CEO 97-17 -- July 17, 1997

CONFLICT OF INTEREST

CITY POLICE CHIEF OWNER OF CORPORATION

LEASING BOAT TO PARASAIL BUSINESS AND DRIVING BOAT

To: Mr. Douglas J. Sale, City Attorney, Panama City Beach

SUMMARY:

A prohibited conflict of interest exists under Section 112.313(7)(a), Florida Statutes, where a city police chief owns a corporation which leases a boat to a parasail business owned by his son. While the chief would not hold a contractual relationship with his son's company (the business entity subject to the regulation of the police department) in violation of the first part of the statute, a continuing or frequently recurring conflict or impediment to the full and faithful discharge of public duty would exist under the second part of the statute. CEO's 95-3, 93-23, 91-42, 91-28, 91-22, 88-76, 88-43, 85-1, 81-67, 81-47, 79-16, 79-1, 78-10, and 74-8 are referenced.

QUESTION:

Does a prohibited conflict of interest exist where a city police chief owns a corporation that leases a parasail boat to a company owned by his son and drives the boat without pay, where the parasail business operates off of a city beach on which the son also operates a beach-dependent business?

Your question is answered in the affirmative.

By your letter of inquiry, materials accompanying your letter, telephone conversations between you and our staff, and additional materials sent by you to our staff, we are advised that J.B. Holloway, Jr. serves as Interim Chief of Police (Chief) of the City of Panama City Beach. We are advised further that the Chief and an individual not associated with the City own all stock of a corporation, that the Chief is president of the corporation, that the principal asset of the corporation is a parasail boat, and that the Chief and the corporation's other shareholder are personally responsible for corporate debt incurred to purchase the boat. Additionally, you advise that the boat is under contract to or leased by another corporation (owned entirely by the Chief's son), and that the Chief's son owns yet another corporation that provides various services to beachfront businesses on Panama City Beach, including rental wave runners utilized to ferry customers from the beach to parasail rides conducted off of the beach and entirely over water. Also, you advise that the Chief, prior to assuming his current public position, obtained a captain's license because, as you state, he enjoys driving the parasail boat and needs to drive the boat (or some other boat) as a captain in order to maintain his license. Further, you advise, since 1995 a City ordinance (water safety ordinance) has required all parasail businesses to conduct rides entirely from and over the Gulf of Mexico, and not over the beach or other land. But, as you advised our staff by telephone, parasail ride customers purchase rides on the beach and are ferried from the beach to the ride.

Additionally, by telephone and the provision of written material, you advise that the Chief's son's companies hold permits/registrations for the boat and other vessels, vehicles, or machinery under the water safety ordinance and under another City ordinance which addresses traffic and motor vehicles on the beach (traffic ordinance). Further, by telephone, you advised our staff that the Police Department has a duty to check for the various permits/registrations issued to the Chief's son's companies and other beach/Gulf businesses. Also, you advise that under a contract between the City and Bay County the Police Department operates a beach patrol, utilizing personnel who are not sworn law enforcement officers, which provides an information service and which has a responsibility to check to make sure that businesses, such as those owned by the Chief's son, have required Departmentally-issued permits. Also, you advise that the Chief or his designee may authorize, under the traffic ordinance, a work vehicle to operate upon the beach to assist a business's wave runner which may have broken down.

The Code of Ethics for Public Officers and Employees provides in part:

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.]

As you recognize in your inquiry, the Chief's situation is conflicting under the first part of this statute if he holds employment or a contractual relationship with a business entity that is subject to the regulation of the Police Department (his public agency) and is conflicting under the second part of the statute if the Chief holds any employment or contractual relationship (whether or not the employment or contractual relationship is with a business entity that is subject to the regulation of his agency) which would create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or which would impede the full and faithful discharge of his public duties.

In analyzing the Chief's scenario under the first part of Section 112.313(7)(a), we must determine (1) with which business entity or entities the Chief holds employment or a contractual relationship and (2) whether any business entity with which the Chief holds employment or a contractual relationship is "subject to the regulation of" the Police Department. We find that the Chief holds, by virtue of his stock ownership, a contractual relationship with his corporation. See CEO 79-16. However, inasmuch as his son's corporation which leases the boat, rather than the Chief's own corporation, is the business entity that arguably is regulated by the Police Department via its application for and receipt of permits (boat registrations and beach vehicle permits) or any Departmental authorization to operate machinery/vehicles on the beach to, for example, assist disabled business wave runner crafts, the Chief's contractual relationship with his company is not prohibited by the first part of the statute, notwithstanding that the Chief's corporation (as opposed to the Chief personally) has a contractual relationship via the boat lease with the company that arguably is regulated by his agency. It is our view, long held and often stated, that a public official does not hold a contractual relationship with a business entity merely because a corporation of which he is an owner, even the sole owner, holds a contractual relationship with the business entity. See CEO 91-42, CEO 91-28, CEO 88-43, CEO 81-47, CEO 79-1, and all of our opinions cited therein. Further, we find that the Chief's driving of the boat which his son's company leases does not constitute employment or a contractual relationship inasmuch as he is not compensated for his services. See CEO 93-23 and our opinions cited therein.

Thus, having found that the Chief does not hold employment or a contractual relationship with his son's corporation which conducts parasailing, we find that no prohibited conflict exists under the first part of the statute. Therefore, whether "regulation" of the son's corporation by the Police Department is present under the City's water safety ordinance under which boat registrations are applied for and issued is not controlling on our ultimate finding under the first part of the statute. Nevertheless, we find that "regulation" is present. While it is our view that enforcement of criminal laws of general applicability does not constitute "regulation" (see, for example, CEO 91-22), we find that the water safety ordinance situation, notwithstanding that it involves a law enforcement agency (the Police Department) and that a portion of it carries criminal penalties, is, due to its application and permit/registration component, also "regulatory." Compare CEO 78-10, in which we found "regulation" to be present where a sheriff was charged with the responsibility of issuing pawnbroker permits under a municipal code. While the sheriff's permit issuance responsibility was more discretionary under the municipal code than is the Chief's under the water safety ordinance, we find that the Chief's application/issuance responsibility is more akin to the sheriff's responsibility in CEO 78-10 than it is to the mere record keeping which apparently was viewed by us in CEO 81-67 not to constitute "regulation." Further, under the traffic ordinance, it is apparent that the Chief/ Department's decision to allow a vehicle on the beach to assist a disabled wave runner craft is discretionary.

Additionally, we note that language is present within the water safety ordinance identifying the Chief of Police as the boat application/registration authority. The ordinance provides in part, with emphasis added:

Sec. 7-63. Parasails, tow boats, etc.-- registration and fee required.

(a) Each tow boat rented, leased or hired within the City to pull a parasail, kite or the like, shall be registered with the chief of police. The application for registration shall include:

(1) the name, residence and mailing address of the owner, and

(2) the name, location and mailing address of the Beach Amusement offering the device, and

(3) a description of the tow boat and device to be pulled, including a copy of the certificate of title where applicable, and

(4) evidence of Florida registration, and

(5) a certificate of the insurance required by section 7-64 issued in favor of the City and stating that the City shall receive ten (10) days written notice in advance of cancellation, and

(6) an original of either the declaration page, a certificate, or other confirmation of insurance which has been executed or counter-signed by either an insurance agent licensed by the State of Florida, Department of Insurance or a Surplus Lines Agent licensed by the State of Florida, Department of Insurance to handle the placement of insurance coverages with insurers made eligible to issue insurance coverage under the Surplus Lines Law.

(b) Each such tow boat shall be the subject of a single application and each application shall be accompanied by a registration fee in the amount of seventy-five dollars ($75.00) to defray the cost of conducting such registration and enforcing the regulations contained in this division.

(c) The Chief of Police shall assign a registration decal, including a number or letter and a colored field, for each tow boat.

(d) Each registration shall expire on the December 31 next following issuance, regardless of the date of issuance.

In addition, CEO 74-8, our seminal opinion in which we adopted our view of the meaning of "subject to the regulation of," recognizes that a public agency regulates a business when the business's operations or modes of doing business are subject to the control or authority of such an agency. Regardless of whether mandamus would ultimately lie to compel issuance of a boat registration, it is the Chief of Police who controls under the ordinance, at least initially, the issuance of registrations, and under whose authority the registrations are issued to businesses.

Unlike examination under the first part of the statute, analysis under its second part is not as mechanically or presumptively driven, but, rather, scrutinizes the reality of a public official's business or financial ties to determine whether they are separate and distinct from his public duties or whether they coincide with his public position to create a situation which tempts dishonor. See Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982).

We find that the Chief's situation is conflicting under the second part of the statute because, as discussed below, his public position and his public agency interface in a number of subject matter areas with private interests with which he is connected in business. Initially, we note that notwithstanding the arguable ministerial nature of the boat registration scheme involving the Chief of Police, it is still the Chief, or other Departmental personnel subordinate to him or subject to his influence, who must be depended upon to objectively view and handle registration applications of the Chief's son's company (the business the operation of which makes possible the operation of the Chief's corporation's boat leasing enterprise) necessary for parasail ride purchases and operations. In addition, we note that the Police Department has a duty to check beach/Gulf businesses, including the Chief's son's parasail corporation and the Chief's son's beach business corporation, for necessary permits or registrations, including boat registrations under the water safety ordinance and permits under the City beach traffic ordinance. In this regard, the Chief's situation is highly analogous to CEO 95-3, in which we found that a prohibited conflict would exist under the second part of Section 112.313(7)(a), Florida Statutes, were a Florida Marine Patrol Officer to hold employment or a contractual relationship with a marina/campground, reasoning that he would be tempted to forsake his public duty to objectively check guests of the marina/campground for licenses, safety equipment, and compliance with fish and game laws. Also, compare CEO 88-76 and CEO 85-1, concerning officers of the Game and Fresh Water Fish Commission providing security for hunting clubs. Further, we note that in addition to the Department's basic duty to check permits and registrations, it is, as you represent, obligated under a County/City agreement to check permits via a Departmental beach patrol comprised of personnel who are not sworn law enforcement officers.

In addition, it is our view that conflict under the second part of Section 112.313(7)(a) cannot be negated by the Chief's assignment of all of his beach-related duties to his highest ranking subordinate, thus "breaking the chain of command" to allow the subordinate "direct and continuing access to the City Manager (the exclusive administrative head of the City) on all [beach-related] matters," as you state has been done. Beach-related duties would still reside in the Police Department, an agency headed by the Chief, and would be handled by personnel subordinate to him. As such, it is our view that he would not be sufficiently "out of the loop" to negate the temptations recognized in Zerweck, supra, especially since the temptation to influence the conduct of his subordinates as to beach-related duties would still exist.

Accordingly, we find that a prohibited conflict of interest exists for the Chief in the above-referenced situation.

ORDERED by the State of Florida Commission on Ethics meeting in public session on July 17, 1997 and RENDERED this 22nd day of July, 1997.

__________________________

Kathy Chinoy

Chair