CEO 89-48 -- September 14, 1989

CONFLICT OF INTEREST

SCHOOL BOARD MEMBER SERVING ON BANK ADVISORY BOARD

To: (Name withheld at the person's request.)

SUMMARY:

A School Board member may not serve on the advisory board of a bank doing business with the Board other than serving as its depository of funds. The fact that the business was awarded to the bank as the result of a request for proposal process would not exempt the relationship from the prohibitions of Section 112.313(7)(a), Florida Statutes. CEO 82-59 is referenced.

QUESTION:

May a member of a School District Board also be a compensated member of the advisory board of a bank which is engaging in transactions with the District as the result of being awarded a contract through a request for proposal process, but when the business with the District is not limited to the depositing of District funds?

Your question is answered in the negative.

In your letter of inquiry, you advise that . . ., one of the members of the Broward County School Board, serves in an advisory capacity for a bank as a community bank director. As a community bank director, he serves as a consultant without voting authority and is not a legal agent authorized to act for the bank or a bank employee. Periodically, however, he is paid a fee by the bank for his services.

Recently the School Board engaged in a funding process called Certificates of Participation (COPS). COPS are a newly approved funding device which essentially allow a district school board to participate in purchase-lease transactions through a corporate device. A trustee is retained to administer the cash flow of the COPS and makes all receipts and disbursements of funds derived under the COPS arrangement.

The School Board issued a Request for Proposals (RFP) seeking proposals from entities desiring to serve as a paid trustee in regard to the COPS transactions. The bank submitted the lowest proposal in response to this request and therefore was recommended by the staff of the District School Board to be awarded the post of trustee.

The School Board member resigned his position as a Community Bank Director with the bank prior to the Board's consideration of the proposals. He now has the opportunity to be considered again for an advisory position for the bank. If the member accepts the position, the bank will continue to serve as trustee for current COPS transactions. You advise that the bank also may submit proposals for the position of trustee should the School Board engage in new COPS transactions in the future, and the bank is likely to seek or engage in future business relationships with the School Board beyond those which are exempted under Section 112.313(12)(g), Florida Statutes.

Section 112.313(7)(a), Florida Statutes, provides:

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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties.

In addition, Section 112.313(3), Florida Statutes, states:

DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee of his 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 his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he 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. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

In CEO 80-79 and CEO 80-89, we determined that Section 112.313(3) and (7) would be violated if a member of a county housing finance authority served as vice president of a bank which had a mortgage loan purchase agreement with the Authority, unless one of the exemptions in Section 112.313(12), Florida Statutes, applied. For similar reasons, we also believe that a School District Board member would be prohibited from being a compensated member of a bank's advisory board, when that bank is doing business with the District, unless one of the exemptions in 112.313(12), Florida Statutes, applies. Section 112.313(7)(a), Florida Statutes, prohibits a public officer from having a contractual relationship with a business entity doing business with his agency. Therefore, the School Board member, as a compensated community director of the bank which serves as a trustee to the School District, would have a contractual relationship prohibited by Section 112.313(7)(a), Florida Statutes. We also note that one of his suggested duties as a Community Director is to "(s)olicit for your bank the business of political subdivisions in which you have any influence such as . . . school districts." Should the School Board member follow this suggestion, he would be acting in a private capacity to sell the services of the bank to his agency, in violation of Section 112.313(3). See CEO 85-40; CEO 83-81; CEO 80-42.

Section 112.313(12)(g), Florida Statutes, provides:

The fact that a county or municipal officer or member of a public board or body, including a district school officer or an officer of any district within a county, is a stockholder, officer, or director of a bank will not bar such bank from qualifying as a depository of funds coming under the jurisdiction of any such public board or body, provided it appears in the records of the agency that the governing body of the agency has determined that such officer or member of a public board or body has not favored such bank over other qualified banks.

This exemption would not apply, as you indicate in your letter of inquiry, because the bank anticipates doing business with the School Board beyond merely serving as a depository of funds. The COPS transactions, where the bank serves as a trustee, also involve more than the bank merely serving as a depository. See, e.g. CEO 85-40.

You indicate that the business which the bank wishes to conduct with the School Board will be awarded through proposals, and you ask whether the exemption for sealed competitive bidding would be applicable. That exemption, Section 112.313(12)(b), Florida Statutes, provides an exemption where:

The business is awarded under a system of sealed, competitive bidding to the lowest or best bidder and:

1. The official or his spouse or child has in no way participated in the determination of the bid specifications or the determination of the lowest or best bidder;

2. The official or his spouse or child has in no way used or attempted to use his influence to persuade the agency or any personnel thereof to enter such a contract other than by the mere submission of the bid; and

3. The official, prior to or at the time of the submission of the bid, has filed a statement with the Department of State, if he is a state officer or employee, or with the supervisor of elections of the county in which the agency has its principal office, if he is an officer or employee of a political subdivision, disclosing his interest, or the interest of his spouse or child, and the nature of the intended business.

We are of the opinion that a request for proposals would not meet the requirements of the competitive bid exemption of Section 112.313(12)(b). That statutory section exempts only "sealed, competitive bids." We do not believe that we can broaden the statutory exemption to include proposals. See 49 Fla. Jur. 2d, Statutes, s. 126 (1984). We further believe that this construction is supported by the fact that a bid must conform to specific criteria and therefore can be objectively evaluated. In contrast, a proposal may be more general and may be evaluated by less precise criteria. See, for example, Section 287.057(2) and (3) and Section 287.012(8) and (12), Florida Statutes. We believe that the Legislature intentionally may have omitted proposals from the exemption created by Section 112.313(12)(b), as the less objective criteria by which they are evaluated do not adequately protect against potential conflicts of interest. To the extent we may have implied in CEO 82-59 that proposals could be included in the Section 112.313(12)(b) exemption, we recede from that opinion.

Accordingly, we find that a prohibited conflict of interest would be created were the subject District School Board member to serve as a compensated advisory board member to a bank doing business with the District.