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Advisory opinion regarding whether there is a conflict of interest when a future homeowner applies for financing through an East Baton Rouge Mortgage Finance Authority Program, when the house or lot being purchased was sold by a builder or real estate company that purchased the lot from a company in which a member of the Mortgage Finance Authority has an ownership interest. |
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Mathew McKay is a member of the East Baton Rouge Mortgage Finance Authority (MFA). Mr. McKay also owns 25% of Crystal Lake, LLC, in which he is one of six owners. The remaining owners have no familial relationship to him.
In 2002, Crystal Lake was formed for the purpose of purchasing land and developing it to finish lots. The first project, Waterford Lake, was completed in 2006. In 2007, Crystal Lake purchased 208 acres in Addis for development. These transactions occurred prior to Mr. McKay's appointment to the MFA Board.
In 2010, Crystal Lake began development of a residential subdivision and in 2011 completed and offered 42 lots for sale to the public. Four different builders/real estate companies purchased all 42 lots. The builders/real estate companies then built either "spec" homes or built homes at the direction of the purchaser on the lots. Additional lots are being developed by Crystal Lake and upon completion, will be offered for sale to any interested builder/real estate company.
Mr. McKay nor any member of his immediate family member have any management, ownership, financial or other interest in any of the four builders/real estate companies that purchased the lots. Further, Mr. McKay nor any member of his immediate family has a family relationship with any of the owners or employees of the four builders/real estate companies that purchased the lots, or with any potential homeowner who ultimately built or purchased a home on the lots.
The question presented by Mr. McKay is whether any potential conflict of interest is presented if a future homeowner made an application for financing (to either construct or purchase a house on one of the lots sold by Crystal lake to the builders/real estate companies) from a bank or lender who offered an MFA financing program. In order to qualify for MFA financing, the home must be in a certain income bracket and the house price must be within a certain range. It should also be noted that Mr. McKay nor any member of his family has a management, ownership or financial interest in any bank or lender who might offer MFA financing. The MFA Board has no involvement in a potential homeowner's qualification for a loan as that is handled directly by the bank or lender who actually loans the money to purchase the house.
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La. R.S. 42:1113B prohibits an appointed member of a board or commission, his immediate family member, or a legal entity in which they have a substantial economic interest, from entering into or being in any way interested in a transaction that is under the supervision or jurisdiction of the board or commission.
La. R.S. 42:1112A prohibits a public servant from participating in a transaction involving his governmental entity in which he has a substantial economic interest.
La. R.S. 42:1112B(3) states that no public servant shall participate in a transaction involving the governmental entity in which, to his actual knowledge, any person of which he is an officer, director, trustee, partner, or employee has a substantial economic interest.
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Adopt proposed advisory opinion.
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| Assigned Attorney: |
Tracy Barker |
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