CEO 91-28 -- June 7, 1991
CONFLICT OF INTEREST
CITY UTILITIES DEPARTMENT EMPLOYEES FORMING CORPORATION TO INSTALL AND TEST BACKFLOW PREVENTION DEVICES REQUIRED BY CITY ORDINANCE
To: (Name withheld at the person's request.)
No prohibited conflict of interest was created under Section 112.313(7)(a), Florida Statutes, where two city utilities department employees formed a corporation for the purpose of installing and testing backflow prevention devices, where the city had enacted an ordinance which required the installation and testing of backflow prevention devices, and where the city required certified, licensed plumbers to register with the city and obtain permits from the city. Nor was a conflict of interest created under Section 112.313(3), Florida Statutes, where the subject corporation performed services as a subcontractor on two city projects. There was no indication that either employee misused his position or used information he obtained through his position which was not generally available, although such actions could constitute violations of Sections 112.313(6), and 112.313(8), Florida Statutes.
Was a prohibited conflict of interest created where a water distribution supervisor and an engineering inspector employed by a city utilities department formed a business for the purpose of installing and testing backflow prevention devices, where the city requires commercial water customers to install backflow prevention devices and have them tested annually, and where the city requires certified licensed plumbers who install and test backflow prevention devices to register with the city's utility department?
Under the circumstances presented, your question is answered in the negative.
Through your letter of inquiry and in the information you have provided to our staff, we are advised that in 1988, the City of Pompano Beach enacted an ordinance which requires commercial establishments to install backflow prevention devices on their water lines at a location after the City's water meter. The device is used to prevent water from flowing back into the distribution system where it can contaminate potable water supplies. We also are advised that the City ordinance requires that backflow preventers be installed and then tested annually by a certified licensed plumber who has registered with the City Utilities Department. Further, the City's Building Department issues the necessary permits for the installation and annual testing of backflow preventers, with the testing results then submitted to the Utilities Department.
In addition, we are advised that two employees of the City Utilities Department formed a corporation in May 1988 to install and test backflow preventers. The corporation registered with the Utilities Department as required by City ordinance. The corporation subsequently was listed first on a list of 37 entities which had registered with the City and which was distributed to all commercial establishments required by ordinance to install backflow preventers.
We are advised further that the City employees who formed the business were the Water Distribution Supervisor and an Engineering Inspector, both of whom worked in the Utilities Department. You advise that the Water Distribution Supervisor was involved in the development of City policies concerning backflow prevention and cross connection control. However, his duties with the City do not involve installation or inspection of backflow preventers and he does not have any involvement in the registration process required of certified licensed plumbers. His involvement in the business entity was as a corporate officer and shareholder.
The Engineering Inspector since has resigned his position with the City and now works full time for the corporation. However, when he was employed by the City in the Utilities Department, his duties did not include matters involving backflow preventers or inspections of backflow preventers.
Finally, we are advised that on two separate occasions, the subject corporation performed work on two City projects. In both cases, the corporation contracted with the contractor, not the City. You question whether the foregoing factual situation poses a conflict of interest for either the Water Distribution Supervisor or the former Engineering Inspector.
The first provision within the Code of Ethics which is implicated is Section 112.313(3), Florida Statutes, which 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 of 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.
This provision prohibits a public employee, acting as a purchasing agent, from purchasing services for his agency from a business entity in which he is an officer or has a material interest. It further prohibits a public employee from acting in his private capacity to sell services to his public agency.
The information you have provided indicates that on the first project the City selected a general contractor to renovate a City park and that the general contractor then hired subcontractors. One of the subcontractors in turn contracted with the subject corporation to test and approve the backflow prevention device. The work was considered a punch list item and did not require a separate permit from the City Building Department. The corporation received payment from the general contractor.
On the second project, the City awarded the contract to the general contractor, and the general contractor then subcontracted with the subject corporation to perform a portion of the project. The corporation was paid by the general contractor.
With regard to the first sentence of Section 112.313(3), Florida Statutes, it does not appear that either employee acted as a purchasing agent for his agency within the City's organizational structure. The City's organizational structure establishes a Public Works Department. Within that "super" department, according to the City Manager, are five separate departments, including the Utilities Department. The Utilities Department consists of three separate divisions: Engineering, Water/Effluent, and Utilities. The Utilities Division is further divided into four sections: Sewer Pumping, Water Distribution, Sewer Transmission, and Backflow Prevention. For purposes of the Code of Ethics, the "agency" of the Engineering Inspector was the Engineering Division, and the "agency" of the Water Distribution Supervisor was the Water Distribution Section. It does not appear that either employee served as a purchasing agent for his respective "agency"; nor does it appear that the work on the two park renovation projects was procured by either of their respective entities in City government. Thus, a conflict of interest does not exist under this provision.
Concerning the second sentence in Section 112.313(3), Florida Statutes, we previously have opined that this provision is not violated where the public employee has subcontracted to provide services to a contractor, where the contractor is doing business with the employee's agency. See CEO 88-43 and the opinions cited therein. As the subject corporation subcontracted with the contractors to provide services on the two park renovation projects undertaken by the City, these opinions are applicable to the situation described herein and, thus, no conflict of interest was created under Section 112.313(3), Florida Statutes.
The Code of Ethics further 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.
The first part of this provision prohibits a public employee from having any employment or contractual relationship with a business entity which either is doing business with, or is subject to the regulation of, his public agency. Both employees had a contractual relationship with the subject corporation due to their positions as corporate officers, as well as their ownership of stock in the corporation. See CEO 86-36, and CEO 82-65. Under the circumstances presented, the subject corporation was not doing business with the employees' public agency but, instead, was doing business with the general contractors who were contracting with the City to renovate two City-owned parks. See CEO 88-43, CEO 85-18, CEO 82-54, CEO 81-88, CEO 79-13, and CEO 79-1.
Further, in CEO 85-6, we concluded under a factually similar situation that an employee of a city water distribution section did not have a conflict under Section 112.313(7)(a), Florida Statutes, where he tested backflow preventers for businesses which received city water. The exemption contained in Section 112.313(12)(c), Florida Statutes, exempts conflicts which result from the purchase or sale of "any utility service."
The next question which must be answered is whether, by virtue of being registered with the City Utilities Department to install and test backflow prevention devices, the subject corporation is regulated by the City Utilities Department. The information provided to us indicates that plumbers are registered and licensed by the South Florida Building Code Board. In turn, the City, through its ordinance, requires plumbers seeking to install and test backflow preventers in the City of Pompano Beach to register with the Backflow Prevention Section of the Utilities Department. We are advised that the registration process consists of providing a copy of the license the plumber holds from the South Florida Building Code Board to the Backflow Prevention Section and filling out a form with information such as name, address, and telephone numbers. Further, we are advised that no plumber ever has been denied the privilege of installing backflow preventers by the City. We also are advised that neither employee was involved in any way with the registration process. It therefore appears that the registration process is purely ministerial and that business entities which register with the Backflow Prevention Section to install backflow preventers are not regulated by the Utilities Department for purposes of Section 112.313(7)(a), Florida Statutes.
We are also of the view that the subject corporation is not regulated by the Utilities Department by virtue of the permitting requirements involved in the installation and testing of backflow preventers. The information provided to us indicates that the City Building Department, an entirely separate department from the Public Works Department, issues the necessary permits for installation and testing of backflow preventers and that the Backflow Prevention Section within the Utilities Department then receives the test results. The City's ordinance indicates that the ultimate sanction for failure to install or test a backflow prevention device is termination of water service. However, neither of the subject employees had any involvement in the administration of the backflow prevention program administered by the Backflow Prevention Section. It is therefore our opinion that the situation did not create a prohibited conflict of interest under the first portion of Section 112.313(7)(a), Florida Statutes.
The second portion of Section 112.313(7)(a), Florida Statutes, prohibits a public employee from having an employment or contractual relationship that creates a continuing or frequently recurring conflict between his private interests and the performance of his public duties, or which impedes the full and faithful discharge of his public duties. Both employees were employed by separate entities within the Utilities Department. Additionally, the Engineering Inspector who has since left City employment had no employment responsibilities regarding the backflow prevention program. See CEO 85-6. Although the Water Distribution Supervisor did participate in the formulation of policies which implemented the backflow prevention program, there is no indication that his contractual relationship with the corporation created a continuing or frequently recurring conflict between his private interests and the performance of his public duties. Nor is there any suggestion that his involvement has impeded the full and faithful discharge of his public duties. We are therefore of the view that under the circumstances presented, no prohibited conflict of interest existed for either employee under Section 112.313(7)(a), Florida Statutes.
Other provisions within the Code of Ethics which may be implicated are as follows:
MISUSE OF PUBLIC POSITION.--No public officer or employee of an agency shall corruptly use or attempt to use his official position or any property or resource which may be within his trust, or perform his official duties, to secure a special privilege, benefit, or exemption for himself or others. This section shall not be construed to conflict with s. 104.31. [Section 112.313(6), Florida Statutes.]
For purposes of this provision, the term "corruptly" is defined as follows:
'Corruptly' means done with a wrongful intent and for the purpose of obtaining, or compensating or receiving compensation for, any benefit resulting from some act or omission of a public servant which is inconsistent with the proper performance of his public duties. [Section 112.312(7), Florida Statutes.]
DISCLOSURE OR USE OF CERTAIN INFORMATION.--No public officer or employee of an agency shall disclose or use information not available to members of the general public and gained by reason of his official position for his personal gain or benefit or for the personal gain or benefit of any other person or business entity. [Section 112.313(8), Florida Statutes.]
Concerning misuse of position, in previous opinions we have refused to make a final determination in an advisory opinion as to whether the individuals have or have not violated Section 112.313(6), Florida Statutes. See CEO 89-20, CEO 85-10, and CEO 82-82. As a determination of intent is difficult to make when rendering an advisory opinion, we will not depart from our previous policy in this regard. However, there is no indication that the Water Distribution Supervisor used his position to influence the policies of the backflow prevention program to benefit the subject corporation. Had he, it is possible that a violation of the Code of Ethics could exist.
Concerning the list of entities which had registered with the City and which then was distributed to water customers, the stated reason for the subject corporation appearing first on the list is that it was the first to register. It is conceivable that the corporation's prominent place on the list could have conferred a benefit on the corporation, as the list was distributed by the City with the message that the water customer needed to contact a registered entity to obtain the required backflow installation and testing service. However, we cannot say from the information that has been provided to us whether either employee misused his position in being the first to register with the City. Nor can we determine whether either employee misused his position to learn about the possibility of working as a subcontractor on the two park renovation projects. Therefore, we decline to find that either employee has engaged in activities which constitute a violation of Section 112.313(6), Florida Statutes.
Similarly, there is no indication that either employee disclosed or used information not available to the general public and gained as a result of his public employment to benefit the subject corporation, which would constitute a violation of Section 112.313(8), Florida Statutes. We note that under the rationale of previous opinions, it also could constitute a violation of this provision if the subject employee received special training as a public employee and then used this special knowledge in private employment. See CEO 82-28, CEO 80-54, and CEO 80-21. However, the information provided to us does not indicate that either employee received special training while employed by the City regarding the installation and testing of backflow prevention devices. Therefore, we find no basis to conclude that Section 112.313(8), Florida Statutes, has been violated.
Accordingly, assuming that the subject employees did not misuse their official positions in connection with their business, and assuming that neither employee received special training from the City concerning the installation and testing of backflow prevention devices, we find that a prohibited conflict of interest did not exist where the Water Distribution Supervisor and an Engineering Inspector formed a corporation to provide installation and testing services, where the installation and testing was required by City ordinance. Additionally, we find that a prohibited conflict of interest was not created where the subject corporation performed services as a subcontractor on two City projects.