CEO 07-4 -- March 7, 2007

POSTEMPLOYMENT RESTRICTIONS

FORMER EMPLOYEE OF DEPARTMENT OF FINANCIAL SERVICES AND OFFICE OF INSURANCE
REGULATION ENGAGING IN REPRESENTATION BEFORE THE DEPARTMENT, THE FINANCIAL SERVICES
COMMISSION, THE OFFICE OF INSURANCE REGULATION, OR THE OFFICE OF FINANCIAL REGULATION
WITHIN TWO YEARS OF LEAVING DFS

SUMMARY:

A defined employee of the Department of Financial Services would be prohibited for two years by Section 112.313(9)(a)4, Florida Statutes, from personally representing another person or entity for compensation before the Department. As she was previously employed by the Office of Insurance Regulation of the Financial Services Commission, she is also prohibited from representing clients before the FSC or any of its sub-units for two years following her departure from that employment.

QUESTION:

Would an employee of the Florida Department of Financial Services be prohibited by Section 112.313(9)(a)4, Florida Statutes, from personally engaging in compensated representation before the Financial Services Commission, the Office of Insurance Regulation, or the Office of Financial Regulation for two years after leaving employment with the Department?

Your question is answered as follows.

In correspondence with this office and conversations with our staff, you advise that you inquire on behalf of ..., who currently is employed with the Department of Financial Services (DFS). You report that this employee's pertinent employment history is as follows:

* December 9, 2003-March 13, 2005: Deputy Director, Office of Insurance Regulation (OIR);

* March 13, 2005-March 10, 2006: DFS Chief of Staff; and,

* March 6, 2006-present: Deputy Chief Financial Officer for the Florida Comprehensive Hurricane Damage Mitigation Program of the DFS.

You advise that the Department of Financial Services "was created as a result of the revision of Article IV, Section 4 of the State Constitution, effective January 7, 2003, which eliminated the constitutionally elected offices of 'Comptroller' and 'Treasurer,' and created the office of 'Chief Financial Officer' (CFO)." Section 20.121(3), Florida Statutes, creates, within the DFS, the Financial Service Commission (FSC or "Commission"), composed of the Governor, the Attorney General, the CFO, and the Commissioner of Agriculture, and establishes, as "structural units" of the FSC, the Office of Insurance Regulation (OIR) and the Office of Financial Regulation (OFR). You inquire as to the restrictions placed by Section 112.313(9)(a), Florida Statutes, on the employee's ability to represent, for compensation, clients before the DFS, the Financial Services Commission, the Office of Insurance Regulation, and the Office of Financial Regulation, should she leave her current position.

Section 112.313(9)(a), Florida Statutes, provides in relevant part:

POSTEMPLOYMENT RESTRICTIONS; STANDARDS OF CONDUCT FOR LEGISLATORS AND LEGISLATIVE EMPLOYEES.—

(a)1. It is the intent of the Legislature to implement by statute the provisions of s. 8(e), Art. II of the State Constitution relating to legislators, statewide elected officers, appointed state officers, and designated public employees.
2. As used in this paragraph:
a. "Employee" means:
(I)  Any person employed in the executive or legislative branch of government holding a position in the Senior Management Service as defined in s. 110.402 or any person holding a position in the Selected Exempt Service as defined in s. 110.602 or any person having authority over policy or procurement employed by the Department of the Lottery. . . .
c. "State agency" means an entity of the legislative, executive, or judicial branch of state government over which the Legislature exercises plenary budgetary and statutory control. . . .
4. No agency employee shall personally represent another person or entity for compensation before the agency with which he or she was employed for a period of 2 years following vacation of position, unless employed by another agency of state government. . . . .

Section 112.313(9)(a)4, Florida Statutes, prohibits a former agency employee from representing another person or entity for compensation "before the agency with which he or she was employed" for a period of two years following vacation of her position. The term "employee" is defined in Section 112.313(9)(a)2.a, as including members of the Selected Exempt or Senior Management Service. As you advise that each of the employee's positions was in either the Selected Exempt or Senior Management Service, Section 112.313(9)(a) applies to her. The issue here is the identity of the agency or agencies "by which she was employed" for purposes of the statute.

As previously stated, Section 20.121 establishes the Financial Services Commission "within" the DFS. However, although the DFS is responsible to provide administrative support to the Commission, the statute further provides that the FSC "shall not be subject to control, supervision, or direction by the Department of Financial Services in any manner."

Section 20.121(3)(a) also creates, as "structural units" of the FSC, the Office of Insurance Regulation and the Office of Financial Regulation. Under this section, the OIR

shall be responsible for all activities concerning insurers and other risk bearing entities, including licensing, rates, policy forms, market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, premium financing, and administrative supervision, as provided under the insurance code or chapter 636

while the Office of Financial Regulation is

responsible for all activities of the Financial Services Commission relating to the regulation of banks, credit unions, other financial institutions, finance companies, and the securities industry.

The Financial Services Commission serves as agency head for purposes of rulemaking for both the OIR and OFR. In addition, the FSC appoints the directors of both entities, with the requirement that both the Governor and the CFO be on the prevailing side of the vote. Apart from that, you relate, there is no interaction between the Department and the FSC. You further advise that the CFO exercises no supervisory control over the employees of the OIR or the OFR, and that there is no overlap between the responsibilities of the Department and those of the OIR or the OFR.

A review of the applicable law supports your representations.

Article II, Section 4(c), Florida Constitution, states that the CFO "shall serve as the chief fiscal officer of the state, and shall settle and approve accounts against the state, and shall keep all state funds and securities," and Florida Statutes Chapter 17 enumerates certain powers and duties of the CFO relative to state funds and accounts. In addition, the CFO serves as head of the Department of Financial Services, which includes the Division of Insurance Fraud, the Division of Rehabilitation and Liquidation, and the Division of Insurance Agents and Agency Services. The Office of Insurance Regulation regulates insurers. So for example, the DFS licenses agents and adjusters¹, while the OIR issues certificates of authority to transact insurance to insurers.² As the Governmental Accountability Report of the Office of Program Policy Analysis and Governmental Accountability states, in answering the question, "What is the difference between the Department of Financial Services and the Financial Services Commission?":

The CFO is directly responsible for licensing and oversight of insurance agents and agencies [and] investigating fraud, including identity theft and securities and insurance fraud . . . .

The Office of Insurance Regulation is responsible for regulation of all insurance companies and risk-bearing entities, including licensing, rates, policy forms, market conduct, claims, adjusters, issuance of certificates of authority, solvency, viatical settlements, and premium financing. The Office of Financial Regulation is responsible for overseeing state-chartered banks, credit unions, financial institutions, finance companies, and the securities industry.

While the DFS may share certain interests with the Financial Services Commission, we do not find that the entities constitute the same agency for purposes of section 112.313(9). We have found that entities created "within" agencies may be considered to be separate agencies for purposes of post-employment restrictions. In CEO 03-10 we advised the former director of legislative affairs for the Department of Management Services that he would not be prohibited for two years from representing clients before so-called "dotted line" agencies (such as the Correctional Privatization Commission and the Florida Commission on Human Relations), housed within, but not under the control of, that department, noting that, "The Supreme Court has recognized that independent agencies can be created and assigned to another agency for administrative purposes."

In light of CEO 03-10, it is our view that the DFS and the Financial Services Commission are separate agencies for purposes of the post-employment restrictions. They do not share the same agency head, neither exercises supervisory control over the other, and the jurisdiction of each, while complementary in some respects, does not appear to overlap. In contrast, the OIR and OFR are "structural units" of the Financial Services Commission and the Commission appoints their respective directors and makes their rules. Given these circumstances, we view the Financial Services Commission, the OIR and the OFR to be a single "agency" for purposes of the statute.

We have opined that for purposes of Section 112.313(9), the agency by which an individual is employed is the whole of the agency, rather than any lower departmental unit. See, CEO 02-12, CEO 04-16, and CEO 06-1. Consistent with these opinions, we find that this employee's current "agency" for purposes of post-employment restrictions, encompasses the whole of the DFS, rather than only the Florida Comprehensive Hurricane Damage Mitigation Program. She would thus be prohibited from engaging in compensated representation before the DFS, or the Chief Financial Officer individually, for a period of two years after leaving employment.

We also find that the employee would be prohibited from compensated representation before the CFO individually, but not before other Cabinet members, or the Governor and Cabinet sitting in a capacity other than as the FSC. This is consistent with CEO 96-33, in which we said that a former deputy comptroller with the Department of Banking and Finance would not be prohibited by Section 112.313(9)(a)4, from representing clients before the Governor and Cabinet or from lobbying individual members of the Cabinet, other than the Comptroller, and their staff for two years after leaving state employment.

Finally, as the employee worked at the OIR until March 13, 2005, and as we have found the OIR to be a part of the larger "agency" of the Financial Services Commission, she also would be prohibited from representing clients before the Financial Services Commission, the OIR, or the OFR for two years after that date.

Accordingly, we find that the employee is prohibited from engaging in compensated representation before the Financial Services Commission, including the OIR and the OFR, until March 14, 2007, and that she would be prohibited from engaging in compensated representation before the Department of Financial Services or the Chief Financial Officer for two years following vacation of her employment.

ORDERED by the State of Florida Commission on Ethics meeting in public session on March 2, 2007 and RENDERED this 7th day of March, 2007.

______________________________
Norman M. Ostrau, Chairman

^[1] Section 626.171, Florida Statutes.