STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
In re: DONALD SANDERS, )
) Case Nos. 93-0161EC
Respondent. ) 93-0162EC
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, received evidence and stipulations of the parties, and enters this recommended order in the above-styled case.
Advocate: Virlindia Doss
Assistant Attorney General
Department of Legal Affairs
The Capitol, PL-01
Tallahassee, Florida 32399-1050
For Respondent: Hilliard Moldoff, Esquire
Whitelock and Moldof
1311 Southeast Second Avenue
Fort Lauderdale, Florida 33316
STATEMENT OF THE ISSUES
In an order entered on October 30, 1991, the Florida Commission on Ethics (EC) found probable cause that Respondent, Donald H. Sanders, as a Coral Springs city commissioner, violated section 112.313(7)(a), F.S., by acting as an investment broker for an individual who is president of a large land development company which frequently has business before the city commission.
In a subsequent order entered on December 11, 1991, the EC found probable cause that the same respondent in his capacity as city commissioner violated section 112.313(7)(a), F.S., by having a loan contract with a company doing business with the city.
The issues for determination in this proceeding are whether those violations did occur and, if so, what penalty is appropriate.
The cases were forwarded to the Division of Administrative Hearings for a formal public hearing and were consolidated at the parties' request. A hearing was scheduled after consultation with counsel for the parties, but was cancelled upon a joint motion filed on May 13, 1993. The motion requested that the cases be determined on a stipulated record, rather than through live testimony. The motion was granted.
The parties' prehearing stipulation, including stipulated facts, was filed on May 13, 1993; the record, consisting of Advocate's exhibits #2-15, was filed on May 28, 1993; the parties' proposed recommended orders were filed on August 24, 1993.
Advocate's exhibits have been received in evidence without objection. Those exhibits include depositions of Respondent, and of Ronald LaRoche and Werner Buntemeyer, as well as documents and commission meeting summaries described in detail in the joint prehearing stipulation. Those exhibits and the thorough written arguments of counsel have been considered in the preparation of this recommended order. Specific rulings on the findings of fact proposed by each party are provided in the appendix which follows.
FINDINGS OF FACT
1. Respondent, Donald L. Sanders (Sanders), is now, and for the past fourteen years has been, a city commissioner in Coral Springs, an incorporated city in Broward County, Florida. Sanders' occupation is stockbroker. He has been employed as such for thirty years, the last nineteen of which have been with the firm, Paine Webber.
Coral Ridge Properties
2. The City of Coral Springs was created by special act of the legislature in 1963, at the behest of Coral Ridge Properties, Inc., the largest landowner and developer of the community. Personnel of Coral Ridge Properties acted as the city officials in the beginning. Gradually, as the community built up, the city hired employees. In 1969, the then residents of the city elected their first five member commission pursuant to the charter established in the special act.
3. Werner Buntemeyer was involved in the initial creation of the city as an employee of Coral Ridge Properties, Inc., and as the city's first city manager. By 1974, the manager job became too big for Buntemeyer's dual role and he resigned, choosing to stay with the company. He is now president of Coral Ridge Properties, Inc., and has worked in that capacity for thirteen years.
4. Werner Buntemeyer is also president of Florida National Properties, Inc., a wholly owned subsidiary of Coral Ridge Properties, Inc., and the land holding company for Coral Ridge Properties. Both companies, Coral Ridge Properties, Inc., and Florida National Properties, Inc. (CRP/FNP), are wholly owned subsidiaries of Westinghouse Communities, Inc., a part of Westinghouse Corporation. Buntemeyer receives bonuses based on the success of these companies.
5. The twenty-five square miles that comprise the City of Coral Springs has grown in population from zero in 1963, to approximately 85,000. CRP/FNP no longer owns most of the land in the city; it is, however, a large landowner with substantial development interests and the city's major developer. Issues affecting CRP/FNP come before the city commission at virtually every meeting.
6. CRP/FNP has representatives who attend those meetings. Buntemeyer does not attend routinely, and probably has attended only twice in the fourteen years that Respondent Sanders has been on the commission. Buntemeyer lobbies commission members individually by inviting them to his office to discuss issues such as economic development or other issues of interest to the company. Buntemeyer has lobbied Sanders individually in this manner.
7. Sanders moved to Coral Springs in 1975, and became active in the community in various organizations. The city in those days was quite small, and folks gathered in the evening after work to socialize. This is how Sanders initially met Werner Buntemeyer.
8. At some point, Sanders suggested some investments to Buntemeyer. Sanders was recommended to Buntemeyer by someone else, so he made some investments through Sanders, even though he mostly invested through other firms.
9. Sanders checked with the city attorney and understood that so long as he did business with Buntemeyer personally, and not with Coral Ridge Properties, a conflict problem would not exist. Sanders did not pursue a formal opinion from the attorney or from the Ethics Commission on this issue. However, Sanders did ask the Ethics Commission on another occasion whether Paine Webber could bid on city bond issues while he was on the city commission. The answer, as Sanders remembers, was "no."
10. Between 1986 and 1990, Respondent Sanders brokered investment transactions for Werner Buntemeyer totalling approximately $142,883.00. The total commission to the firm on these transactions was $5,696.00, and the total commission paid to Sanders was approximately $2,275.00. The document created at the inception of the relationship was a normal contract between a broker and client.
11. There is no evidence that Sanders' public duty was ever actually compromised by his relationship with Werner Buntemeyer. From the summaries of commission meetings submitted as Advocate's exhibit #12, virtually all of the votes taken on any issue were unanimous, 5-0 or 4-0. In only one instance did Sanders dissent from the majority. It was a minor issue involving a letter from Coral Ridge Properties regarding trespassing. The commission voted to ask the developer to sit down with the offending students and explain its position in a more sensitive manner. According to the minutes of the meeting, Sanders felt the commission was responding to threats. (Advocate's exhibit #12, 11/20/90 meeting).
R. L. LaRoche
12. In 1987, Sanders had just purchased a home and was looking for some cash to pay off his bills. He had heard that developers in town sometimes made second mortgage investments through their pension plans so he decided to go that route, if possible, to avoid the points and extra costs of borrowing through a conventional lender.
13. Ronald LaRoche is the sole owner and president of R. L. LaRoche, Inc., a general contracting company specializing in commercial and municipal construction. Sanders and LaRoche were occasional social friends; they played golf and saw each other sometimes at parties.
14. Sanders called up LaRoche, made an appointment, saw him in his office and asked if he had money in his pension fund that he was willing to loan.
15. On May 29, 1987, the parties closed on a $15,000.00 loan to Donald Sanders and his wife, secured by a second mortgage on the Sanders' condominium. The lender and mortgagee is "R. L. LaRoche, Inc. Profit Sharing Plan and Trust." Terms of the note called for monthly interest payments of $150.00 (12 percent), with the principal coming due at the end of a twelve-month period, on May 29, 1988.
16. The loan was extended each year until LaRoche wanted to make a similar loan to someone else and asked Sanders to pay off his loan. The loan was repaid in August 1992.
17. R. L. LaRoche, Inc. Profit Sharing Plan and Trust is a benefit offered to the company's employees, like a pension plan, and is available only to that company's employees. At Ronald LaRoche's election, the company makes contributions to the plan. If the company is profitable, normally contributions are made. The employees receive their benefits when they leave the company. The plan has been in existence for ten to twelve years with the number of employees eligible to participate ranging from six to fifteen. In consultation with his attorney and accountant, Ronald LaRoche makes all of the decisions regarding contributions to, and investments for the plan. There are Internal Revenue Service (IRS) guidelines governing investments and, as fiduciary, LaRoche considered the Sanders' loan to be well within the guidelines. Twelve percent was considered a good return, given the economy at the time.
18. On December 20, 1988, the Coral Springs city commission, including Respondent Sanders, voted to approve R.L. LaRoche, Inc., as one of the contractors to bid on construction of the Coral Springs City Center. LaRoches' bid was $700,000.00 lower than the second bid, and R. L. LaRoche, Inc., was awarded the contract on March 28, 1989.
19. The contract was in excess of $4 million. From time to time, change orders or other matters relating to the contract with R. L. LaRoche, Inc., came before the city commission. The votes were mostly routine, based on recommendations by city staff, but the commissioners also asked questions about the change orders to ensure themselves as laypersons why the change was required.
20. Until the conflict issue was brought up, Sanders voted on the matters affecting the contract. After he was publicly criticized, he abstained from the discussion and votes.
21. At the time that the contract was awarded to Ronald LaRoche's company, Sanders did not think about a potential conflict; when the issue was raised and he did think about it, he felt he was still okay because he considered the profit sharing plan to be a separate entity from the corporation. Moreover, he did not consider that any of his votes were influenced by his loan.
22. The Profit Sharing Plan and Trust is described in a fifty-three page document titled "Summary Plan Description for R. L. LaRoche, Inc. Profit Sharing Plan and Trust" (Advocate's Exhibit #13). Under the plan the trustee is granted substantial discretion. The plan itself is voluntary and the employer, R. L. Laroche, Inc., has the right at any time to reduce benefits, discontinue contributions or terminate the plan and trust. Notification of such must be provided to the appropriate governmental agency or agencies pursuant to the Internal Revenue Service Code of 1954 and the Employee Retirement Income Security Act of 1974 (ERISA). Benefits, once vested, are sacrosanct, and the trustee is prohibited from entering into a transaction with the employer, any relative of the employer, any corporation controlled by the employer, and any officer or stockholder of the employer without first requesting a determination of legality from the U.S. Department of Labor. (See Section 6.15, p. 35/48, Advocate's exhibit #13.) In summary, the plan's very existence, investments and contributions are subject to the discretion of Ronald LaRoche, as trustee, but the exercise of that discretion is heavily regulated by the IRS and the Department of Labor. A creature of the employer corporation, the plan and trust nonetheless has a life of its own.
CONCLUSIONS OF LAW
23. The Division of Administrative Hearings has jurisdiction in this proceeding pursuant to Section 120.57(1), F.S., and Rule 34-5.010, F.A.C.
24. The burden of proof, absent a statutory directive to the contrary, is on the party asserting the affirmative of the issue of the proceeding. Antel v. Department of Professional Regulation, 522 So.2d 1056 (Fla. 5th DCA 1988); Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); and Balino v. Department of Health and Rehabilitative Service, 348 So.2d 249 (Fla. 1st DCA 1977). In this proceeding, it is the commission, through the Advocate, that is asserting the affirmative that Respondent violated section 112.313(7)(a), F.S. Therefore, the burden of proving the elements of Respondent's alleged violations is on the Advocate.
25. The standard of proof in cases before the Ethics Commission requires proof of the charges by a preponderance of the evidence. In re Michael Langton, 14 F.A.L.R. 4175 (1992). See also In re Leo C. Nichols, 11 F.A.L.R. 5234 (1989).
26. Section 112.313(7)(a), F.S., provides, in pertinent part:
(7) CONFLICTING EMPLOYMENT OR CONTRACTUAL
(a) 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,
excluding those organizations and their
officers who, when acting in their official
capacity, enter into or negotiate a
collective bargaining contract with the state
or any municipality, county, or other
political subdivision of the state; 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.
27. In order to establish that Respondent violated section 112.313(7)(a), F.S., proof of either of the following sets of elements must be presented:
1. The Respondent must be a public officer
or a public employee.
2. The Respondent must be employed by or
have a contractual relationship with a
business entity or agency.
3. The business entity or agency must be
subject to the regulation of or doing
business with the agency of which the
Respondent is an officer or employee.
1. The Respondent must be either a public
officer or a public employee.
2. The Respondent must hold employment or a
contractual relationship that will
a. create a continuing or frequently
recurring conflict between his private
interests and the performance of his public
b. impede the full and faithful
discharge of his public duties.
28. As a city commissioner, Respondent was a public officer as defined in Section 112.313(1), F.S.
29. Respondent had a contractual relationship (a broker's agreement) with Werner Buntemeyer, and with the R. L. LaRoche, Inc. Profit Sharing Plan and Trust (a mortgage). The entities doing business with or subject to the city commission's regulation were CRP/FNP and R. L. LaRoche, Inc..
30. Buntemeyer, an individual who invested his personal funds, is plainly not the entity regulated by or doing business with the city. Although less clearly distinct, the profit sharing plan and trust is also considered a separate entity. Federal prohibitions against self-dealing and other limitations described at length in the plan summary compel that conclusion. The first elements of proof are not met. No prior Commission on Ethics Opinion (CEO) is found addressing profit sharing plans as entities and the opinions cited by the Advocate which relate to wholly owned subsidiaries or separate bank trust departments are readily distinguished. Section 112.312(5), F.S. defines "business entity" to include a trust. See also CEO 91-31.
31. It is, therefore, necessary to move to the second set of elements and determine whether Respondent's relationships at issue created a conflict or impeded the full and faithful discharge of his public duties. Here the proof fails as well.
32. In Zerwerk v. State Commission on Ethics, 409 So.2d 57 (Fla. App. 4th DCA 1982), the court upheld the validity of section 112.313(7), F.S., against claims of unconstitutional vagueness, and held that even though actual corruption need not be found,
. . . Section 112.313(7)(a), Florida Statutes
(1979), establishes an objective standard
which requires an examination of the nature
and extent of the public officer's duties
together with a review of his private
employment to determine whether the two are
compatible, separate and distinct or whether
they coincide to create a situation which
"tempts dishonor." Id, at 61.
33. In CEO 91-31, the Commission on Ethics held that a prohibited conflict of interest under section 112.313(7)(a), F.S., would not be created when an individual serving as county engineer also owned real property and served as co-trustee of a family trust that owned substantial amounts of undeveloped real property located along proposed routes of county road projects. In that opinion, the commission examined the extensive duties of the county engineer, his delegation of authority to subordinates, the size of the county and the amount of trust property in relationship to all undeveloped property in the county; the commission found that a continuing or frequently recurring conflict would not exist, and reasoned as follows:
Notably, the statue does not prohibit a
public employee from having employment or a
contractual relationship that would create
any conflict of interest whatsoever. The
term "conflict of interest" is defined in
Section 112.312(6), Florida Statutes, as
meaning "a situation in which regard for a
private interest tends to lead to disregard
of a public duty or interest." The
legislature easily could have phrased the
statute as prohibiting "any employment or
contractual relationship that would create a
conflict of interest," but it clearly has not
done so. Rather, the law prohibits only
those employments and contractual
relationships that will create a continuing
or frequently recurring conflict or that
would impede the full and faithful discharge
of public duties.
This accords with the legislature's statement
of intent underlying the Code of Ethics,
expressed in Section 112.311, Florida
It is hereby declared to be the policy of
the state that no officer or employee . . .
of a county . . . shall have any interest,
financial or otherwise, direct or indirect
. . . or incur any obligation of any nature
which is in substantial conflict with the
proper discharge of his duties in the public
interest. [Section 112.311(5).]
[i]t is also essential that government
attract those citizens best qualified to
serve. Thus, the law against conflict of
interest must be designed as not to impede
unreasonably or unnecessarily the recruitment
and retention by government of those best
qualified to serve. Public officials should
not be denied the opportunity, available to
all other citizens, to acquire and retain
private economic interests except when
conflicts with the responsibility of such
officials to the public cannot be avoided.
34. This type of de minimis analysis is appropriate here, where the stockholder activities with the president of the city's largest developer amounted to a mere $2275.00 in commissions to Respondent over several years; and the mortgage held by the city contractor's profit sharing plan was obtained in an arms length transaction, was appropriately recorded, and was at a rate no more beneficial to Respondent than to other similarly situated borrowers. Under the two circumstances at issue, where the principals with whom Respondent contracted were not the subject of the city's regulation or business and the opportunity for Respondent to advance private interests in derogation of public duty was, at most, fleeting and remote, the prohibition of Section 112.313(7)(a), F.S., does not apply.
Based on the foregoing, it is hereby RECOMMENDED that a final order and public report be issued dismissing the complaints in these consolidated cases.
DONE AND ENTERED this 27th day of October, 1993, in Tallahassee, Leon County, Florida.
Division of Administrative Hearings
The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
Filed with the Clerk of the
Division of Administrative
Hearings this 27th day of
APPENDIX TO RECOMMENDED ORDER IN CASE NO. 93-161EC
The following constitute specific rulings on the findings of fact proposed by the parties.
The Advocate's Proposed Findings
1 and 2. Adopted in paragraph 1.
3. Adopted in paragraph 4.
4. Adopted in paragraph 5.
5. Adopted in paragraphs 3 and 4.
6. Adopted in paragraph 4.
7. Adopted in paragraphs 2 and 5.
8. Adopted in paragraph 5.
9. Rejected as uneccessary.
10. Adopted in paragraph 6.
11 and 12. Adopted in paragraph 8.
13 and 14. Adopted in paragraph 10.
15 and 16. Adopted in substance in paragraph 12.
17 and 18. Adopted in paragraphs 12 and 14.
19. Adopted in paragraph 13.
20 and 21. Adopted in paragraph 15.
22. Adopted in paragraph 16.
23 - 26. Adopted in paragraph 17.
27 and 28. Adopted in paragraph 18.
29. Rejected as unnecessary and immaterial.
30. Adopted in substance in paragraphs 19 and 20.
31. Rejected as unnecessary.
32. Adopted in substance in paragraph 20.
Findings of Fact proposed by Respondent
Respondent's findings of fact are included in the first four pages of his "Fact, Law and Recommendation [sic] Order". They are unnumbered and mixed with argument on the issues. The proposed findings of fact are substantially those adopted by the parties by stipulation and as such have been incorporated here. Only two factual statements by Respondent need to be specifically addressed as unsupported by the weight of the evidence: He references the profit sharing plan as a separate corporation; it was not a corporation. He also dismisses LaRoche's authority over the plan as minimal; it was not, but the plan still is a separate entity.
Virlindia Doss, Esquire
Advocate for the Commission on Ethics
Office of the Attorney General
The Capitol, PL-01
Tallahassee, Florida 32399-1050
Hilliard Moldoff, Esquire
Whitelock and Moldof
1311 Southeast Second Avenue
Fort Lauderdale, Florida 33316
Bonnie Williams, Executive Director
Post Office Drawer 15709
Tallahassee, Florida 32317-5709
Phil Claypool, General Counsel
Post Office Drawer 15709
Tallahassee, Florida 32317-5709
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions to this recommended order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.