CEO 78-24 -- April 20, 1978

CONFLICT OF INTEREST

COUNTY EMPLOYEE OWNING COMPANY WHICH SELLS PATENTED ITEM TO COUNTY

To: Mr. Franklin L. Herrington, Duval County Communication Technician, Doctors Inlet

Prepared by: Phil Claypool

SUMMARY:

A public employee is prohibited by s. 112.313(3), F. S. 1977, from acting in a private capacity to sell any goods to the political subdivision which employs him. However, when a county purchases patented radio equipment mounting brackets from a company in which a county employee owns a majority interest, the transaction is deemed to fall within the exemption contained in s. 112.313(12)(e), which creates an exception to the prohibition contained in s. 112.313(3) if the business entity involved is the only source of supply within the political subdivision and there is full disclosure made to the governing body of the political subdivision. While other radio equipment mounting brackets may be available, the subject patented bracket is specially designed to perform a specific function and is manufactured only by the employee's company. Accordingly, so long as the employee discloses his interest in the company as provided in s. 112.313(12)(e), no prohibited conflict of interest would be created were the company to sell the brackets to the county.

QUESTION:

Would a prohibited conflict of interest be created were a company in which I own a majority interest to sell a patented radio equipment mounting bracket to the county which employs me as a senior communication technician?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you advise that you are employed by Duval County as a senior communication technician, responsible for assisting in the maintenance and repairs of all communication equipment owned by the county. You also advise that you have designed and hold the U. S. patent for the Wayne Bracket, a mounting rack specially designed for mounting communication and other related equipment used in emergency vehicles, such as police cars and ambulances. According to materials relating to the patent of this invention, the bracket is designed to be installed over the transmission and drive shaft tunnel of the vehicle so that all radio and safety equipment is convenient to the driver and other front seat passenger while not interfering with their comfort and space. According to Mr. George Warner, communications specialist with the county, there are no other comparable mounting brackets available on the market. Mr. Warner also was of the opinion that this bracket is a vast improvement over other methods of mounting radio and emergency equipment because: Such equipment can now be placed in one central location and, where previously such equipment was bolted to the underside of the vehicle's dash, this is an impossibility now that newer vehicles have plastic dashes with the transmission tunnel and dash so close together that there is no room for mounting the equipment beneath the dash.

You also advise that you have assigned the exclusive manufacturing and distribution rights of this bracket to a company in which you own a controlling interest. In addition, you have allowed the county motor pool to manufacture these brackets in the past. The county, however, wishes to cease making the brackets but, alternatively, wishes to purchase them from your company, both because the quality of the brackets made by the county is not standardized and because it is more expensive for the county to manufacture them than for the company to do so ($31 vs. $19).

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

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.

(c) Appointment to public office.

(d) Beginning public employment.

[Section 112.313(3), F. S. 1977.]

This provision prohibits a public employee, acting in a private capacity, from selling any goods to the political subdivision which employs him. We have previously advised that one who owns more than 5 percent of a business acts in his private capacity to sell when that business sells. See CEO's 77-42 and 75-196. Thus, it appears that your company may not sell any goods to the county.

However, the Code of Ethics provides several specific exemptions to the above-quoted provision. One of these exemptions occurs where

[t]he 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. 1977.]

The apparent legislative purpose behind this exemption is to alleviate the hardships which otherwise would be imposed by the Code of Ethics upon political subdivisions where an agency might have to forego some services or might have to purchase goods at additional cost in order to avoid creating conflicts of interest for its officers or employees. Thus, in CEO 77-125, we advised that this exemption would allow an athletic supply company owned by a school district employee to sell to schools within the district types of athletic equipment not stocked by other stores in the county. Similarly, in CEO 77-127, we advised that this exemption would apply where a fire district wished to use a telephone answering service owned by that district's legal counsel because that answering service was the only provider of 24-hour service in the county. Also, in CEO 78-17, we advised that a fire district could purchase items from a hardware store owned by a district board member so long as that store remained the only source of supply of that particular item within the district.

We are of the opinion that the "sole source of supply" exemption should apply to the circumstances you have outlined. As noted above, while there may be other methods of mounting radio and other emergency equipment within a vehicle, so that your company would not be the sole source of supply of mounting brackets, there are no other brackets available in the market which perform the specific function of this patented bracket. Nor do we feel that the fact that the county in the past has made these brackets would bear on the application of the exemption because this was done only by permission of the patent holder and because the county has indicated that it prefers to stop making these brackets for economic reasons.

Accordingly, so long as you make disclosure of your interest in the company to the governing body of the county as provided in s. 112.313(12)(e), above, we find that no prohibited conflict of interest would be created were your company to sell these brackets to the county.