Board members face breach of fiduciary duty

December 15, 2012

Mississippi aldermen and supervisors do not have the authority to delegate their power to a regional development agency. Elected board officials cannot exceed the authority granted to them, nor put their interests above voters’ interests. Such action exceeds the board’s authority, it is illegal and it places board members in danger of a claim for breach of fiduciary duty.

A breach of fiduciary duty is a relatively simple claim to assert:
1. Proof of the existence of a duty (elected official)
2. Proof that it was owed to the complaining party (the voter)
3. Breach of the duty (giving power to a regional development agency)
4. Causation (regional development agency acts irresponsibly, without restriction)
5. Injury (voter lost voice, taxes increased or property ownership violated)

Economic development agencies want fewer people involved in policy making, to the point that a single nonelected person or a legal firm can handle an entire project. The false appearance of voter representation is critical to the process. Once aldermen and supervisors agree to a regional development agency, they are no longer needed. They only serve to enforce the plans of the development agency. Accountability, transparency, and voter representation are lost.

The voters are ignored in favor of special interests groups that typically gain power over and financially benefit from areas where they don’t live or pay taxes (suffer the consequences). Often, the agency gets money from federal and state government grants rather than from county taxes. In this case, the development agency chases government money, regardless of the mandates that comes with the money and irrespective of the impacts on the community. The agency’s government money-chasing with strings attached is a conflict of interest over which voters and elected board members have no control.

There are curently three agencies trying to form: Clay, Oktibbeha and Lowndes counties, a second one forming for Choctaw, Montgomery and Webster counties and a third agency forming for Chickasaw, Pontotoc and Union counties.

If board members give up their authority to these development agencies, board members become civilly liable to the voters for breach of fiduciary duty. Each board member who voted for the regional agency will have to prove in court that he or she acted appropriately.

A breach of fiduciary duty has severe consequences. The offending board member will be held personally liable in money damages for all losses sustained as a result of misconduct. Such judgments (and the attendant legal fees) are rarely, if ever, covered by the board officer’s liability insurance. All of this can be avoided, if board members vote “no” to the regional economic development agency.

Remember the term, “breach of fiduciary duty.” You might see it again.

Elaine Vechorik
Sturgis

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Tags: aldermen, authority, breach of fiduciary duty, civil court, Mississippi, regional economic development, supervisors

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