CONFLICT OF INTEREST

CITY POLICE OFFICER OWNING A RECEIVERSHIP COMPANY
CONTRACTING WITH THE CITY

To: Eugene Steinfeld, City Attorney (Margate)

SUMMARY:

A prohibited conflict of interest would not be created under Section 112.313(3), Florida Statutes, if a city police officer’s company contracted with the city to be appointed receiver of residential properties encumbered by city code enforcement liens, as the officer would not be selling services to his political subdivision. However, a prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, because the police officer’s private interests would conflict with his public code enforcement responsibilities. Referenced are CEOs 75-196, 92-40, 98-10, and 13-16.¹

QUESTION:

Would a prohibited conflict of interest be created if a receivership company owned by a city police officer contracted with the city to be appointed receiver of residential properties for which the city is a code enforcement lienor?

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

You write on behalf of a police officer employed by the City of Margate. The police officer is a patrolman assigned to a specific zone in the City. As a patrolman, the police officer has authority to enforce the City Code. Because such enforcement is noncriminal, police officers of the City usually refer such matters to a code enforcement officer—a person who is not a sworn law enforcement officer, but is employed by the City within the Police Department in a separate division from road patrol. You state that it is rare that a patrolman would personally enforce the City Code for a residential property violation.

You write that the police officer is the sole owner of a licensed, bonded, and insured receivership company. Once appointed as receiver of a residential property, the company repairs the property to a habitable state, if necessary, and manages the property, finding suitable tenants from whom the company collects rent until the appurtenant past-due liens or other arrears are satisfied. The company has contracted with homeowner and condominium associations and has been appointed receiver by courts in Broward, Dade, Palm Beach, Martin, Manatee, Orange, and Hillsborough Counties.

You write that the company has proposed contracting with the City to provide it with similar receiver services, regarding properties with City Code liens. In a recently-submitted letter, you provided some details about how this contract would operate in practice. You state that the potential properties subject to receivership are already subject to several code enforcement violations and outstanding utility liens. You also state that, for a property to be placed into receivership, (1) it must be in violation, (2) it must be subject to a special magistrate’s review, and (3) it must be in need of receivership. You note that the receivership company receives no public funds under the contract and its services are offered at no cost to the City; the receivership company would receive rent payments from the new tenant of the property and would pass along the rent to the City.

Section 112.313(3), Florida Statutes, provides:

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 second part of this statute prohibits a public officer or employee from acting in a private capacity to rent, lease, or sell services to his agency, to his political subdivision, or to any other agency of his political subdivision. We have found one to “act in a private capacity” when he or she sells goods or services through a business in which he or she has a material interest or occupies a leadership/management position. See, among others, CEO 75-196. We have also found that compensation received from a third party for services provided to an employee’s agency or political subdivision does not constitute a sale of services to the agency or political subdivision. CEO 92-40 (finding no sale of services, and therefore no conflict under Section 112.313(3), where a county-employed stadium manager proposed to produce a television commercial for the county’s tourist development council that would feature local businesses that sponsored the commercial—sponsorship taking the form of direct payment to the stadium manager, who would retain sponsorship overages as profit—and where the county tourist development council did not pay the stadium manager for this service). Here, there is no sale of services; though the receivership company provides a service to the City, the City pays no money for it. The money the receivership company accepts comes from the new tenants occupying the property in receivership. Therefore, a prohibited conflict of interest would not be created under the second part of Section 112.313(3).²

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

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.

The first part of Section 112.313(7)(a) prohibits a public officer from having employment or a contractual relationship with a business entity doing business with his agency. We do not find that the police officer’s situation implicates the first part of Section 112.313(7)(a), in that the agency his company would be doing business with would be the City Commission, not the City Police Department. Also, we see no indication that the police department regulates his company.

The second part of the statute prohibits a public officer from having any employment or contractual relationship—not merely those contracts resulting in receipt of public funds—that would 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. This requires an examination of the official’s public responsibilities against his private interests “to determine whether the two are compatible, separate, and distinct, or whether they coincide to create a situation that tempts dishonor.” Zerweck v. State Commission on Ethics, 409 So. 2d 57, 61 (Fla. 4th DCA 1982) (internal quotations omitted). There need not be any actual corruption for this provision to apply; the potential for an objective incongruence of private interests and public responsibilities is sufficient. We have found in the past that employment or a contractual relationship will “tempt dishonor” if the nature and subject matter of the secondary employment could influence the public officer’s performance of his public duties. CEO 13-16 (citing CEOs 91-34, 98-10, and 89-02).

In CEO 13-16, we considered the proposed employment of a police officer who sought to do private investigative work specializing in the investigation of allegedly unfaithful spouses. In that instance, we found that some of those investigations might lead to discoveries that could be the subject of a criminal investigation—for example, aggravated battery, homicide, etc.—and the private interests of his clients could clash with the public responsibilities of the police officer. Because the secondary employment could influence the police officer’s performance of his public duties, we found that a prohibited conflict existed under the second part of Section 112.313(7)(a).

In this case, since some code enforcement actions will ultimately result in unpaid liens, if the officer’s company is contracting to serve as receiver, his private interest would be to execute the strictest code enforcement possible. At the same time, his public duty calls for him to be objective with respect to code enforcement. As in CEO 13-16, the private interests intersect with the public duty, creating a prohibited conflict of interest.

The influence on the officer’s public duties in not mitigated by a review of the code violation by a special magistrate. The magistrate presumably ensures that the violations or receiverships are appropriate as a matter of law and procedure, but the potential influence on the officer’s public duties does not necessarily have to manifest itself in the finding of improper code violations; a temptation to an increased effort to find legally sufficient code violations, which could pass muster with the special magistrate, would still result in a prohibited conflict under Section 112.313(7)(a).

Similarly, this influence on the officer’s public duties is not negated by the fact that the potential properties subject to receivership are already subject to several code enforcement violations and outstanding utility liens. Once a relationship is forged between the City and the receivership company, the temptation to dishonor the officer’s public duties for the sake of future receivership opportunities would exist, irrespective of the presence of preexisting receivership opportunities.

By all of this, we do not suggest in any way that the officer would dishonor his public duties. The statute is entirely preventative in nature, and as we have stated in other opinions, the concern is whether the official’s private interests could coincide with his public responsibilities to “tempt dishonor,” rather than whether the official could resist the temptation.

Accordingly, we find a prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, should the City police officer’s business serve as receiver for properties encumbered by City code enforcement liens.³

Your question is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on July 24, 2015, and RENDERED this 29th day of July, 2015.

____________________________________

Stanley M. Weston, Chair

^[1]Prior opinions of the Commission on Ethics can be viewed at www.ethics.state.fl.us.

^[2]The first part of Section 112.313(3) is not implicated, as there is no indication that the police officer would be acting as a purchasing agent for the City to acquire the services of his company.

^[3]Section 112.313(7)(a) does not prohibit all outside employment obtained by a police officer. See CEO 98-10. Based upon the facts provided in the inquiry, we do not find that the company’s other business, consisting of receivership opportunities not arising from City code enforcement liens in the City of Margate, would present a conflict of interest under the Code of Ethics.