CEO 80-79 -- October 30, 1980

CONFLICT OF INTEREST

MEMBERS OF COUNTY HOUSING FINANCE AUTHORITY PRIVATELY ENGAGED IN HOUSING AND FINANCE INDUSTRIES

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

Prepared by: Phil Claypool

SUMMARY:

No prohibited conflicts of interest would be created by virtue of service on a county housing finance authority by one who is a partner in a law firm which has several lending institutions as clients; one who is an executive vice president of a local lending institution; one who is president of a firm which is engaged in land planning, civil engineering, land surveying, and development management; and one who is employed as vice president of a company engaged in the mobile home industry. However, under the prohibition contained in s. 112.313(3), F. S., a member of the authority may not be an officer, partner, director, or proprietor of, or hold a material interest in, a business entity which is selling any realty, goods, or services to the authority, unless one of the exemptions contained in s. 112.313(12) should apply. In the absence of such business activity, s. 112.313(3) would not prohibit service on the authority by any of the above-described individuals. Neither would s. 112.313(7)(a) be violated simply by the individuals' sitting on the authority. However, that statute would prohibit service on the authority by anyone who has an employment or contractual relationship with a business entity which is doing business with the authority.

QUESTIONS:

1. Does a prohibited conflict of interest exist when a member of a county housing finance authority is a partner in a law firm with several lending institutions as clients?

2. Does a prohibited conflict of interest exist when a member of a county housing finance authority is an executive vice president with a local lending institution?

3. Does a prohibited conflict of interest exist when a member of a county housing finance authority is president of a firm which is engaged in land planning, civil engineering, land surveying, and development management?

4. Does a prohibited conflict of interest exist when a member of a county housing finance authority is employed as vice president of a company engaged in the mobile home industry?

Question 1 is answered in the negative.

In your letter of inquiry you advise that ____, the ____ of the authority, is a partner in a law firm which represents as clients several lending institutions within the county.

Section 112.313(3), F. S., provides as follows:

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.

(d) Beginning public employment.

This provision prohibits a member of the authority from being a partner in a business entity which is selling any realty, goods, or services to the authority. Several exemptions to the strict application of this prohibition are contained in s. 112.313(12). Unless one of the exemptions applies, therefore, a prohibited conflict of interest would be created if the subject authority member's law firm were to sell its services to the authority. However, in the absence of such circumstances, s. 112.313(3) would not prohibit the subject authority member from serving on the authority.

Section 112.313(7)(a), F. S., provides 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 is an officer or employee, excluding those organizations and their officers who, when acting in their official capacity, enter into or negotiate a collective bargaining contract with the state or any municipality, county, or other political subdivision of the state; 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 portion of this provision prohibits a member of the authority from being employed by or having a contractual relationship with a business entity which is doing business with the authority. Thus, as discussed above in reference to s. 112.313(3), the subject authority member may not serve on the authority if his law firm does business with the authority. However, the subject authority member also has a contractual relationship with each client of his law firm. The Third District Court of Appeal has held:

We adopt the rule recognized by our sister states that the retention of a law firm obligates every member thereof to fulfilling that contract, and that upon a dissolution any of the partners is obligated to complete that obligation without extra compensation. [Frates v. Nichols, 167 So.2d 77, 81 (3 D.C.A. Fla., 1964).]

This principle has been followed by the court in the more recent cases of Kreutzer v. Wallace, 342 So.2d 981 (3 D.C.A. Fla., 1977), and Welsh v. Carroll, 378 So.2d 1255 (3 D.C.A. Fla., 1980). As we have found no cases which would contradict this rule, we find that s. 112.313(7)(a) would prohibit the subject authority member from serving on the authority should any of the lending institutions which are clients of his law firm do business with the authority. Again, one of the exemptions contained in s. 112.313(12) may be applicable; in that event, the prohibition would no longer pertain.

The second portion of s. 112.313(7)(a) prohibits a member of the authority from having 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 those duties. Assuming that the lending institution clients of the subject member's law firm do not do business with the authority, we are of the opinion that his partnership in a law firm which represents several lending institutions would not create a continuing or frequently recurring conflict of interest and would not impede the full and faithful discharge of his duties. Rather, it appears that the subject member's expertise in the law and practices of those institutions would be of great assistance to the authority. Although the Legislature has stated that "[i]t is essential to the proper conduct and operation of government that public officials be independent and impartial," it has recognized that "[i]t is also essential that government attract those citizens best qualified to serve." Section 112.311(1) and (2), F. S.

Accordingly, we find that no prohibited conflict of interest exists when the subject member of the Housing Finance Authority is a partner in a law firm which represents several lending institutions as clients. However, as discussed above, the subject authority member may not remain in that position if one of the clients of his law firm does business with the authority, unless one of the exemptions in s. 112.313(12), F. S. applies.

Question 2 also is answered in the negative.

In your letter of inquiry you advise that ____ is ____ of a lending institution located in Leon County. You also advise that the county resolution which appointed the members of the authority designated him as knowledgeable in the field of finance. In our opinion, the subject authority member is in substantially the same position as outlined in our response to your first question. That is, there is no prohibition against his serving the authority unless the lending institution which employs him does business with the authority, presuming that no exemption in s. 112.313(12), F. S., applies. We note that the subject member has been designated as knowledgeable in the field of finance. However, in our view, this designation by the appointing authority does not bring the subject member within the terms of s. 112.313(7)(b), which provides:

This subsection shall not prohibit a public officer or employee from practicing in a particular profession or occupation when such practice by persons holding such public office or employment is required or permitted by law or ordinance.

The designation of one as "knowledgeable in the field of finance" simply does not amount to legally requiring or permitting one to practice in a particular profession or occupation while serving on the authority, since a person may be knowledgeable in the field of finance without necessarily being actively involved in the banking profession.

Accordingly, we find that no prohibited conflict of interest exists when the subject member of the housing finance authority is executive vice president of a local lending institution. However, the subject member may not continue to serve in that position if the institution which employs him does business with the authority, unless one of the exemptions in s. 112.313(12), F. S., applies.

Question 3 is answered in the negative.

In your letter of inquiry you advise that ____ is president of a firm engaged in land planning, civil engineering, land surveying, and development management, so that his firm potentially could receive contracts for these services with respect to property upon which will be constructed homes ultimately financed for the occupant through the authority's program. In addition, you advise that ____ has been designated as knowledgeable in the field of commerce.

Section 112.313(3), F. S., discussed above in response to your first question, would prohibit the subject authority member from serving on the authority should his firm contract with the authority to sell its services, unless one of the exemptions of s. 112.313(12) were to apply. Similarly, the first portion of s. 112.313(7)(a) would prohibit him from serving on the authority if his firm contracts to do business with the authority, unless one of the exemptions applies to that contract.

We are of the opinion that the second portion of s. 112.313(7)(a), regarding continuing or frequently recurring conflicts of interest and contractual relationships that would impede the full and faithful discharge of one's duties, would not prohibit the subject authority member from serving on the authority if his firm contracts to provide its services in connection with a qualifying housing development. As you have indicated, the basic function of the authority is to make available to the private sector through lending institutions additional funds for the construction and reconstruction of affordable housing in the county. Thus, the public responsibilities of the subject authority member do not directly involve any of the services provided by his firm, even though his firm might benefit indirectly from increased housing construction.

Accordingly, we find that the Code of Ethics for Public Officers and Employees does not prohibit the subject authority member from serving in that capacity while acting as president of a firm engaged in land planning, civil engineering, land surveying, and development management. In addition, we find that the Code of Ethics does not prohibit the subject authority member from serving in that capacity if his firm receives contracts for its services in connection with a qualifying housing development.

Your fourth question is answered in the negative.

In your letter of inquiry you advise that ____ is employed as vice president in charge of finance for a company engaged in the mobile home industry. In addition, you advise that this company potentially could benefit from increased sales of such homes should manufactured housing be eligible for financing under the authority's program.

As you have presented no information which would indicate that the mobile home company which employs the subject authority member may contract to do business with the authority, or that the company is in any way subject to the regulation of the authority, we find that s. 112.313(3) and the first clause of paragraph (7)(a) would not prohibit him from serving on the authority while being employed by the company. Under the rationale of our answer to question 3, we are of the opinion that the subject authority member's employment with the mobile home company would not present a continuing or frequently recurring conflict of interest and would not impede the full and faithful discharge of his public duties.

If, in the future, the authority designates whether manufactured housing is eligible for financing under the authority's program and the subject member votes on that decision, he would be presented with a voting conflict of interest under s. 112.3143, F. S., if the decision were to inure to the special gain of the company which employs him. We refer you to CEO's 77-57 and 77-129 for information as to when gain may be "special" under the voting conflicts provision. Alternatively, the subject member may abstain from the authority's decision under s. 286.012, F. S.

Accordingly, we find that no prohibited conflict of interest exists under the Code of Ethics for Public Officers and Employees when the subject authority member is employed as vice president of a company engaged in the mobile home industry.