CEO 89-38 -- September 14, 1989
CONFLICT OF INTEREST
SCHOOL SUPERINTENDENT'S SON SELLING RETIREMENT PLAN TO SCHOOL EMPLOYEES
To: (Name withheld at the person's request.)
No prohibited conflict of interest would be created were the son of a school superintendent to be employed by an investment company which contracts with a financial services company providing pension services to school system employees. The Superintendent is not purchasing services from the company employing his son within the meaning of Section 112.313(3), Florida Statutes, because the school system's business relationship is with the financial services company rather than the investment company employing his son. On this basis, also, no prohibited conflict of interest would be created if the son were to contact school employees to sell services of the financial services company, as well as on the basis that the son does not hold a material interest in either company and the Superintendent does not purchase the services of either company on behalf of his agency.
Would a prohibited conflict of interest be created were an investment company employing the son of a Superintendent of Schools to contract with a financial services company operating a retirement investment plan for school system employees to provide services such as a search for fund management, creation of informational reports, or provision of a guaranteed investment program?
This question is answered in the negative.
In your letter of inquiry, you advise that you serve as the Superintendent of Schools for the Dade County School Board. You also advise that your son is employed by a national investment company and that he and his company are interested in pursuing business relationships with a financial services company operating a voluntary retirement savings program for school system employees. The financial services company receives pretax dollars from employees and transmits these funds to a custodian which manages these funds. The company which employs your son is considering contracting with the financial services company to conduct a search for an investment fund manager, provide a quarterly report for employees investing in the fund, and provide a guaranteed interest investment program.
Two sections of the Code of Ethics for Public Officers and Employees apply to relatives of local public officers. Section 112.313(4), Florida Statutes (1987), deals with unauthorized compensation to influence a public officer's action. It includes compensation to the officer, his spouse, or his minor children. The only provision which could apply to the adult son of a public officer is Section 112.313(3), Florida Statutes (1987), which provides:
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 of 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.
(c) Appointment to public office.
(d) Beginning public employment.
This provision would prohibit you from purchasing services on behalf of your agency from the company which employs your son if your son is an officer, partner, director, or proprietor of, or if he holds a material interest in, the corporation selling these services to the school system. You have indicated that your son would not have any of the relationships with the company under contract with the School Board that are specified in the statute and would not even be considered an employee of that company. Under the facts presented, the company which employs your son would not be doing business with the School Board, but rather with the company under contract with the School Board. As long as there is no business relationship between the School Board and your son's employer, Section 112.313(3) would not apply.
Accordingly, we find that no prohibited conflict of interest would be created were your son to be employed by an investment company providing services to a financial services company selling various pension services to School Board employees.
Would a prohibited conflict of interest be created were your son to contact school system employees to sell retirement plan services?
This question also is answered in the negative.
In your letter of inquiry and in telephone conversations with our staff, you indicate that your son is also interested in contacting School Board employees directly to sell the services of the financial services company under contract with the School Board. He would not be an employee or stockholder of the financial services company, but rather would be working under its contract with his employer. His employer would have no contractual or other business relationship with the School Board. Instead, his employer would be providing investment services which would be offered to employees through the financial services company. As an alternative, you indicate that your son would be interested in contracting with third parties to market these financial services to School Board employees, or supervising employees of the company who would market these services.
You also have indicated that you were not the Superintendent at the time the financial services company was chosen. Rather, it was selected by a committee which transmitted its recommendation to the Superintendent, who then presented it to the School Board. Neither you nor the School Board have a role in selecting investment companies with which the financial services company operating the system will contract.
The same rationale as in Question 1 applies here, for several reasons. First, as in Question 1, it appears that your son's employer is not doing business with the school system, but rather with the financial services company operating the retirement plan. Second, he is not an officer, partner, director, or proprietor of, nor does he hold a material interest in, either company, as required under Section 112.313(3). "Material interest" is defined in Section 112.312(12), Florida Statutes, as meaning direct or indirect ownership of more than 5 percent of the total assets or capital stock of any business entity. In CEO 85-35, we found that no conflict of interest existed where the sons of a Director of the Division of Purchasing, Department of General Services, were employed as salesmen by corporations doing business with the Division and other State agencies because his sons were employees rather than officers or owners of the corporations.
Third, you cannot be said to be purchasing services for your agency from either company. In CEO 82-24, we advised that a vice-mayor's spouse could sell services to the city because the vice mayor did not have a role in purchasing these services, even though the spouse was a proprietor of a business entity selling to the public officer's agency. We previously have advised that services were not being purchased for an agency where sales were to individuals employed by the agency rather than to the agency itself. See CEO 75-127 and CEO 82-77.
The Code of Ethics does not prohibit a public officer's relative from being employed by a business entity doing business with that public officer's agency, as long as that relative is not an officer, partner, director, or proprietor of, or does not hold a material interest in, the business. CEO 76-126. However, you should be cautious about involving yourself in any reapproval process of providers of these pension services to avoid the potential appearance of a misuse of position to benefit your son's business interests. Also, your son should be cautioned to avoid use of your name or position as an inducement to school personnel to subscribe to the pension services offered.
Accordingly, we find that no prohibited conflict of interest would be created under the facts presented if your son were to sell, or supervise persons who sell, pension services to school system employees.