A voting conflict of interest would be created under Section 112.3143(3)(a), Florida Statutes, were a city council member to vote on measures concerning expansion of a medical center owned by a corporation that is owned by another corporation which owns yet another corporation which owns still another corporation which employs the member. Expansion of the medical center would inure to the special private gain or loss of the corporation which owns the medical center and to the special private gain or loss of its parent organization, which also is the parent organization of a corporate principal (employer) by whom the member is retained (employed).
QUESTION:
Is a corporation which wholly owns a corporation which wholly owns another corporation which employs a city council member a "parent organization of a corporate principal" by whom the member is retained for purposes of Section 112.3143(3)(a), Florida Statutes, thus requiring the member's abstention from voting and other compliance with the statute regarding measures inuring to the special private gain or loss of the corporation?
Your question is answered in the affirmative.
By your letter of inquiry, we are advised that you write in behalf of Loretta Isenberg-Hand, a member of the Melbourne City Council, who is employed (in a "per diem employee" capacity) by a corporation. Further, you advise that the member's employer is wholly owned by another corporation, which in turn is wholly owned by another corporation, which wholly owns yet another corporation which owns the medical center (located in the City and proposed for expansion) at which the member is assigned by her employing corporation to work as a nurse. In addition, you advise that the member receives her compensation for her private work as a nurse from the corporation which employs her, not from the corporation which owns the medical center where she works[1] and not from the other corporations. Further, you advise that the medical center has proposed a massive expansion of its facility, involving approval of various zoning permits, including but not limited to a conditional use permit regarding the height of new buildings and a site plan approval for the facility, much or all of which will be voted on by the City Council.
Section 112.3143(3)(a), Florida Statutes, the portion of the voting conflicts law which is applicable to elected, local public officers such as the member, provides, with emphasis supplied:
VOTING CONFLICTS.—No county, municipal, or other local public officer shall vote in an official capacity upon any measure which would inure to his or her special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained, other than an agency as defined in s. 112.312(2); or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of the officer's interest in the matter from which he or she is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his or her 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.
Inasmuch as you have not indicated that the member personally will be affected by Council measures concerning the proposed expansion, and inasmuch as the corporation owning the to-be-expanded facility and the corporation which wholly owns it will be affected by expansion, our focus is on the highlighted language of the statute and the issue of whether the corporation which owns the corporation which owns the medical facility is the "parent organization" of the corporation which employs (retains) the member, by virtue of its ownership of another corporation which owns the corporation which employs (retains) the member.
We have not had occasion to construe "parent organization," and the term is not defined within the Code of Ethics. Further, an examination of caselaw reveals no thorough discussion of the meaning of the term, or of the related or arguably synonymous term "parent corporation," although the latter is found extensively in caselaw, in contexts apparently presupposing its meaning. Additionally, although the term and related terms are found here and there in several Florida Statutes, there does not appear to be a generally applicable statutory definition.[2] Thus, it is useful to consult basic tools or sources, such as Black's Law Dictionary (7th ed. 1999), which, although not containing a definition of "parent organization," defines the following synonymous or related terms as follows:
parent corporation.A corporation that has a controlling interest in another corporation (called a subsidiary corporation), usu. through ownership of more than one-half the voting stock.—Often shortened to parent.—Also termed parent company.
subsidiary corporation. A corporation in which a parent corporation has a controlling share.—Often shortened to subsidiary.
organization. 1. A body of persons (such as a union or corporation) formed for a common purpose. 2. See UNION
national union. A parent union with locals in various parts of the United States
Thus, it can be seen that there is no meaning readily attributable to the term "parent organization" in the instant context,[3] although it is manifest that a corporation which wholly owns another corporation is the parent organization of the corporation which is owned. Therefore, in construing the term, we apparently are bound by no statute definition or caselaw definition and thus are free to determine its meaning in light of the overriding purpose of the voting conflicts law: that a local public officer is not to vote on measures regarding which his objectivity is compromised or questioned due to his private, economic connections. For purposes of business, contracts, torts/lawsuits, and similar matters the paramount tenet is that each corporation is a separate business entity, separate from other corporations or natural persons who own it, irrespective of any "wholly owned" status, whose distinct legal identity will not be ignored or "pierced" absent fraud, disregard of the corporate form in operations, and/or similar factors, in order to promote passive investment/lack of personal liability and the growth of industry and commerce. In our view, the ethical context is markedly different. In the instant situation, for example, the member's "bread is buttered," via her nurse's pay, by and through a business organization or structure which is headed by a company/corporation/organization that will be affected by the expansion of the medical facility and the City Council votes necessary to the expansion. In reality, this parent organization owns the member's employer,[4] which, as is common to all employers, holds great sway over the views, actions, and decisions of its employees in a variety of contexts.
We are not ignorant of potential criticism based upon assertions that we have ignored the meaning and requirements of corporate law in reaching our finding herein. However, a "hyper-technical, legalistic" interpretation of the term "parent organization" in the ethics context of the voting conflicts law, in disregard of a purpose of the voting conflicts law, would unduly insert the "fictions" and lack of personal responsibility ostensibly indispensable to corporate operations and the growth of money and commerce into the context of ethics and the personal responsibility of public officers.
In sum, it is our view that the Legislature, in choosing the term "parent organization,"[5] sought to address the reality of a public officer's economic connections interfering with his or her objectivity in voting, and that in doing so it was not the Legislature's desire to slavishly adhere to "entity distinctions" created and recognized in other contexts for other purposes.
Accordingly, we find that the Council member is subject to the voting conflicts law contained in Section 112.3143(3)(a), Florida Statutes, regarding measures which would inure to the special private gain or loss of the corporation which owns a corporation which owns the corporation employing the member.
ORDERED by the State of Florida Commission on Ethics meeting in public session on September 4, 2003 and RENDERED this 9th day of September, 2003.
________________________
Richard L. Spears, Chairman
[1] Apparently, the corporation which owns the medical center where the member works is a "sister corporation" to the corporation which owns the corporation employing the member. Black's Law Dictionary (7th ed. 1999), defines "sister corporation" to mean
[o]ne of two or more corporations controlled by the same, or substantially the same, owners.—Also termed brother-sister corporation.
[2] Section 496.404(15), Florida Statutes, within the "Solicitation of Contributions Act," defines "[p]arent organization" to mean
that part of a charitable organization or sponsor which coordinates, supervises, or exercises control over policy, fundraising, and expenditures or assists or advises one or more of the organization's chapters, branches, or affiliates in this state.
Sections 627.357(1)(d)&(e), Florida Statutes, regarding medical malpractice self-insurance, and a portion of the "Rating law," define "[h]ospital subsidiary corporation" and "[h]ospital parent corporation" to mean, respectively
any corporation over which a hospital or the hospital's parent corporation exercises financial or operational control and which provides health care services to the hospital or the hospital parent corporation or another hospital subsidiary corporation.
any corporation which has financial or operational control over a hospital and which provides health care services to the hospital or another hospital subsidiary corporation.
[3] A situation in which corporation "A," although owning all of the stock or shares of corporation "B," does not own any stock or shares of corporation "C."
[4] By wholly owning the corporation that wholly owns her employer.
[5] We note that the arguably more limited term "parent corporation" was not chosen.