CEO 94-5 -- March 10, 1994
CONFLICT OF INTEREST
HOUSING FINANCE AUTHORITY MEMBER SHAREHOLDER
IN LAW FIRM REPRESENTING FINANCIAL INSTITUTIONS
AND BOND UNDERWRITERS
To: Mark Herron, Attorney at Law (Tallahassee)
A prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, were clients of a housing finance authority member's law firm to do business with the authority. The member would hold a contractual relationship with business entities doing business with his public agency, regardless of whether or not the member personally handles the clients' legal business or the clients utilize the office location of the firm from which the member practices. Under the facts of this opinion, except in a limited circumstance, no prohibited conflict of interest would be created were subsidiary or affiliate companies of the firm's clients to do business with the authority. CEO's 80-25, 80-79, 81-66, 86-37, 91-24, and 92-11 are referenced.
Would a prohibited conflict of interest be created were financial institutions or bond underwriters who are clients of a housing finance authority member's law firm, which has offices in several Florida cities, to do business with the authority, where the clients are generated and maintained by offices of the firm other than the office from which the member practices and where the clients have no direct or indirect contact with the member or with any attorneys practicing from the member's office?
Your question is answered in the affirmative.
By your letter of inquiry, we are advised that Luis Artime recently has been appointed as a member of the Housing Finance Authority of Dade County. In addition, you advise that the Authority was created by County ordinance as a "separate public body corporate and politic" to carry out and exercise all powers and public governmental functions set forth in Part IV, Chapter 159, Florida Statutes, that Section 159.608, Florida Statutes, sets forth various powers which may be authorized by a housing finance authority, and that Section 159.612, Florida Statutes, authorizes a housing finance authority to issue bonds.
The Authority member, you advise, is a shareholder in a law firm which has offices throughout the State; he practices from the firm's Miami office. From its various offices, you advise, attorneys with the firm serve as counsel for various financial institutions. Often a financial institution represented by the firm is not the same corporate entity as the corporate entity which may be seeking business from the Authority, although, you advise, both may be subsidiaries or affiliates of the same corporate parent. Further, you advise that attorneys in the firm serve as counsel in litigation matters for entities which act as bond underwriters and may compete for the business of the Authority, and that representation of the bond underwriters is not carried out through the Miami office of the firm.
You question whether the member would have a prohibited conflict of interest under Section 112.313(7)(a), Florida Statutes, were financial institutions or bond underwriters who are clients of the firm to do business with the Authority.
Section 112.313(7)(a), Florida Statutes, 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.
In CEO 80-79, Question 1, we found that Section 112.313(7)(a) would prohibit a housing finance authority member who was a partner in a law firm from serving on the authority should any of the lending institutions which were clients of his firm to do business with the authority, adhering to the legal principle that every member of a law firm holds a contractual relationship with every client of the firm. Since the issuance of CEO 80-79, we consistently have adhered to that reasoning in various situations, including CEO 81-66 (municipal development authority member shareholder in law firm retained by municipality), CEO 86-37 (mayor member of law firm, other members of which are involved with business entity contracting with city), and CEO 92-11 (Florida Transportation Commission member "of counsel" to law firm practicing eminent domain law).
We are not prepared to abandon our precedent merely because the member's law firm has offices in various cities and because the member and the other firm attorneys practicing from his particular firm office would not be handling the affairs of firm clients doing business with the Authority. The success of the firm as well as the member's remuneration as a shareholder still in part would be derived from the firm's total business, including the portion derived from the representation of clients doing business with the Authority, and thus the member would have a private economic tie that could fetter his full and objective performance as a member of the Authority in regard to Authority matters and duties concerning clients of the firm. The same would be true whether the member held an interest in a smaller firm or whether he held an interest in a large firm which operated from one large office housing many attorneys.
Compliance with the voting conflicts law (Section 112.3143, Florida Statutes), which would include abstention from voting or participation in matters involving clients of the member's law firm, does not obviate the conflict under Section 112.313(7)(a). Nothing in Section 112.313(7)(a) indicates that compliance with Section 112.3143 creates an exemption from it application; in contrast, other specific exemptions are provided in Section 112.313(12). Moreover, we do not believe that abstention should have the effect of creating an exemption, because an Authority member's duties are not confined to voting on or participating in matters which come before the Authority for formal consideration, because the Authority likely would deal with matters that would affect clients of the member's firm although such matters might not directly inure to the special private gain of the clients and would thus not be within the scope of the voting conflicts law, and because abstentions themselves, particularly if numerous, could create a continuing or frequently recurring conflict or impediment to the full and faithful discharge of the member's public duties.
Accordingly, we find that a prohibited conflict of interest would be created were the Authority member's law firm to represent clients which are doing business with the Authority.
Would a prohibited conflict of interest be created were a subsidiary or affiliate corporation of a client of the firm to do business with the Authority?
Except for the circumstance involving holding companies and subsidiaries wherein the parent company serves as a holding company for only one asset (the stock of the subsidiary corporation), we have followed the rule that each company is a separate business entity for purposes of Section 112.313(7)(a). See CEO 80-25 and CEO 91-24, for example. Therefore, unless the relationships of subsidiaries or affiliates with client companies of the member's law firm fall within that limited circumstance, we find that no prohibited conflict of interest would be created under the first clause of Section 112.313(7)(a). As to the second clause of Section 112.313(7)(a), we do not find (under the circumstances) that a continuing or frequently recurring conflict, or impediment to the full and faithful discharge of public duties, would be created.
This question is answered accordingly.