CONFLICT OF INTEREST; VOTING CONFLICT GOVERNOR'S BLIND TRUST

To: Peter Antonacci, General Counsel, Office of the Governor, and James T. Fuller, Esquire.

SUMMARY:

Under the circumstances presented, a blind trust created by the Governor in 2011 is in compliance with the blind trust statute enacted in 2013; and he may continue to rely on an advisory opinion of the Commission on Ethics issued to him in 2011. CEO 11-5 is referenced.¹

QUESTION:

Is a blind trust created by the Governor in 2011, prior to the enactment of Section 112.31425, Florida Statutes (Qualified blind trusts), via Chapter 2013-36, Laws of Florida (CS SB 2), effective May 1, 2013, in compliance with the new law, such that the Governor enjoys the protections from conflicts of interest and voting conflicts afforded public officers under the new law?

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

In your letter of inquiry, you relate that Governor Rick Scott sought and received, in 2011, an advisory opinion (CEO 11-5) from us finding that no prohibited conflict of interest existed where he had invested in companies and investment funds that indirectly owned Florida-based or Florida-regulated entities; and finding that no prohibited conflict of interest would be created were the Governor to place his investment assets in a blind trust, with the trust placing most of ² its investment assets into discretionary accounts that would be managed by investment advisers who would have the discretion to invest, divest, and reinvest assets, even if an adviser were to invest in a Florida company in which the Governor would be prohibited from directly owning an interest. Continuing, you state that the opinion concerned the Governor's creation of, at the beginning of his administration, a blind trust to which he transferred substantially all of his financial assets; that the trust was modeled on the blind trust of the Federal Office of Government Ethics and on prior Florida Legislative proposals seeking to recognize such trusts under Florida law; and that the purpose of the Governor's trust was to preclude any appearance of conflict of interest between the Governor's financial assets and his duties as Governor. Further, you relate that even though we were provided detailed information about the Governor's trust during the 2011 advisory opinion process, to avoid any question about his compliance with the new law, attached to your current opinion request is a notice of blind trust, an acknowledgement and certification executed by the trustee, and a list of assets placed in the trust at its creation.³

However, our opinion to the Governor was issued before the enactment of the blind trust statute (Section 112.31425) and, thus, it was not possible for the Governor to comply with one of the new law's provisions--the filing with us within five business days after execution of a trust agreement a notice providing certain information. You have supplied this in your request for this opinion, and you ask, in the Governor's behalf, whether his trust complies with the new law.

Effective May 1, 2013, Section 112.31425, Florida Statutes, provides:

112.31425 - Qualified blind trusts.—

(1) The Legislature finds that if a public officer creates a trust and does not control the interests held by the trust, his or her official actions will not be influenced or appear to be influenced by private considerations.

(2) If a public officer holds a beneficial interest in a qualified blind trust as described in this section, he or she does not have a conflict of interest prohibited under s. 112.313(3) or (7) or a voting conflict of interest under s. 112.3143 with regard to matters pertaining to that interest.

(3) The public officer may not attempt to influence or exercise any control over decisions regarding the management of assets in a qualified blind trust. The public officer or any person having a beneficial interest in the qualified blind trust may not make any effort to obtain information with respect to the holdings of the trust, including obtaining a copy of any trust tax return filed or any information relating thereto, except as otherwise provided in this section.

(4) Except for communications that consist solely of requests for distributions of cash or other unspecified assets of the trust, the public officer or the person who has a beneficial interest may not have any direct or indirect communication with the trustee with respect to the trust, unless such communication is in writing and relates only to:

(a) A distribution from the trust which does not specify the source or assets within the trust from which the distribution is to be made in cash or in kind;

1. The public officer's spouse, child, parent, grandparent, grandchild, brother, sister, parent-in-law, brother-in-law, sister-in-law, aunt, uncle, or first cousin, or the spouse of any such person;

2. A person who is an elected or appointed public officer or a public employee;

3. A person who has been appointed to serve in an agency by the public officer or by a public officer or public employee supervised by the public officer; or

4. A business associate or principal of the public officer.

(b) All assets in the trust must be free of any restrictions with respect to their transfer or sale. The trust may not contain investments or assets the transfer of which by the trustee is improbable or impractical without the public officer's knowledge.

(c) The trust agreement must:

1. Contain a statement that its purpose is to remove from the grantor control and knowledge of investment of trust assets so that conflicts between the grantor's responsibilities as a public officer and his or her private interests are eliminated.

2. Give the trustee complete discretion to manage the trust, including, but not limited to, the power to dispose of and acquire trust assets without consulting or notifying the covered public officer or the person having a beneficial interest in the trust.

3. Prohibit communication between the trustee and the public officer, or the person who has a beneficial interest in the trust, concerning the holdings or sources of income of the trust, except amounts of cash value or net income or loss, if such report does not identify any asset or holding, or except as provided in this section.

4. Provide that the trust tax return is prepared by the trustee or his or her designee and that any information relating thereto is not disclosed to the public officer or to the person who has a beneficial interest, except as provided in this section.

5. Permit the trustee to notify the public officer of the date of disposition and value at disposition of any original investment or interest in real property to the extent required by federal tax law so that the information can be reported on the public officer's applicable tax returns.

6. Prohibit the trustee from disclosing to the public officer or the person who has a beneficial interest any information concerning replacement assets to the trust, except for the minimum tax information necessary to enable the public official to complete an individual tax return required by law.

(d) Within 5 business days after the agreement is executed, the public officer shall file with the commission a notice setting forth:

1. The date that the agreement is executed.

2. The name and address of the trustee.

3. The acknowledgment by the trustee that he or she has agreed to serve as trustee.

4. A certification by the trustee on a form prescribed by the commission that the trust meets all of the requirements of this section. In lieu of said certification, the public officer may file a copy of the trust agreement.

5. A complete list of assets placed in the trust that the public officer would be required to disclose pursuant to s. 112.3144 or s. 112.3145.

(7) If the trust is revoked while the covered public official is a public officer, or if the covered public official learns of any replacement assets that have been added to the trust, the covered public official shall file an amendment to his or her most recent financial disclosure statement. The amendment shall be filed no later than 60 days after the date of revocation or the addition of the replacement assets. The covered public official shall disclose the previously unreported pro rata share of the trust's interests in investments or income deriving from any such investments. For purposes of this section, any replacement asset that becomes known to the covered public official shall thereafter be treated as though it were an original asset of the trust.

This law recognizes that a certain lack of knowledge, a "blindness," of a public officer as to the particular nature of his holdings inherently fosters an objectivity, or lack of conflict, as to public responsibilities or decisionmaking he may have, which possibly would be affected if the officer personally managed his investments. However, in order to achieve the Legislatively-intended blindness, an officer's trust must have certain characteristics or provisions, and certain information must be provided [Section 112.31425(6)], and the officer must not attempt to influence trust decisions, must limit any communications with the trustee, must report the trust and its value on the officer's financial disclosure form, and must report the trust as a primary source of income on the disclosure form [Section 112.31425(3),(4), (5), Florida Statutes.]⁴ If a public officer meets the initial requirements of the statute and remains in compliance with its provisions as time passes or triggering events under the law occur, then he is entitled to protection from certain conflicts of interest and voting conflicts under the Code of Ethics.

Under the particular facts presented in your inquiry, we find that the Governor is in compliance with the new law despite his trust having been created some two years before its enactment. His trust's characteristics, his trust notice, his trustee's acknowledgement and certification,⁵ and his list of assets⁶ appear to comply with the law. Thus, we find that he is entitled to the law's protections, as long as he remains compliant with the statute's provisions.
Your question is answered accordingly.⁷

ORDERED by the State of Florida Commission on Ethics meeting in public session on September 13, 2013, and RENDERED this 18th day of September, 2013.

____________________________________

Morgan R. Bentley, Chair

^[1] Prior opinions of the Commission on Ethics may be obtained from its website (www.ethics.state.fl.us).