CONFLICT OF INTEREST; DOING BUSINESS; VOTING CONFLICT
SCHOOL BOARD CANDIDATE WHO IS EMPLOYED BY
NON-PROFIT ENTITY CONTRACTING WITH SCHOOL DISTRICT AND WHOSE RELATIVES'
FIRMS DO BUSINESS WITH SCHOOL DISTRICT
To: Mark Herron, Esquire (Tallahassee)
A continuing or frequently recurring conflict of interest and an impediment to the full and faithful discharge of public duty would be created were a school board member to remain employed as the program director for a non-profit business and education alliance that receives funding from the school district, due to an impermissible overlap between her private interests and her public duties.
With regard to the school board's contract with an insurance agency in which her husband owns a material interest, the existing contract would be "grandfathered-in" because it was executed prior to her qualification for elective office and would not violate Section 112.313(3), Florida Statutes. Nor would a prohibited conflict of interest be created were the agreement to be renewed as provided in the agreement for three additional one-year terms, as long as the provisions in the renewed agreement remain the same as those of the original. She would be required to abstain from voting to renew the contract pursuant to Section 112.3143(3), Florida Statutes, as it would inure to the special private gain or loss of her husband.
As long as the school board member abstains from voting on matters that inure to the special private gain or loss of the law firm that serves as counsel to the school board and where her brother is a shareholder, no prohibited conflict of interest is created by that situation.
Does a prohibited conflict of interest exist where a school board member is employed by a non-profit business and education alliance contracting with the school district?
Based upon the circumstances presented, your question is answered in the affirmative.
This opinion is sought on behalf of your client,…….., who is contemplating becoming a candidate for the Leon County School Board. You inquire about the prospective candidate's current employment situation and whether it would create a prohibited conflict of interest if she were to be elected to the School Board, and also whether business dealings between her husband's insurance agency and the School District, and her brother's law firm and the School District, create prohibited conflicts of interest for her. We will examine her employment situation first.
You explain that, presently, your client is employed by the Greater Tallahassee Chamber of Commerce, Inc., where she serves as Program Director for World Class Schools of Leon County, Inc. ("WCSL"), "a non-profit business and education alliance between the Chamber and the School District focused on creating a World Class system where all students achieve high academic standards and are prepared for post secondary education and direct high wage employment."1 You explain further that the WCSL program facilitates and supports the following activities:
The current contract with the School District was entered into in August 2009, and funds the program in the amount of $50,000 through June 2010.
The applicable provision of the Code of Ethics is as follows:
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 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.]
This provision prohibits a school board member from having an employment relationship with a business entity that is doing business with or regulated by her agency. It also prohibits employment relationships which create continuing or frequently recurring conflicts between private interests and the performance of public duties, or which impede the full and faithful discharge of public duties.
In a number of opinions, we have concluded that Section 112.316, Florida Statutes, operates to "grandfather in" contracts that were entered into prior to assuming public office. See CEO 02-14, where we concluded that a school board member would not violate Section 112.313(7)(a), Florida Statutes, where he was employed with an investment banking firm chosen by the school district to market its bonds before he took office. We have also applied Section 112.313(15), Florida Statutes, to exempt conflicts where the school board member was employed by a tax-exempt education foundation. See CEO 07-11. Section 112.313(15), Florida Statutes, provides:
ADDITIONAL EXEMPTION.—No elected public officer shall be held in violation of subsection (7) if the officer maintains an employment relationship with an entity which is currently a tax-exempt organization under s. 501(c) of the Internal Revenue Code and which contracts with or otherwise enters into a business relationship with the officer's agency and:
(a) The officer’s employment is not directly or indirectly compensated as a result of such contract or business relationship;
(b) The officer has in no way participated in the agency's decision to contract or to enter into the business relationship with his or her employer, whether by participating in discussion at the meeting, by communicating with officers or employees of the agency, or otherwise; and
(c) The officer abstains from voting on any matter which may come before the agency involving the officer's employer, publicly states to the assembly the nature of the officer's interest in the matter from which he or she is abstaining, and files a written memorandum as provided in s. 112.3143.
However, in our view, even if the contract were considered to be "grandfathered-in," or even if all of the conditions in Section 112.313(15) were met, we still must consider whether her employment with WCSL creates a prohibited conflict of interest under the second part of Section 112.313(7)(a), Florida Statutes, i.e., a continuing and frequently recurring conflict or an impediment to the full and faithful discharge of her duties as a member of the School Board.
In CEO 06-23, we opined that a school board member would violate the second part of Section 112.313(7)(a), Florida Statutes, were she to remain employed as an assistant principal at a charter school after her election to the school board. In that situation, we found that the school board member's ability to objectively evaluate the performance of the charter school would be compromised if she continued to be employed there because a public officer cannot serve two masters with potentially differing interests regarding the same subject matter. Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982). Here, where the School Board candidate directs the work of WCSL on behalf of her employer, she must chose whether to continue as Program Director of WCSL or to hold the office of School Board member, as the two would create a prohibited overlap. Moreover, as we noted in Footnote 7 of CEO 06-23:
In making our finding of a prohibited conflict, we do not impugn the character or personal integrity of the member. As the Zerweck court noted, the statute is purely preventive in nature; it is concerned with what "might happen." The statute requires no intentional or wrongful transgression on the part of the member such as would be required for a corrupt use of position under Section 112.313(6), Florida Statutes; and we find no such transgression on the part of the member. Our opinion herein addresses only the incompatibility of simultaneously holding both the School Board seat and employment as assistant principal of the charter school.
That sentiment is equally appropriate here.
Accordingly, we find that a School Board member would be prohibited from simultaneously holding office and being employed as Program Director of a non-profit business and education alliance that contracts with the School District.
Does a prohibited conflict of interest exist where a school board member's husband owns a material interest in an insurance agency that provides insurance services to the school board?
Under the circumstances set forth below, your question is answered in the negative.
You explain that the prospective candidate's husband owns a material interest in an insurance agency that currently has a contract with the school district to provide certain insurance related products and benefits. The contract was entered into in 2007 for a three-year term, and can be extended by the School District for three additional one-year periods.
Section 112.313(3), Florida Statutes, provides:
DOING BUSINESS WITH ONE'S AGENCY.--No 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 officer's 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 officer's 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 legislator's 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.
[Section 112.313(3), Florida Statutes.]
This provision prohibits a public officer from acting in her official capacity to purchase services for her agency from a business entity in which her spouse is an officer, partner, director, or proprietor of, or in which he owns a material (greater than 5 percent) interest. However, as you note in your inquiry, Section 112.313(3)(b) contains a grandfathering provision for business entered into prior to the public officer's qualification for elective office. Thus, the School District's contract with the insurance agency would not violate Section 112.313(3), Florida Statutes, as it was entered into long before her qualification for elective office.
As to whether that contract can be renewed, in CEO 02-14, Question 2, we concluded that where an original contract specifically provides for time-certain extensions, then "grandfathering" will apply to those renewals, provided the terms of the contract remain the same as those of the original. However, the school board member would be required to comply with the voting conflicts statute—Section 112.3143(3)(a), Florida Statutes—and abstain from voting on any renewal/extension of the contract with her husband's insurance agency and file the voting conflict form—CE Form 8B.
Future contracts between the School Board and the insurance agency would be prohibited unless one of the exemptions in Section 112.313(12), Florida Statutes, were applicable. For example, if the insurance services contract is awarded under a system of sealed, competitive bidding to the lowest and best bidder, and if the School Board member otherwise complies with the conditions set forth in Section 112.313(12)(b), Florida Statutes, and files the CE Form 3A--Interest in Competitive Bid for Public Business, no conflict would be created if the School Board were to enter into another contract with the insurance agency in which the School Board member's husband owns a material interest. See CEO 82-71, Question 2, which discussed the competitive bid exemption where the husband of a school board member owned a business that sold goods and services to the school district.
Question 2 is answered accordingly.
Does a prohibited conflict of interest exist where a school board member's brother is a shareholder in a law firm that serves as counsel to the School Board?
Question 3 is answered in the negative; however, she would be required to abstain from voting on matters that inure to the special private gain or loss of the law firm in which her brother is a shareholder and file the memorandum of voting conflict form.
Your final question involves the prospective candidate's brother, who is a shareholder in a law firm that serves as counsel to the Leon County School Board. You write that the School Board entered into a continuing contract with the law firm in 2002 which is subject to termination with a 30-day notice. In CEO 82-25, we noted that Sections 112.313(3) and 112.313(7)(a), Florida Statutes, were inapplicable to a situation where the state attorney allowed his brother-in-law's company to provide a dental insurance program to employees in the state attorney's office. Similarly, both provisions are inapplicable here. However, the School Board member will have to comply with the voting conflicts law—Section 112.3143(3), Florida Statutes—when considering matters involving the law firm. It provides:
No 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 officer's 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.
This provision requires the School Board member's declaration of conflict, abstention from voting, and timely filing of the CE Form 8B (memorandum of voting conflict) regarding measures of the School Board that would inure to her brother's special private gain or loss, because the definition of "relative" in Section 112.3143(1)(b) includes one's brother. Whether a particular vote inures to the brother's special private gain or loss cannot be definitively addressed based on the limited facts before us. However, as a general rule, we would advise the School Board member to abstain from voting on matters that would result in gain or loss to the law firm since, as a shareholder, it appears that her brother would stand to gain or lose from any vote that results in gain or loss to the law firm.
Question 3 is answered accordingly.
ORDERED by the State of Florida Commission on Ethics meeting in public session on February 26, 2010 and RENDERED this 3rd day of March, 2010.
Roy Rogers, Vice Chair
cc: Mr. Mark Herron