CEO 86-37 -- May 15, 1986

CONFLICT OF INTEREST

CITY MAYOR MEMBER OF LAW FIRM, OTHER MEMBERS OF WHICH ARE INVOLVED WITH BUSINESS ENTITY CONTRACTING WITH CITY

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

SUMMARY:

A prohibited conflict of interest would be created under Section 112.313(7), Florida Statutes, were a member of the law firm of a city mayor to represent a potential contractor with the city before the city commission. As explained in CEO 80-79, each attorney in a law firm has a contractual relationship with each client of that firm. Under the circumstances presented, none of the exemptions contained in Section 112.313(12), Florida Statutes, would be applicable. Neither a prohibited conflict of interest under Section 112.313(7) nor a voting conflict of interest under Section 112.3143, Florida Statutes, would be created were a member of the mayor's law firm to be an equity investor in a business entity which proposes to contract with the city to lease and develop property owned by the city. CEO 83-71 is referenced in this regard. Finally, the mayor would be prohibited by Section 112.3143(3) from voting on the contract if a member of his law firm represents a client that is financing the proposed contractor as a joint venturer. Under the circumstances, the measure under consideration would inure to the special private gain of a principal by whom the mayor is retained.

QUESTION 1:

Would a prohibited conflict of interest be created were a member of the law firm of a city mayor to represent a potential contractor with the city before the city commission?

This question is answered in the affirmative.

In your letter of inquiry and in a telephone conversation with our staff, you have advised that .... the Mayor of the City of Miami, is a member of a law firm each member of which has his own profit center and shares overhead but not the fees of the other members of the firm. Hence, the clients of one firm member are not the clients of the other, although in some cases one member will work for the client of another and will include within his own profit center the fees for that work.

You also advise that before the Mayor was elected, the City requested proposals for a unified development project on an island owned by the City under which the developer would lease the island from the City and construct and manage the development. Proposals were opened before the Mayor took office, with only one proposal being received. A selection committee has been meeting since that time to consider the proposal, which is for a marine exhibition center, hotel, and marina to be located on the island. You question whether a member of the Mayor's firm may represent the proposed developer.

The Code of Ethics for Public Officers and Employees provides in relevant 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 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. [Section 112.313(7)(a), Florida Statutes (1985).]

This provision prohibits a public officer from having any contractual relationship with a business entity which is doing business with his agency.

In a telephone conversation with our staff, you advised that attorneys with the law firm use firm letterhead, that clients assume that a partnership exists among the members of the firm, and that the members of the firm are covered by one malpractice insurance policy. Thus, it appears that the members of the firm hold themselves out as a partnership to such an extent that we may consider the firm to be a partnership. See Section 620.635, Florida Statutes, and DR 2-102(c) of the Code of Professional Responsibility for attorneys.

In CEO 80-79 we concluded that each attorney in a law firm has a contractual relationship with each client of that firm. Therefore, the Mayor would have a contractual relationship with the developer if another member of his firm were to represent that developer. The developer clearly would be doing business with the City were it to contract with the City to lease and develop the City's property.

Section 112.313(12), Florida Statutes, contains a number of exemptions to the prohibition of Section 112.313(7); of the exemptions, two require discussion here. Section 112.313(12)(b) exempts transactions where the business is awarded under a system of sealed, competitive bidding to the lowest or best bidder and where certain other conditions are met. However, in this situation it is apparent that the proposal process was not a system of "sealed, competitive bidding." In addition, in CEO 79-10 and CEO 80-10 we advised that this exemption would not apply where the public agency is selling surplus property or leasing real property to the business entity, as opposed to selling or leasing property from the business entity.

The second exemption applies where:

The business entity involved is the only source of supply within the political subdivision of the officer or employee and there is full disclosure by the officer or employee of his interest in the business entity to the governing body of the political subdivision prior to the purchase, rental, sale, leasing, or other business being transacted. [Section 112.313(12)(e), Florida Statutes (1985).]

We are of the opinion that this provision also does not apply to the present situation. First, we have difficulty in finding that a potential lessee of public property would be a "source of supply" in any situation. Secondly, we do not believe that because only one entity responded to an agency's request for proposals it follows that the entity is the only source within the political subdivision. Other interested and able parties may not have received notice. Further, in most cases the public official will be in a position to "tailor" the specifications for proposals in such a way that an entity in which he has an interest would be the only source within the political subdivision capable of responding with an appropriate proposal. We hasten to add that this could not be the case here, as the Mayor did not take office until after proposals were opened.

Accordingly, we find that a prohibited conflict of interest would be created were a member of the Mayor's law firm to represent the proposed developer before the City Commission.

QUESTION 2:

Would a prohibited conflict of interest or voting conflict of interest be created were a member of the Mayor's law firm to be an equity investor in the developer which proposes to lease and develop property owned by the city?

This question is answered in the negative.

In CEO 83-71 we advised that Section 112.313(7), Florida Statutes, would not prohibit a member of a city housing authority from being engaged in a real estate partnership with an individual who was a partner in the accounting firm which audited the authority's books. There, we found that the authority member did not have any employment or contractual relationship with the accounting firm, but rather that his contractual relationship was with the individual who was a partner in the firm. Similarly, here, the Mayor has a contractual relationship with the firm member rather than with the proposed developer. As the investment in the developer was made with private funds of the firm member and is not connected with the law firm, the Mayor's indirect relationship with the proposed developer would be too attenuated to be prohibited by Section 112.313(7).

Regarding voting conflicts of interest, the Code of Ethics provides:

No county, municipal, or other local public officer shall vote in his official capacity upon any measure which inures to his special private gain or shall knowingly vote in his official capacity upon any measure which inures to the special gain of any principal, other than an agency as defined in s. 112.312(2), by whom he is retained. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of his interest in the matter from which he is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his 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. However, a commissioner of a community redevelopment agency created or designated pursuant to s. 163.356 or s. 163.357 or an officer of an independent special tax district elected on a one- acre, one-vote basis is not prohibited from voting. [Section 112.3143(3), Florida Statutes (1985).]

This provision would prohibit the Mayor from voting on any matter which inures to his special private gain or to the special gain of a principal by whom he is retained. In CEO 81-8, we advised that a county commissioner would not be presented with a voting conflict of interest regarding a matter which affected the interests of a business partner but which did not affect the partnership's interests or the commissioner's personal interests. Here, neither the Mayor nor the law firm has a financial interest in the proposed developer.

Accordingly, we find that no prohibited conflict of interest or voting conflict of interest would be created were a member of the Mayor's law firm to be an equity investor in the proposed developer.

QUESTION 3:

Is the Mayor prohibited by Section 112.3143(3), Florida Statutes, from voting on the contract to the proposed developer, where one member of the Mayor's law firm represents a client that is financing the proposed developer?

This question is answered in the affirmative.

In a telephone conversation with our staff, you advised that the proposal for developing the City's property was received from a corporation which was formed by a developer and a local architectural firm. A second entity has been created to finance the project as a joint venturer, although the contract with the City will be entered into by the developing corporation rather than by all joint venturers.

Under Section 112.3143(3), Florida Statutes, the question presented is whether the measure under consideration would inure to the special private gain of the Mayor or of a principal by whom the Mayor is retained. We previously have advised that a client of the law firm of a public officer is a principal by whom the officer is retained. See, for example, CEO 85-14, CEO 84-31, and CEO 84-11. As the Mayor has no involvement with the developing corporation or the financing joint venturer, we find that the award of the contract would not inure to the Mayor's gain. The question remains, however, as to whether the award of the contract will inure to the special gain of the client of the law firm which is financing the proposed development as a joint venturer.

In many situations, such as where a financial institution is providing financing for a business entity, governmental action benefiting that entity may only be of a remote or speculative benefit to the financial institution. Here, however, the joint venturer has been created in order to finance the development project. On this basis, we find that the City's decision to enter into a contract with the developing corporation would result in direct gain to the joint venturer entity that would be financing the project. Similarly, the shareholders in the developing corporation also would stand to benefit directly from the City's action.

Accordingly, we find that the Mayor would be prohibited from voting on the contract with the developing corporation were a member of his law firm to represent the joint venturer entity which has been created to finance the development.