CEO 81-52 -- September 17, 1981

VOTING CONFLICT OF INTEREST

MEMBER OF FLORIDA STUDENT FINANCIAL ASSISTANCE COMMISSION VOTING ON MEASURES AFFECTING FINANCIAL OR EDUCATIONAL INSTITUTION WHICH EMPLOYS HIM

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

SUMMARY:

Pursuant to Section 112.3143, Florida Statutes, a public officer is required to file a Memorandum of Voting Conflict if he votes on a measure in which he has a personal, private, or professional interest and if that measure inures to his special private gain or to the special gain of a principal by whom he is retained. Therefore, if a Commissioner votes on a matter which directly and individually affects the financial or educational institution which employs him, disclosure should be made in the manner provided in that Section. However, if the measure relates to all institutions generally and would benefit none of them especially, no special gain would inure to the institution employing a Commissioner and no Memorandum of Voting Conflict would be required to be filed.

QUESTION:

Is a voting conflict of interest created where a member of the Florida Student Financial Assistance Commission votes on measures which affect the financial or educational institution which employs him?

In your letter of inquiry you advise that pursuant to Section 240.423(1), Florida Statutes, the Florida Student Financial Assistance Commission has been created as a State-chartered, nonprofit corporation to administer the comprehensive program of student grants, scholarships, loans, and loan guarantees authorized by law. The Commission is composed of nine members appointed by the Governor, three of whom must be from the commercial financial community, three of whom must be from the post-secondary education community, one of whom must be a student, and two of whom are lay citizens.

Among the responsibilities of the Commission as set forth in Section 240.425, Florida Statutes, is its entering into contracts of insurance with various financial institutions under which the institution makes student loans which are guaranteed against default by the Commission. The contracts are executed by the Executive Director subject to approval by the Commission. The members appointed from the commercial financial community (banks and savings and loan associations) are officers of financial institutions which hold contracts of insurance with the Commission. In addition, a member of the Commission appointed from the post secondary education area also is on the Board of Directors of a participating financial institution, as well as being an administrator of a private university which holds a contract of insurance.

In a telephone conversation with our staff, you advised that loans guaranteed by the Commission are reinsured by the federal government, with the Commission being required to administer the loans in such a manner as to comply with applicable federal policies and procedures. In addition, you advised that the Commission has developed standard contract terms for each of the three categories of lenders participating in the program -- commercial financial institutions, insurance companies, and educational institutions. Under the program, the Commission has contracted with approximately 120 different institutions and has guaranteed approximately 97,000 loans, with each loan application being endorsed by the Executive Director if it meets the terms of the insurance contract with the institution.

You question whether a disclosure must be made when a member of the Commission who is an officer of a participating lending institution votes to confirm the Executive Director's action in entering into a contract of insurance with the institution or votes on matters of policy affecting all lender participants or the particular institution.

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

Voting conflicts. -- No public officer shall be prohibited from voting in his official capacity on any matter. However, any public officer voting in his official capacity upon any measure in which he has a personal, private, or professional interest and which inures to his special private gain or the special gain of any principal by whom he is retained shall, within 15 days after the vote occurs, disclose the nature of his interests 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. [Section 112.3143, Florida Statutes (1979).]

Under this provision, a public officer is required to file a memorandum of voting conflict if he votes on a measure in which he has a personal, private, or professional interest and if that measure inures to his special private gain or to the special gain of a principal by whom he is retained. As an alternative in such situations, Section 286.012, Florida Statutes, would allow a public officer to abstain from voting. See CEO 78-96, a copy of which is enclosed.

Under this provision, whether there is a voting conflict of interest requiring disclosure turns on the nature of the measure being considered by the Commission. If the measure would inure to the special gain of the institution which employs the subject Commissioner, disclosure should be made on CE Form 4, Memorandum of Voting Conflict. Thus, if a Commissioner votes on a matter which directly and individually affects the institution which employs him, disclosure should be made in the manner provided in Section 112.3143. For example, in a telephone conversation with our staff you advised that in the event of default on a loan the lender may seek reimbursement from the Commission under the terms of its insurance contract with the Commission. If the Commission votes on the issue, the lender would stand to receive special gain in the sense that it is being directly and individually affected by the Commission's decision. If a member of the Commission serves as an officer of the lender, for example, and if he votes on the question presented to the Commission, then he should file a memorandum of voting conflict. Similarly, if a member of the Commission votes to confirm the Executive Director's action in entering into a contract of insurance with his financial or educational institution, the institution would stand to benefit especially.

On the other hand, it appears that other measures before the Commission would not inure to the special gain of the financial or educational institution employing a Commissioner. Matters relating to all institutions generally would benefit none of them especially. See CEO 77-57, Question 2, a copy of which is enclosed. As an example, if the Commission votes to adopt standard terms for insurance contracts applicable to all commercial financial institutions, no memorandum of voting conflict would be required to be filed by any member of the Commission.

Your question is answered accordingly. In addition, please note that public officers who are officers or directors of state or federally chartered banks or savings and loan associations are required to disclose that interest on CE Form 3, Disclosure of Specified Business Interests. We are enclosing copies of CEO 77-86A and CEO 75-166 for your further information in this regard.