CEO 79-83 -- December 20, 1979

CONFLICT OF INTEREST

SCHOOL PRINCIPAL ENGAGING IN PARTNERSHIP WITH PERSON DOING BUSINESS WITH SCHOOL IN ORDER TO DISTRIBUTE EDUCATIONAL PRODUCTS

To: (Name withheld at the person's request.)

Prepared by: Phil Claypool

SUMMARY:

Were a high school principal to enter into a partnership with, or be employed by, the owner of a company which sells athletic supplies to the high school, he would not have a contractual relationship with a business which is doing business with his public agency, the school, in violation of s. 112.313(7)(a), F. S., because his contractual relationship would not be with the athletic supply company, but rather with the owner of that company in a separate venture. Nevertheless, the principal's being a partner or employee of the owner of a company which has done substantial business through school purchases approved by him does raise issues under the second clause of s. 112.313(7)(a), which prohibits a public employee from having a contractual relationship that will create a continuing or frequently recurring conflict of interest or that would impede the full and faithful discharge of his public duties. In the instant case, the principal would have a contractual relationship with a person whose livelihood in part depends on his (the principal's) approval of expenditures for athletic purchases. However, s. 112.313(12)(e) sets forth an exemption to the prohibition contained in paragraph (7)(a) in which the business entity involved is the only source of supply within the political subdivision and the officer or employee discloses to the governing body his interest in the business entity. As the athletic supply company involved here is the only sporting goods dealer in the county (see CEO 77-125, a previous opinion issued concerning this situation), no prohibited conflict exists so long as it remains the sole supplier and so long as the disclosure requirements are complied with.

Another question arises from the fact that the proposed business wishes to engage in sales of educational materials to school districts, including that of the subject principal. Section 112.313(3) prohibits a public employee from being a partner in a business selling goods to his public agency or to any agency within his political subdivision. In a previous advisory opinion it was found that under this provision a schoolteacher could own a company selling school supplies to the district school board and to schools within the district other than the one at which he teaches. See CEO 78-22. However, a school principal, as part of the school district administration, is deemed to be in a better position than a schoolteacher to offer advice or recommendations regarding the purchase of general education products, and therefore it is found that sales to the school board which employs the principal and to individual schools within the district are prohibited, unless one of the exemptions contained in s. 112.313(12) applies. As to potential employment with the educational products distributor, s. 112.313(7)(a) would prohibit the sale of materials to the principal's own school but not to others in the district. No provision of the Code of Ethics serves to prohibit the sale of educational products to school districts other than that by which the subject principal is employed.

QUESTIONS:

1. Would a prohibited conflict of interest be created were I, a high school principal, to enter into a partnership with, or be employed by, the owner of a company which sells athletic supplies to the high school, when the partnership or employment would be in a business venture separate from the athletic supply business?

2. Would a prohibited conflict of interest be created were a business entity which is owned by me, a high school principal, or which employs me, to sell educational materials to school districts including my own?

Question 1 is answered in the negative, subject to conditions expressed below in this opinion.

In your letter of inquiry you advise that you are the principal of Wildwood High School and that you have final authority over all purchases from the school's instructional budget provided by the school board, as well as from the internal accounts of the school, which include athletic expenditures. Last year, you advise, the high school purchased approximately $8,000 worth of athletic equipment and supplies from a local company which is the only sporting goods dealer in the county.

You further advise that you would like to go into partnership with the owner of that athletic supply company, the partnership being in another company which would distribute educational products such as filmstrips, maps, globes, learning kits, etc. You question whether you would have a prohibited conflict of interest were you to enter into this partnership or were you to be employed by this person as a consultant, based on his ownership of the athletic supply company.

The Code of Ethics for Public Officers and Employees provides in relevant part:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP. -- No 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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), F. S.]

The first portion of this provision prohibits you from being employed by or having a contractual relationship with a business which is doing business with your agency. For purposes of the Code of Ethics, your "agency" is the public school at which you serve as principal. Section 112.312(2), F. S. However, in the situation you have described, you would not be employed by or have a contractual relationship with the athletic supply company, but rather with the owner of that company in a separate venture.

Nevertheless, the fact that you would be a partner of or consultant to the owner of a company which has done substantial business through school purchases approved by you does raise issues under the second portion of s. 112.313(7)(a), above. That portion prohibits a public employee from having a contractual relationship that will create a continuing or frequently recurring conflict of interest or that would impede the full and faithful discharge of his public duties. In this respect, we note that you would have a contractual relationship with a person whose livelihood in part depends on your approval of expenditures for athletic purchases.

However, the Code of Ethics also contains an exemption to the operation of s. 112.313(7) if:

The business entity involved is the only source of supply within the political subdivision of the officer or employee, and there is full disclosure of the officer's or employee's interest in the business entity to the governing body of the political subdivision. [Section 112.313(12)(e), F. S.]

You have advised that the particular athletic supply company involved here is the only sporting goods dealer in the county, which is the area encompassed by your school district. See CEO 77-125, a previous opinion rendered concerning this situation.

Accordingly, so long as the athletic supply company remains the only source of supply of the goods purchased by the high school, and so long as the remaining requirements of the exemption section set forth above are complied with, we find that no prohibited conflict of interest would be created were you to enter into a partnership with, or be employed by, the owner of a company which sells athletic supplies to the high school at which you are principal.

Your second question is answered in the affirmative as to schools within your district and in the negative as to schools in other districts.

In your letter of inquiry you question whether you could sell educational materials to various school districts, including your own, if you were a partner in the proposed educational products distributorship or if you were hired by that company as a consultant.

The Code of Ethics provides in part as follows:

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his 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 his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he 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 legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

[Section 112.313(3), F. S.]

This provision prohibits you, an employee of a school district, from being a partner in a business selling goods to the school district, or to any individual schools of the district. In a previous advisory opinion we have advised that under this provision a schoolteacher could own a company selling school supplies to the district school board and to schools within the district other than the one at which he or she teaches. See CEO 78-22. In our view, however, the fact that you are part of the school district administration as a principal indicates that you are in a better position than a schoolteacher to offer advice or recommendations regarding the purchase of general education products sold by your company, either to the district school board which employs you or to the schools within the district.

Section 112.313(7)(a), quoted above in our response to your first question, is the provision of the Code of Ethics most relevant to your being employed as a consultant to a distributor of educational products. Under that provision, you are prohibited from being employed by a business entity which is doing business with your agency. As determined above, your "agency" is the school at which you are principal. Therefore, under this provision of the Code of Ethics, you may be employed as a consultant by a company which is doing business with the school board and with other schools in the district other than the one at which you are principal.

The restrictions pointed out in the previous two paragraphs express the general rules for the situations you contemplate. The Code of Ethics provides, in s. 112.313(12), F. S., several exemptions to these general rules. These exemptions are discussed in a previous advisory opinion, CEO 77-182.

We find that no prohibited conflict of interest would be created were a business entity which employs you to sell educational materials to the school board, to schools other than the one at which you are principal, or to school districts other than your own. Such materials may be sold to the school at which you are a principal if one of the exemptions contained in s. 112.313(12), F. S., applies. We find that no prohibited conflict of interest would be created were a business entity which is owned by you to sell educational materials to school districts other than your own. Such sales may be made to the school board which employs you or to individual schools within the school district if one of the exemptions contained in s. 112.313(12) applies.