CEO 01-1 -- January 30, 2001

 

CONFLICT OF INTEREST

 

SCHOOL BOARD MEMBER'S CORPORATION SELLING BUILDING SUPPLIES TO SCHOOL BOARD

 

To:       Ms. Beverly A. Morris, Attorney for School Board of  Marion County (Ocala)

 

SUMMARY:

 

A prohibited conflict of interest would be created under Sections 112.313(3) and 112.313(7)(a), Florida Statutes, were building supplies for school board projects to be obtained from a school board member's corporation via "direct purchases." CEO's 82-54, 78-83, 78-43, and 77-155 are distinguished.

 

QUESTION:

 

Would a prohibited conflict of interest be created were a corporation of which a school board member is an officer/director/material interest holder to sell building supplies to the school board via a "direct purchase" procedure?

 

Your question is answered in the affirmative.

 

By your letter of inquiry and accompanying memorandum, we are advised that Steve Hering ("member") is a newly-elected member of the Marion County School Board and that he holds stock in a corporation[1] which, prior to his election, sold building supplies (principally hardware) for use in School Board projects, under a "direct purchase" procedure.[2]  Further, you advise that the member desires to know whether new direct purchases by the Board from his corporation would be violative of the Code of Ethics for Public Officers and Employees, in view of his recently-acquired public status.

Under the direct purchase procedure, you relate, the contractor or construction manager on a Board project determines the source of materials being used in the project, the Board issues a purchase order upon the direction of the contractor, and the Board then directly pays the invoice to the supplier (i.e., the member's corporation) once the contractor has received delivery, inspected the materials, and checked the invoice.

The Code of Ethics provides in part:

 

DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officer's or employee's spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer's or employee's 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 the officer's or employee's own agency, if he or she is a state officer or employee, or to any political subdivision of any agency thereof, if he or she 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 or when such offices are on property wholly or partially owned by the legislator.  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.

[Section 112.313(3), Florida Statutes.]

 

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 or she 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 or her private interests and the performance of his or her public duties, or that would impede the full and faithful discharge of his or her public duties. [Section 112.313(7)(a), Florida Statutes.]

 

The first part of Section 112.313(3) prohibits a public officer from purchasing goods, services, or realty for his public agency from a business entity (e.g., a corporation) of which he, his spouse, or his child occupies a leadership position or holds a material interest; the second part of Section 112.313(3) prohibits his acting in a private capacity to rent, lease, or sell goods, services, or realty to his political subdivision or any agency thereof, and the first part of Section 112.313(7)(a) prohibits his holding a contractual relationship with a business entity which is doing business with his public agency.

We find that a prohibited conflict of interest would be created under both statutes were the Board to make direct purchases from the member's company.  Through the Board's purchasing actions, the member (a public officer) would be purchasing goods (building materials) for his public agency from a business entity of which he is an officer/director/material interest holder, through the corporation's actions on the private side of the sale he would be acting in a private capacity to sell goods to his political subdivision (the school district) or to an agency thereof, and through his holding of stock in the corporation he would hold a contractual relationship with a business entity (his corporation) which is doing business with his public agency via its sale of goods to the Board.

In concluding that a conflict would exist in the member's situation, we are aware of our opinions in which we have found that a prohibited conflict is not created under Section 112.313(3) where a public officer's corporation provides goods or services to another corporation that in turn provides goods or services to the public officer's public agency, reasoning that such a situation does not constitute an indirect sale to the officer's agency, and we are aware of our opinions in which we have found that the first part of Section 112.313(7)(a) is not violated in such a scenario because the public officer, while holding a contractual relationship with his own corporation (subcontractor), does not hold a contractual relationship with the other corporation (general contractor) that is doing business with his agency.  See, for example, CEO 78-43 and CEO 82-54.  However, here the member's situation is distinguishable in that his corporation would be receiving materials purchase money directly from his School Board in exchange for its provision of the materials and in that contractual privity would exist between the member and the very business entity (his corporation) that is doing business with the Board.[3]

Accordingly, we find that a prohibited conflict of interest would be created were the Board to purchase materials from the member's corporation, notwithstanding the use of "direct purchases."

 

ORDERED by the State of Florida Commission on Ethics meeting in public session on January 25, 2001 and RENDERED this 30th day of January, 2001.

 

 

___________________________________

Howard Marks

Chair


[1]By a telephone conversation between you and our staff, we are advised that the member took public office on November 21, 2000, and that he is an officer/director/material interest (greater than five percent) holder of the corporation. 

[2]Used in order to avoid the additional sales tax that would be applicable if the contractor, rather than the Board, purchased the materials.

[3]In this regard, we note key language from some of our opinions in which no conflict was found, which we find distinguishes the circumstances of the previous opinions from the instant scenario: CEO 82-54, "... it is not the [county commissioner's] company which is doing business with the county, but rather the paving contractor"; CEO 78-83, ". . . the authority deals directly with the general contractor but has no contractual relationship with the subcontractors . . . ."; CEO 77-155, "[Section 112.313(3)] is not applicable to your situation because you will be selling to the contractor rather than to the school district, which is your agency."