CEO 97-6 -- January 23, 1997

CONFLICT OF INTEREST

CITY OFFICIALS SERVING AS EX OFFICIO DIRECTORS

OF NONPROFIT MUSEUM CORPORATION SELLING BUILDING

TO CITY AND LEASING IT BACK FROM CITY

To: Mr. Robert Michael Eschenfelder, Assistant City Attorney, City of St. Petersburg

SUMMARY:

No prohibited conflict of interest would be created under Section 112.313(3) or (7)(a), Florida Statutes, where a city's mayor, council member, and intergovernmental relations director serve as "ex officio" directors of a nonprofit corporation that operates a museum located in the city if the corporation were to sell the museum building to the city and lease it back from the city. As "ex officio" directors the city officials do not have the authority granted members of the board of directors of the corporation, and the officials do not receive any compensation for their service to the corporation. Nor would the council member be prohibited from voting on the corporation's proposal to sell the museum building to the city and lease it back from the city while serving without compensation as an "ex officio" director of the nonprofit corporation, as the corporation would not be a principal by whom the council member is "retained."

QUESTION 1:

Would a prohibited conflict of interest be created where a city's mayor, council member, and intergovernmental relations director serve as "ex officio" directors of a nonprofit corporation that operates a museum located in the city if the corporation were to sell the museum building to the city and lease it back from the city?

Under the circumstances presented, this question is answered in the negative.

In your letter of inquiry, you advise that Mr. David J. Fischer serves as the Mayor of the City of St. Petersburg, Ms. Connie Kone serves as a member of the St. Petersburg City Council, and Mr. Herbert Polson serves as the City's Intergovernmental Relations Director. You also advise that each of them also serves as an "ex officio" director of a nonprofit corporation formed to operate a museum located in a building in downtown area of the City. They all serve without compensation and have no financial interest in or association with the nonprofit corporation. Although under the corporate bylaws the board of directors is vested with the management of the affairs of the corporation, the bylaws also state:

The Board of Directors may elect one or more Ex Officio Directors and one or more Honorary Directors, who may attend Board of Directors' meetings, but who shall not have the right to notice or vote. Each such Ex Officio or Honorary Director shall serve for such term as specified upon his election, but if none is specified then the term shall be one (1) year. The other provisions of these Bylaws relative to vacancies and removal of Directors shall be applicable. Unless otherwise specified in these Bylaws, all references to "Directors" relate to voting Directors and not to Ex Officio Directors nor to Honorary Directors.

You further advise that the ex officio board members may participate in the board's discussions, but that they have no vote. Furthermore, when the board of directors is to discuss or vote upon a topic which would touch upon the nonprofit's direct involvement with the City, the board goes into "executive session" and the City officials are excluded from listening to or participating in those discussions or votes.

Currently, the corporation has presented a plan to the City Council asking that the City purchase from the corporation the building which houses the museum, then lease the property back to the corporation. The three city officials were not involved in formulating this plan in their capacities as ex officio members of the board of directors, you advise, but the Council member contemplates participating in the discussion of and voting on the proposal as a member of the Council. The Mayor and the Intergovernmental Relations Director would have no official involvement in the City's decision to purchase the building.

The Code of Ethics for Public Officers and Employees contains the following prohibitions:

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 or 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 sentence of Section 112.313(3) prohibits the subject city officials from acting in an official capacity to purchase any realty from a business entity of which he or she is a "director." As you have advised that neither the Mayor nor the Intergovernmental Relations Director would have any involvement in their official capacities in the City's decision to purchase the property, the statute would not be applicable to them.

We also conclude that, although the Council member would be in a position in her official capacity to vote on the City's purchase, the statute does not apply to her situation because she is not truly a "director" of the nonprofit corporation. As you have observed, the Florida nonprofit corporation law specifies that a "board of directors" is

the group of persons vested with the management of the affairs of the corporation irrespective of the name by which such group is designated, including, but not limited to, managers or trustees. [Sec. 617.01401(2), Fla. Stat.]

Further, the law provides that

[a]ll corporate powers must be exercised by or under the authority of, and the affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation. [Sec. 617.0802, Fla. Stat.]

While we have concluded that a trustee of an insurance trust (CEO 81-40) and a church deacon (CEO 90-24) were the functional equivalents of directors for purposes of Section 112.313(3), based on the authority the trustees and deacons exercised for their organizations, we are of the opinion that in the present situation an "ex officio" director is not truly a director within the contemplation of Section 112.313(3) because an "ex officio" director lacks the power and authority of a director of the nonprofit museum corporation. Therefore, we conclude that the subject Council member is not prohibited from acting in her official capacity to purchase the property from the corporation.

The second sentence of Section 112.313(3) prohibits the subject city officials from "acting in a private capacity" to sell realty to the City. We previously have concluded that a director of a private corporation acts in a private capacity to sell when the corporation takes action, again because of the authority a board of directors has over the affairs of the corporation. See CEO 90-68 and CEO 94-17. However, just as we concluded that an "ex officio" director is not truly a director of the corporation because of the lack of authority to direct the affairs of the corporation, we also conclude that under the circumstances presented an "ex officio" director would not be acting in a private capacity to sell to the City were the corporation to sell its building to the City.

Section 112.313(7)(a) addresses employment and contractual relationships and prohibits those that are in conflict with a public official's duties. However, we have found that a director of a nonprofit corporation who serves without compensation or other consideration does not have an employment or contractual relationship with the corporation. See, for example, CEO 83-70 and CEO 94-17. Therefore, although the nonprofit museum corporation would be doing business with the City if it were to sell its building to the City and if it were to lease it back from the City, none of the subject City officials has an employment or contractual relationship with the corporation that would be prohibited by Section 112.313(7)(a).

Accordingly, under the circumstances presented we find that no prohibited conflict of interest would be created where the city's mayor, council member, and intergovernmental relations director serve as "ex officio" directors of a nonprofit corporation that operates a museum located in the city if the corporation were to sell the museum building to the city and lease it back from the city.

QUESTION 2:

Would a voting conflict of interest be created were the council member to vote on the corporation's proposal to sell the museum building to the city and lease it back from the city while serving without compensation as an "ex officio" director of the nonprofit corporation?

This question is answered in the negative.

Section 112.3143(3) and (4), Florida Statutes, provide in relevant part:

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(3); 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. [Sec. 112.3143(3)(a), Fla. Stat.]

No appointed public officer shall participate in any matter which would inure to the officer's special private gain or loss; which the officer 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; 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, without first disclosing the nature of his or her interest in the matter. [Sec. 112.3143(4), Fla. Stat.]

These provisions in the Code of Ethics address situations where the official's vote would inure to the special private gain of a principal by whom she is retained. However, we have concluded that a director of a nonprofit corporation who serves without compensation is not "retained" by that corporation. See, for example, CEO 83-70 and CEO 91-29. Nor does it appear that the Council member personally would stand to realize any gain or loss by virtue of the City's decision to purchase or not purchase the corporation's property.

Accordingly, we find that no voting conflict of interest would be created were the council member to vote on the corporation's proposal to sell the museum building to the city and lease it back from the city while serving without compensation as an "ex officio" director of the nonprofit corporation.

ORDERED by the State of Florida Commission on Ethics meeting in public session on January 23, 1997, and RENDERED this 28th day of January, 1997.

__________________________

Mary Alice Phelan

Chair