CEO 85-70 -- October 3, 1985

FINANCIAL DISCLOSURE

DISCLOSURES REQUIRED WHERE STATE REPRESENTATIVE OWNS INSURANCE SERVICING AND CONSULTING COMPANIES

To: The Honorable Carl Ogden, State Representative, District 14, Jacksonville

SUMMARY:

Where a State Representative owns interests in two insurance servicing and consulting companies which provide services for several trade associations and employer groups, the following disclosures should be made. Assets, such as stock, valued in excess of $1,000 should be identified on Form 6. If the income tax return is not filed as part of Form 6, sources of income in excess of $1,000 should be disclosed on Form 6, as well as the name of each association and employer providing more than ten percent of the total income of each of the Representative's companies, if he owns more than five percent of the company and receives more than $1,000 of income per year from it. It is suggested that the Representative's interest in the companies also be disclosed on Form 3. Finally, a Memorandum of Voting Conflict, Form 4, should be filed if the Representative votes on a measure inuring to the special gain of his companies.

QUESTION:

What disclosures are required for you, a State Representative, to disclose your interests in two insurance servicing and consulting companies which provide services for several trade associations and employer groups?

In your letter of inquiry you advise that recently you formed two insurance servicing and consulting firms which handle (adjudicate) claims, bill, market, and consult for various trade associations and single employer groups regarding the formation and operation of self- funded health plans for their employees. You also advise that IRS rules prohibit employers from having an interest in any kind of income from such self-funded trusts and from having any ownership in or receiving any benefit from the servicing company. Finally, you advise that the fees charged are directly related to the number of employees involved, as that is the basis upon which you estimate the costs for servicing.

As a member of the Florida House of Representatives, you are an elected constitutional officer subject to the requirement of filing full and public financial disclosure under Article II, Section 8, Florida Constitution (Commission on Ethics Form 6), by July 1 of each year. As part of this disclosure, you are required to identify each asset you own which is valued in excess of $1,000. Therefore, you should identify on your Form 6 as assets your interests (stock) in these companies if the value of your ownership exceeds $1,000.

Form 6 also requires the disclosure of income, which may be satisfied by filing a copy of your most recent tax return. However, if you do not choose to file a copy of your tax return as part of Form 6, you are required to disclose specific sources of income in excess of $1,000, as well as secondary sources of income. Under Commission on Ethics Rule 34-8.05, F.A.C., if you own more than five percent of a business entity's total assets or capital stock and derived more than $1,000 of income from that business entity during the disclosure period, you are required to disclose all customers, clients, or other sources of income to that business entity which provided more than ten percent of the total income of the business. Therefore, assuming that you own more than five percent of your companies and receive more than $1,000 of income per year from them, you will be required to disclose the name of each association and employer which provides more than ten percent of the total income of each company.

You also advise that although your company is a third-party administrator, it is like a small insurance company with reinsurance to protect against large aggregate losses. Your company must be licensed by, and must provide both a surety bond and a fidelity bond to, the Department of Insurance. In addition, all self-funded trusts must be approved by that Department.

Section 112.313(9), Florida Statutes, requires a public officer who owns more than a five percent interest in a business entity which is granted a privilege to operate in this State to file a statement disclosing his interest no later than 45 days after its acquisition on Commission on Ethics Form 3. Business entities granted a privilege to operate are defined in Section 112.312(15), Florida Statutes, to include "insurance companies," as well as other types of businesses which are closely regulated by the State. Although it is not clear that your companies are "insurance companies" for purposes of this disclosure provision, we would suggest that you disclose your interests in those companies on Form 3 both because they are regulated by the Department of Insurance and because, as you have indicated, they are at least analogous to small insurance companies.

Finally, you advise that most of the trade associations with which your companies seek to do business are represented by lobbyists before the Legislature. Although many issues pertaining to the associations will not come before the committees you serve on, some issues involving the association will be presented for votes on the floor of the House.

With respect to voting conflicts of interest for members of the Legislature, the Code of Ethics provides:

Except as provided in subsection (3), no public officer is prohibited from voting in his official capacity on any matter. However, any public officer voting in his official capacity upon any measure which inures to his special private gain or the special gain of any principal by whom he is retained shall, 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. [Section 112.3143(2), Florida Statutes, (Supp. 1984).]

This provision requires you to file Commission on Ethics Form 4, Memorandum of Voting Conflict, if you vote on a measure which inures to the special gain of a principal by whom you are retained.

Under the circumstances presented, whether you are presented with a voting conflict of interest on a particular measure will turn on the relationship of that measure to your companies rather than on the relationship of the measure to the associations which are clients of your companies, as you are retained by the companies rather than by the associations. For a general description of what would constitute "special gain" for a member of the Legislature, please see previous opinions CEO 77-129 and CEO 80-61.

Your questions are answered accordingly.