CEO 79-55 -- September 6, 1979

CONFLICT OF INTEREST

CONSULTANT TO DIVISION OF FLORIDA LAND SALES AND CONDOMINIUMS RETAINING FINANCIAL RELATIONSHIP WITH TRUST COMPANY WHICH WAS PREVIOUS EMPLOYER

To: James S. Roth, Director, Division of Florida Land Sales and Condominiums, Department of Business Regulation, Tallahassee

Prepared by: Phil Claypool

SUMMARY:

No prohibited conflict of interest would be created were the Division of Florida Land Sales and Condominiums, Department of Business Regulation, to employ as consultant to the division an officer of a trust company which is a wholly owned subsidiary of a banking corporation, affiliates of which could have involvements with the division incidental to their commercial banking or fiduciary activities. Employment by the division would be for a period not to exceed 1 year, during which time the employee would continue to receive a salary from the trust company, as well as other benefits, and would have the guarantee of a position with the company after termination of employment with the division. Although a public employee is prohibited by s. 112.313(7)(a) of the Code of Ethics from having any employment or contractual relationship with a business entity subject to the regulation of or doing business with his public agency, neither the trust company with which the employee has a private relationship nor its parent organization, the banking corporation, is subject to the regulation of the division. Nor does it appear that the trust company could be deemed to be doing business with the division. Section 112.313(7)(a) further prohibits employment or contractual relationship which creates a continuing conflict of interest or impedes the full and faithful discharge of public duties. But the primary responsibilities and authority of the division employee, those of a consultant in general policy and procedural matters, appear to be totally unrelated to any interests which the trust company or the banking corporation and its other affiliates may have. Moreover, the employee's job description specifically provides that his involvement will not extend to matters in which the banking corporation has an "at risk" financial interest.

QUESTION:

Would a prohibited conflict of interest be created were the Division of Florida Land Sales and Condominiums to employ as consultant to the division an officer of a trust company who will retain a financial relationship with the trust company?

Your question is answered in the negative.

In the letter of inquiry submitted by the prospective employee, Earl Foster, he advises that, in accordance with the efforts of the Governor to involve members of the private sector in state government, he has been asked to serve as a consultant to the Division of Florida Land Sales and Condominiums of the Department of Business Regulation for a period not to exceed 1 year. He also advises that presently he is senior vice-president of trust investments for a trust company which is a wholly owned subsidiary of a banking corporation. In that capacity, he writes, he is responsible for overseeing the investment activities of the trust company with respect to fiduciary assets, including investment advice, portfolio management, and trading of marketable securities, although he has never had any responsibility or authority with respect to nonmarketable assets such as real estate or condominiums.

In addition, Mr. Foster advises that from time to time affiliates of the banking corporation could have involvements with the Division of Florida Land Sales and Condominiums as an incident to the commercial banking or fiduciary activities of the banking system. For example, the banking system might protect its collateral lending position with respect to real estate or condominium units through foreclosure and disposition. Additionally, it is possible that real estate or condominium units regulated by the division might be part of fiduciary assets held in estates or trusts by affiliates in the normal course of banking and fiduciary activities. However, he advises, any such activity by the corporation would be strictly incidental to its banking functions.

As an employee of the Division of Land Sales and Condominiums, Mr. Foster will be called upon to advise and counsel with respect to general policies and procedures of the division, including computer analysis of trends and developments. Generally, the job description provides that Mr. Foster would assist in developing the division's educational program on condominium matters, assist in establishing an industry financial data base and methods by which such data can be evaluated, evaluate the forms and reports required by the division, assist in developing a uniform condominium prospectus, and consult in the division's acquisition and development of electronic data processing hardware and software systems. More specifically, his job description states that he will provide, on request only, suggestions and analysis regarding the division's handling of registrants which face financial difficulties or which otherwise require special attention from the division. However, the description also emphasizes that no suggestions or analysis shall be requested or provided when the registrant is one in which the banking corporation has an "at risk" financial interest.

While employed as a consultant to the division, Mr. Foster will continue to receive a salary from the trust company, as well as other fringe benefits. The trust company has guaranteed him an appropriate position with them, if not his present position, following his service with the state. However, Mr. Foster will be working solely for the division and will not perform any work for the trust company during his tenure with the state, his only substantial communications with the trust company being in relation to his return to that employer.

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. 1977.]

The "business entity" with which Mr. Foster has a contractual relationship is the trust company and not its parent organization, the banking corporation. See s. 112.312(3), F. S., defining the term "business entity," and CEO 78-20. Clearly, neither the banking corporation nor the trust company is subject to the regulation of the Division of Florida Land Sales and Condominiums, as would be the developers of condominiums or residential cooperatives, for example, under Chs. 718 and 719, F. S. Nor does it appear from the facts presented that the trust company could be deemed to be doing business with the division. Therefore, the first portion of the above-quoted provision does not apply.

In addition, we find that Mr. Foster's continuing financial relationship with the trust company will not create a continuing or frequently recurring conflict of interest or impede the full and faithful discharge of his public duties as a consultant to the division. His primary responsibilities and authority, those of a consultant in general policy and procedural matters, appear to be totally unrelated to any interests which the trust company or the banking corporation and its other affiliates may have. In the event he becomes involved in specific matters pending before the division, his job description specifically provides that his involvement will not extend to matters in which the banking corporation has an "at risk" financial interest. We feel that this precaution sufficiently precludes the possibility of a conflict of interest during Mr. Foster's employment with the division. See CEO 79-37, in which we approved of similar precautions for another individual employed as part of the Governor's program to involve members of the private sector in state government.

Accordingly, we find that, under the above-described circumstances, no prohibited conflict of interest would be created were the Division of Florida Land Sales and Condominiums to employ Mr. Foster as a consultant if he retains a financial relationship with the trust company which presently employs him.