CEO 03-6 Ė June 10, 2003

 

CONFLICT OF INTEREST; VOTING CONFLICT

 

 

COUNTY HOUSING FINANCE AUTHORITY MEMBERS REAL ESTATE BROKER AND OFFICER OF FINANCIAL INSTITUTION

 

To:††††† Name withheld at personís request

SUMMARY:

 

A prohibited conflict of interest does not exist under Section 112.313(3) or Section 112.313(7)(a), Florida Statutes, where a member of a county housing finance authority is a real estate broker representing buyers of bond-based, low-interest home loans, and where another member is employed by a financial institution participating in a mortgage origination agreement between the institution and a housing finance authority other than the memberís authority.Also, while the broker is not subject to the voting conflicts law regarding measures to authorize the issuance of bonds for low-interest loans, the employee of the financial institution is.CEO's 80-79, 80-89, and 92-2 are referenced.[1]

 

QUESTION 1:

 

Does a prohibited conflict of interest exist where a member of a county housing finance authority also is a real estate broker representing individuals purchasing homes via low-interest loans?

 

††††††††††† Under the scenario presented, this question is answered in the negative.

 

††††††††††† By your letter of inquiry and other written materials provided to our staff, we are advised that Virginia Glass (hereinafter the "Broker") serves as a member of the Leon County Housing Finance Authority (hereinafter the "LHFA") and is a real estate broker. In addition, we are advised that the LHFA was created by ordinance to provide financing for affordable housing or rental housing to persons and families of low, moderate, or middle income and to provide capital investment in such housing; that to accomplish these purposes, the LHFA encourages private enterprise and investors to sponsor, build, and rehabilitate residential housing for the targeted groups; and that the LHFA's governing board numbers seven, a majority of whom must have knowledge in the fields of labor, finance, or commerce. Further, we are advised that the LHFA recommends to the County Commission the issuance of tax-exempt bonds, resulting in the availability of funds to lenders from which targeted group buyers[2] obtain low-interest loans for home purchases; that the Broker represents (as a real estate broker) some of the buyers and receives real estate commissions for her representation; and that buyers do not enter into contracts with (or otherwise do business with) the LHFA.


††††††††††† Regarding this question, the Code of Ethics for Public Officers and Employees provides in relevant part:

 

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.óNo public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he or she is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his or her private interests and the performance of his or her public duties or that would impede the full and faithful discharge of his or her public duties. [Section 112.313(7)(a), Florida Statutes.]


In accord with our precedent,[3] we do not find that a prohibited conflict exists under Section 112.313(7)(a) due to the Brokerís representation of buyers.The natural person buyers with whom the Broker would hold contractual relationships are not "business entities" (see CEO 92-2) and, in any event, they are doing business with a lender rather than with the LHFA.


QUESTION 2:

 

Would a voting conflict of interest be created under Sections 112.3143(3)(a) and 112.3143(4),[4] Florida Statutes, where a county housing finance authority member is called upon to vote on a measure to recommend the issuance of tax-exempt bonds where the member is a real estate broker who represents individuals purchasing homes through low-interest loans that would be subsidized from the bond proceeds?


††††††††††† This question is answered in the negative.

 

††††††††††† Through materials you provided to us,[5] we are advised further that each year the LHFA authorizes the issuance of bonds that result in lower than market interest rates for low and moderate income home buyers in Leon County; that the Broker receives the usual commission any broker would receive upon the sale of property, regarding homes that are bond-financed; but that arguably the homes are more likely to sell because of the bond program.


††††††††††† We find that bond-issuance measures do not require the Broker's compliance with the voting conflicts law, inasmuch as any direct effect upon the Broker occasioned by issuance would appear to be remote and speculative, given that purchasers of bond-financed homes would not be required to use the Broker or her firm but could choose among other brokers and other real estate firms. Further, assuming arguendo that the homes are more likely to sell because of the bond program, many brokers and real estate firms would be affected by the more likely sales.


QUESTION 3:


Does a prohibited conflict exist under Section 112.313(3) or Section 112.313(7)(a), Florida Statutes,[6] where a member of the LHFA is an employee of a lender participating in the origination of low-interest, bond-based loans?


††††††††††† Under the scenario presented, this question is answered in the negative.

 

††††††††††† In addition to the information set forth above, we are advised that William Mattice (hereinafter the "Banker") serves as a member of the LHFA and that he is an employee of a lending institution that is a party to a mortgage origination agreement between his employer (and other "Participants") and the Escambia County Housing Finance Authority (the "EHFA"); that pursuant to an interlocal agreement between the LHFA and the EHFA, the EHFA is authorized to operate as the issuer of bonds in Leon County as part of an affordable housing program; that the EHFA then enters into agreements with participating banking institutions which originate mortgage loans for first-time home buyers; and that the banking institutions sell the loans to a loan servicer, who then disburses monies back to the banking institutions for sale of the loans.


††††††††††† Regarding the Banker, it appears that CEO 80-89 is our controlling precedent and thus that a prohibited conflict of interest does not exist for him under either Section 112.313(3) or 112.313(7)(a).In CEO 80-89, we found that there would not be a prohibited conflict where a housing finance authority member also served as a vice president of a bank whose parent bank owned another bank that had entered into an agreement with the housing finance authority, recognizing the separateness of entities and thus reasoning that the member would not be an officer or employee of the bank which was doing business with the authority.Similarly, in the Banker's situation, while his employing banking institution is doing business with the EHFA by virtue of a mortgage origination agreement, his employer is not doing business with the LHFA (his public agency as an LHFA member), notwithstanding the parent/subsidiary-like relationship between the EHFA and the LHFA.[7]

††††††††††† This question is answered accordingly.[8]


QUESTION 4:

 

Is the Banker subject to the voting conflicts law regarding measures to issue bonds?


††††††††††† This question is answered in the affirmative.

 

††††††††††† Unlike the Broker's remote and speculative situation (see Question 2 above), the situation involving the Banker indicates certain participation by his lender employer (principal) regarding monies affected by bond-issuance measures.Via a telephone call from a member of your staff to a member of ours, we are advised that the Bankerís employer is a participating lender and thus that his employer is affected by measures of the LHFA regarding bonds.

†††† ORDERED by the State of Florida Commission on Ethics meeting in public session on June 5, 2003 and RENDERED this 10th day of June, 2003.

 

 

 

__________________________
Patrick K. Neal,
Chair

 

 

 



[1]Opinions of the Commission on Ethics cited herein are viewable on the Commission's website:www.ethics.state.fl.us

[2]Your office clarified that the Broker does not contract with the lenders, but, rather, that buyers contract with (obtain loans from) lenders.

[3]See CEO 80-79 (apparently concerning the Leon County Housing Finance Authority), in which we found that no conflict of interest would be created regarding the business pursuits of several authority members.

[4]Statutes provide:

 

VOTING CONFLICTS.óNo county, municipal, or other local public officer shall vote in an official capacity upon any measure which would inure to his or her special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained, other than an agency as defined in s. 112.312(2); or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer.Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of the officerís interest in the matter from which he or she is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his or her interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes.[Section 112.3143(3)(a), Florida Statutes.]

 

(4)††††††††† No appointed public officer shall participate in any matter which would inure to the officerís special private gain or loss; which the officer knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which heor she is retained; or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer, without first disclosing the nature of his or her interest in the matter.

(a)††††††††† Such disclosure, indicating the nature of the conflict, shall be made in a written memorandum filed with the person responsible for recording the minutes of the meeting, prior to the meeting in which consideration of the matter will take place, and shall be incorporated into the minutes.Any such memorandum shall become a public record upon filing, shall immediately be provided to the other members of the agency, and shall be read publicly at the next meeting held subsequent to the filing of this written memorandum.

(b)††††††††† In the event that disclosure has not been made prior to the meeting or that any conflict is unknown prior to the meeting, the disclosure shall be made orally at the meeting when it becomes known that a conflict exists.A written memorandum disclosing the nature of the conflict shall then be filed within 15 days after the oral disclosure with the person responsible for recording the minutes of the meeting and shall be incorporated into the minutes of the meeting at which the oral disclosure was made.Any such memorandum shall become a public record upon filing, shall immediately be provided to the other members of the agency, and shall be read publicly at the next meeting held subsequent to the filing of this written memorandum.

(c)††††††††† For purposes of this subsection, the term 'participate' means any attempt to influence the decision by oral or written communication, whether made by the officer or at the officer's direction.[Section 112.3143(4), Florida Statutes.]

 

[5]Especially a copy of an August 14, 2002 letter to you from the Chairman of the LHFA.

[6]Section 112.313(7)(a) is set forth under Question 1 above; Section 112.313(3) provides:

 

DOING BUSINESS WITH ONEíS AGENCY.óNo employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officerís or employee's spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer's or employee's spouse or child, or any combination of them, has a material interest.Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to the officerís or employee's own agency, if he or she is a state officer or employee, or to any political subdivision or any agency thereof, if he or she is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislatorís place of business or when such offices are on property wholly or partially owned by the legislator.This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

[7]Notwithstanding the lack of the required elements necessary for a "mechanical" violation of Section 112.313(7)(a), language from a representative mortgage origination agreement provided to us by your Office indicates that the EHFA's role and status under such agreements, vis-ŗ-vis participants such as the Bankerís employer, in reality supplants a similar role and status for the LHFA, thereby negating any actual temptation to dishonor on the part of the Banker (an LHFA, not an EHFA, member).

[8]Neither our answer to this Question nor our answer to Question 2 above requires consideration of Section 112.313(7)(b), Florida Statutes.However, it does not appear that Section 112.313(7)(b) is applicable.See CEO 80-79, Question 2.