CEO 87-85 -- December 10, 1987

CONFLICT OF INTEREST

CITY MAYOR'S LAW FIRM RETAINED BY SHAREHOLDER

OF CORPORATION SEEKING BONDS FROM CITY

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

SUMMARY:

A prohibited conflict of interest would be created were the law firm of the mayor of a city to be retained as bond counsel by a shareholder of a corporation which is seeking to have industrial revenue bonds issued by the city to finance a project of the corporation. As the mayor would be acting in his official capacity through the city's involvement with the bond issue to indirectly purchase services for the city from his law firm, and as he would be acting in a private capacity through his firm to sell services to the city, Section 112.313(3), Florida Statutes, would be violated. Section 112.313(7), Florida Statutes, would be violated were the corporation or its majority shareholder to hire the law firm as bond counsel.

QUESTION:

Would a prohibited conflict of interest be created were the law firm of the mayor of a city to be retained as bond counsel by a shareholder of a corporation which is seeking to have industrial revenue bonds issued by the city to finance a project of the corporation?

Your question is answered in the affirmative.

In your letter of inquiry and in a telephone conversation with our staff you have advised that .... serves as Mayor of the City of St. Petersburg. You question whether the Mayor's law firm could be retained as bond counsel by an individual who owns a major part of the stock of a corporation for which the City would issue and sell industrial revenue bonds to finance a project of the corporation. You advise that there would be no direct contractual relationship between the law firm and the corporation or between the law firm and the City. As bond counsel, the law firm would write a legal opinion as to the tax exempt nature of the interest to be paid on the bonds, with the other parties to the transaction being represented by their own counsel. The opinion would be relied upon by and directed to the City, the corporation, the underwriters of the bond issue, and ultimately the bondholders. If such a transaction were prohibited, you question whether a prohibited conflict of interest would be created if the bond counsel opinion written by the Mayor's law firm were to be directed to and relied upon by the bondholders and were to be directed to another attorney involved in the bond issue, such as counsel for the City or the underwriters, if those attorneys were to give opinions to their clients based upon the bond counsel opinion.

Under either situation, we are of the opinion that the Code of Ethics for Public Officers and Employees would prohibit the Mayor's law firm from being retained as bond counsel with respect to the issuance of bonds by the City. The Code of Ethics provides:

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), Florida Statutes (1985).]

The first part of this provision prohibits a public officer acting in his official capacity from directly or indirectly purchasing any services for his own agency from a business entity of which he is a partner.

It is our understanding that normally the public agency which is issuing industrial revenue bonds hires bond counsel for the issue, who is paid out of the bond proceeds as part of the costs of issuance. If the City were to hire the Mayor's law firm as bond counsel, the Mayor would be acting in his official capacity to purchase directly from his firm services for the City which would enable the bonds to be sold. Under the circumstances you have presented, we are of the opinion that the Mayor would be acting in his official capacity through the City's involvement in the bond issue to indirectly purchase services for the City from his law firm, in violation of Section 112.313(3), Florida Statutes, above. Here, the services provided by the firm would be an integral part of the legal services necessary for the issuance of the bonds by the City, with the opinion being directed to and relied upon either by the City or by the City's attorneys.

The second portion of Section 112.313(3), Florida Statutes, prohibits a public officer from acting in a private capacity to sell services to his agency. Whether the Mayor's law firm were to be hired directly by the City or by the majority shareholder of the corporation to act as bond counsel, we conclude that he would be acting in a private capacity to sell services to the City. We previously have advised that a partner in a law firm acts in a private capacity to sell services to his public agency when that firm is retained to provide legal services to that agency. See CEO 81-49 and CEO 81-50, affirmed, Howard v. State Commission on Ethics, 421 So.2d 37 (Fla. 3d DCA 1982).

The Code of Ethics also provides:

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), Florida Statutes (1985).]

This provision prohibits a public officer from having a contractual relationship which is with a business entity doing business with his agency, which would create a continuing or frequently recurring conflict of interest, or which would impede the full and faithful discharge of his public duties. We have advised that an attorney has a contractual relationship with each client of his law firm. See CEO 86-37.

If the corporation receiving the bond proceeds were to hire the Mayor's law firm as bond counsel, the Mayor then would have a contractual relationship with a business entity which is doing business with the City. See CEO 86-2, in which we found that a partnership seeking industrial revenue bond financing from a city would be "doing business with" the city. In terms of the potential for a conflict of interest, we see no reason to distinguish the professional obligation which would be due from the Mayor's law firm to the corporation from the obligation due the majority shareholder of the corporation under the circumstances presented. In either case, the Mayor, through his law firm, would be presented with the identical conflict of interest when functioning in his official capacity with respect to the bond issue and related matters.

Accordingly, we find that a prohibited conflict of interest would be created were the law firm of the Mayor to be retained as bond counsel by a shareholder of a corporation which is seeking to have industrial bonds issued by the City to finance a project of the corporation.