CEO 88-63 -- October 19, 1988

VOTING CONFLICT OF INTEREST; CONFLICT OF INTEREST

COUNTY PUBLIC HOSPITAL BOARD MEMBERS VOTING TO

AWARD CONTRACT TO BANKS REPRESENTED BY THEIR LAW FIRMS

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

SUMMARY:

A county public hospital board member who is a partner in a law firm which represents a local bank trust department is prohibited by Section 112.3143(3), Florida Statutes, from voting to enter into an investment management contract with the investment management division of the same bank when that bank is the client of his law firm at the time of the vote. Section 112.313(7)(a), Florida Statutes, would not prohibit a board member's law firm from representing the trust department of a bank which was retained by the board in connection with the bank's fiduciary responsibilities over an estate, trust, or guardianship. CEO's 86-37, 86-38, 80-79, 80-75, and 79-55 are referenced.

QUESTION 1:

Is a member of a county public hospital board who is a partner in a law firm which represents a local bank trust department prohibited by Section 112.3143, Florida Statutes, from voting on a recommendation to enter into an investment management contract with the investment management division of that bank?

Your question is answered in the affirmative.

In your letter of inquiry you advise that .... and .... are members of the Sarasota County Public Hospital Board. You further advise that the Board recently began to seek consultants for an investment management contract. This contract would operate to acquire the services of local consultants for the investment of funds in the possession or control of the Board. Several of the banks which are interested in the contract are represented in a limited capacity by the law firms of the subject Board members. You question whether a Board member who is a partner in a law firm which represents a local bank trust department in its fiduciary duties in connection with a specific estate, trust, or guardianship is prohibited by Section 112.3143, Florida Statutes, from voting on a recommendation to enter into an investment management contract with the investment management division of that bank.

Section 112.3143(3), Florida Statutes, provides:

No county, municipal, or other local public officer shall vote in his official capacity upon any measure which inures to his special private gain or shall knowingly vote in his official capacity upon any measure which inures to the special gain of any principal, other than an agency as defined in s. 112.312(2), by whom he is retained. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of his interest in the matter from which he is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his interest 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. However, a commissioner of a community redevelopment agency created or designated pursuant to s. 163.356 or s. 163.357 or an officer of an independent special tax district elected on a one- acre, one-vote basis is not prohibited from voting. [Section 112.3143(3), Florida Statutes (1987).]

This provision prohibits a public officer from voting on a measure which would inure to his special private gain, or from knowingly voting on a measure which would inure to the special private gain of a principal by whom he is retained.

You advise that under the present facts the Board members and their law firms do not stand to benefit from the award of the investment management contract. Nonetheless, we previously have advised that a client of the law firm of a public officer is a principal by whom he is retained. See, for example, CEO 86-37. A board member would not be prohibited from voting on a matter benefiting former clients, however. As we advised in CEO 80-75, a voting conflict is not present if the firm of the board member has no ongoing relationship with the client at the time the measure comes before the board.

You also advise that all fees paid to the firms would be paid by the estate, trust, or guardianship which is being administered, and, for that reason, it would appear that these entities would be the principals of the members' firms rather than the trust departments. Statutory authority exists for the employment of attorneys by fiduciaries to assist in the performance of their administrative duties. See Sections 733.612(33), 737.402(2)(y), and 744.444(13), Florida Statutes. While an estate, trust, or guardianship properly is charged for attorney's fees incurred in the administration by a fiduciary, the employment relationship remains between the trust division and the law firm.

Accordingly, we find that a board member whose law firm represents a local bank trust department is prohibited by Section 112.3143(3), Florida Statutes, from voting to enter into an investment management contract with the investment management division of that bank.

QUESTION 2:

Would a prohibited conflict of interest be created under Section 112.313(7)(a), Florida Statutes, were a board member's law firm to represent a bank trust department in its fiduciary duties in connection with an estate, trust, or guardianship when the board has entered into an investment management contract with the investment management division of that bank?

Under the circumstances presented, this question is answered in the negative.

Section 112.313(7)(a), Florida Statutes, prohibits a public officer from having a contractual relationship with a business entity doing business with his agency. That section 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. [Section 112.313(7)(a), Florida Statutes (1987).]

We previously have advised that an attorney has a contractual relationship with each client of his law firm. See CEO 80-79.

Section 112.312(3), Florida Statutes, defines "business entity" to mean

any corporation, partnership, limited partnership, proprietorship, firm, enterprise, franchise, association, self-employed individual, or trust, whether fictitiously named or not, doing business in this state.

In previous advisory opinions we have treated each corporate subsidiary as a separate "business entity" in applying the Code of Ethics under Section 112.313(7)(a), Florida Statutes. For example, in CEO 79-55 we advised that an employee of a trust company which was a wholly-owned subsidiary of a banking corporation had a contractual relationship with the trust company rather than with its parent organization. Conversely, in CEO 86-38 we were unable to make this distinction as the trust company was not a separate corporation.

While you have advised that the commercial division and the trust department of one of the banks under consideration operate under separate charters, the attorney for that bank group explained that, as a national bank, the bank is chartered by the Office of the Comptroller of the Currency as a single national association rather than as separate corporations. As the definition of "business entity" provided in Section 112.312(3), Florida Statutes, includes "any . . . association," we are unable to differentiate between the commercial division and the trust department of that bank for purposes of Section 112.313(7)(a), Florida Statutes.

However, the Code of Ethics also provides:

Construction. -- It is not the intent of this part, nor shall it be construed, to prevent any officer or employee of a state agency or county, city, or other political subdivision of the state or any legislator or legislative employee from accepting other employment or following any pursuit which does not interfere with the full and faithful discharge by such officer, employee, legislator, or legislative employee of his duties to the state or the county, city, or other political subdivision of the state involved.[Section 112.316, Florida Statutes (1987).]

This section mandates that the Code of Ethics not be construed to prohibit a public official from engaging in private pursuits which do not interfere with the full and faithful discharge of his public duties.

Here, a Board member's law firm would have no managerial responsibilities but would be hired as an independent contractor. Also, the law firm would have no duties relating to the commercial division of a bank. In addition, we note that the law firm would be one of many law firms employed by a bank's trust department. You have advised that when a customer of a bank requests referral to an attorney, a bank trust department provides the names of at least three attorneys or firms who the trust officer believes to be capable of handling the legal matter. A customer who has an established relationship with an attorney normally continues this relationship for any dealings with a bank's trust department; upon the death of a customer, the trust department will retain the attorney or firm who prepared the customer's testamentary documents. In view of these circumstances, we are of the opinion that Section 112.316 would be properly applied in this case.

Accordingly, under the circumstances presented we find that no prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, were a board member's law firm to represent a bank trust department in its fiduciary duties in connection with an estate, trust, or guardianship when the board has entered into an investment management contract with the investment management division of that bank.