memorandum, which is over 30 pages long, explores other areas, such as a doctrine of incompatibility. He cites several court cases as his basis for coming to his final conclusion that no conflict of interest exists.

Effects of court's decision

Rusch argues that a declaratory judgement decision would not be limited to just Vermillion, but would have far-reaching effects in across South Dakota.

"If this court accepts the state's arguments, even the possibility that an employer might exert undue influence on an employee for their votes as an council member, is sufficient to make positions incompatible," he wrote.

He added that from his office he can see the Clay County Public Safety Center which is a facility jointly operated by the Vermillion and Clay County.

"I see Vermillion-Clay County ambulances every day. I know that the city of Vermillion and the Vermillion Public Schools have joint agreements for the use of the National Guard Armory.

"The Vermillion Public Schools keep their buses in buildings on the county fairgrounds and use the USD DakotaDome," he added.

Rusch stated that if the court accepts the state's arguments service on a local governing body is "incompatible" with employment by USD, this legal precedent may impact numerous state employees throughout South Dakota.

"The state has failed to provide the court with authority supporting its position that offices are incompatible merely based upon potential conflicts of interest," Rusch wrote. "all of the authorities cited in the state's briefs indicate that incompatibility is different from conflicts of interest. All of the cases cited indicate that the test of incompatibility is whether the official duties of each position involve subordination or any sort of supervision or control over the other position.

"Clearly that is not the situation between a university employee," he added, "and a city alderman."

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