CONFLICT OF INTEREST; VOTING CONFLICT
COUNTY COMMISSIONER UNCOMPENSATED DIRECTOR OF
NONPROFIT CORPORATION RECEIVING COUNTY FUNDS
FOR HEALTH CARE INFORMATION NETWORK
To: Maureen S. Sikora, Deputy Manatee County Attorney
SUMMARY:
A prohibited conflict of interest would not be created under Section 112.313(7)(a), Florida Statutes, were a county commissioner to become an uncompensated director of a nonprofit corporation receiving funding from the county for a healthcare information network. Further, because the county and the corporation entered into their relationship when the commissioner was not a director of the corporation, Section 112.313(3), Florida Statutes, has not been violated. In addition, no voting conflict would be presented regarding measures affecting the corporation, for whom the commissioner serves without retention, or regarding measures affecting the commissioner's physician-husband as one of many similarly-situated participants in the network. However, additional business between the county and the corporation, if any, entered into after the commissioner becomes an unpaid director of the corporation, may be violative of Section 112.313(3); and the commissioner may wish to refrain from becoming a director, even if no additional business is entered into, in order to avoid the appearance of a conflict of interest. CEO 77-16, CEO 78-18, CEO 86-24, CEO 01-8, CEO 06-12, CEO 06-20, CEO 07-11, CEO 08-11, and CEO 09-7 are referenced.1
QUESTION 1:
Would a prohibited conflict of interest be created were a county commissioner to become an uncompensated director of a nonprofit corporation receiving funding from the county for a healthcare information network?
Under the circumstances presented, your question is answered in the negative, as to business between the county and the corporation entered into while the commissioner was not a director of the corporation; however, the commissioner may wish to refrain from becoming an unpaid director in order to avoid the appearance of a conflict of interest and in order to promote public confidence in government.
By your letter of inquiry and additional information provided to our staff, we are advised that Carol Whitmore (Commissioner) serves as a member of the Manatee County Commission. In addition, we are advised that, until recently,2 the Commissioner served (without compensation or reimbursement of any kind) on the board of directors of a nonprofit corporation "established for the collaboration and coordination of information, expertise, and resources among health providers, health information networks, and health alliances in the Manatee County area." Further, we are advised that the County and the corporation may enter into an agreement under which the County will pay the corporation to develop a local healthcare information network. More specifically, we are advised that County funds will pay for, via the corporation,3 (1)the purchase of computer hardware/software to make medical information and records accessible to members of the network and (2)promotional and development activities to form the network among local healthcare providers.4
As this question is postured (factually and chronologically), 5Section 112.313(7)(a), Florida Statutes, primarily is at issue; it 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 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's (e.g., county commissioner) holding employment or a contractual relationship with a business entity (e.g., nonprofit corporation)6 which is doing business with the officer's public agency (e.g., county commission). The second part of the statute prohibits a public officer from holding any employment or any contractual relationship if, under the relevant facts, the employment/contractual relationship would create a continuing or frequently recurring conflict between the officer's private interests (including the interests of the private entity to which the officer is connected) and the performance of the officer's public duties, or if the employment/contractual relationship would impede the full and faithful discharge of the officer's public duties; Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982).
Were the Commissioner, in addition to becoming an uncompensated director of the nonprofit corporation, to become a member of the nonprofit corporation (analogous to a shareholder of a for-profit corporation), we would find that a prohibited conflict of interest would be created for the Commissioner under Section 112.313(7)(a). Under the first part of the statute, she would hold a contractual relationship [via her membership with the corporation (CEO 06-12)] with a business entity [the nonprofit corporation (CEO 78-18)] doing business with her public agency via the funding agreement.7 Under the second part of the statute, the situation would be indicative of the potential for divided loyalty and "temptation to dishonor"8 discussed in Zerweck, supra, in that the interests of the County and the corporation would coincide in a manner which might not always be harmonious. For example, disputes might arise under the agreement between the County and the corporation as to performance, payment, quality of product, or other matters.
However, both the first and second parts of Section 112.313(7)(a) require as an essential element for a violation a public officer's holding of either employment or a contractual relationship, neither of which is present in the Commissioner's situation due to the fact that she would be uncompensated as a director and due to the fact that she would not be a member of the corporation. Therefore, we find that a prohibited conflict would not be created for the Commissioner were she to become an unpaid director of the corporation.9
Nevertheless, as we have recognized, in, e.g., CEO 74-50 ("CLOSE BUSINESS RELATIONSHIPS AS CONSTITUTING POSSIBLE CONFLICTS OF INTEREST"), that while compliance with the strict letter of the law (as the Commissioner will be doing under the scenario presented) will be adequate to avoid a violation, it may not be enough to foster public confidence in government. In other words, the Commissioner's not becoming a director, officer, member, employee, or similar position-holder of the corporation may assist her and the County in avoiding even the appearance of a conflict of interest.
Question 1 is answered accordingly.
QUESTION 2:
Will the Commissioner be presented with a voting conflict under Section 112.3143(3)(a), Florida Statutes, regarding votes/measures of the County Commission to fund the corporation, regarding votes/measures otherwise affecting the corporation, or regarding votes/measures affecting the participants in the healthcare information network, including her physician-husband, if she becomes an uncompensated director of the corporation?
Question 2 is answered as set forth below.
In addition to the information concerning Question 1 above, we are advised that the Commissioner's husband is a physician who may participate in the healthcare network to be formed via the corporation; that his participation would be the same as that of all other physicians, hospitals, laboratories, and healthcare providers; and that it is anticipated that there are more than one hundred doctors and other healthcare providers in the County who will join the network. Also, as stated above in regard to Question 1, we are advised that the Commissioner will not be paid or compensated by the corporation for her service as a director.
Section 112.3143(3)(a) provides, with emphasis supplied:
VOTING CONFLICTS.—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(2); 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.
We find that the Commissioner would not be presented with a voting conflict under the scenario presented herein. Assuming arguendo that County Commission votes/measures to fund or otherwise affect the corporation also directly would cause gain or loss to physicians or others participating in the network [one of whom would be her husband-"relative" under Section 112.3143(1)(b), Florida Statutes], we see no indication that such gain or loss would be "special," inasmuch as many healthcare providers would be similarly affected.10 See, e.g., CEO 01-8. Further, assuming the requisite special private gain or loss to the corporation, while the Commissioner may be the corporation's agent and it her principal, it is not a principal by whom she is retained, given her lack of pay or compensation from it. See, among others, CEO 09-7 (Question 2).
Nevertheless, again, as regarding Question 1 above, we suggest a better course for the Commissioner than adherence to the letter of the law alone. Assuming that she becomes an unpaid director, we suggest that she declare that relationship, abstain from voting, and timely file CE Form 8B (memorandum of voting conflict) regarding votes/measures of the County Commission concerning the corporation. Such conduct would foster public confidence in government and apparently would be in accord with Section 286.012, Florida Statutes,11 which provides, with emphasis supplied:
No member of any state, county, or municipal governmental board, commission, or agency who is present at any meeting of any such body at which an official decision, ruling, or other official act is to be taken or adopted may abstain from voting in regard to any such decision, ruling, or act; and a vote shall be recorded or counted for each such member present, except when, with respect to any such member, there is, or appears to be, a possible conflict of interest under the provisions of s. 112.311. s. 112.313, or s. 112.3143. In such cases, said member shall comply with the disclosure requirements of s. 112.3143.
Question 2 is answered accordingly.
ORDERED by the State of Florida Commission on Ethics meeting in public session on February 26, 2010 and RENDERED this 3rd day of March, 2010.
___________________________________
Roy Rogers, Vice Chair
cc: Maureen S. Sikora, Esquire
CCA/CF/mwf
[1] Prior opinions of the Commission on Ethics may be obtained from its website (www.ethics.state.fl.us) or may be obtained directly from the Commission.
[2] We are advised that the Commissioner has resigned all of her statuses with the corporation and that she will abstain from voting and comply with Section 112.3143(3)(a), Florida Statutes, regarding County—corporation matters, in order to guard against a potential ethics violation pending her receipt of our opinion.
[3]You advise that these initial moneys will cover start-up costs for the network, but that the corporation may seek additional moneys from the County for the network, or for other purposes, in future years.
[4]We are advised that it is expected that the County will make periodic payments to the corporation for eligible expenses: purchases of computer equipment and programs based on receipt of paid invoices and canceled checks; promotion and development activities based on submittal to County staff of documentation consisting of calendars listing dates of activities, names of persons in attendance, and results of meetings.
[5]Inasmuch as you represent that the Commissioner resigned her statuses with the corporation before it entered into the provision of services for the County via the agreement, Section 112.313(3), Florida Statutes, is not at issue, assuming that the county and the corporation do not enter into additional receipts/provisions or relationships between themselves after the Commissioner becomes an unpaid director of the corporation. Section 112.313(3) provides:
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:
Section 112.312(5), Florida Statutes, defines "business entity" to include "any corporation," and we have found that nonprofit organizations are business entities (see, e.g., CEO 78-18).
[7] A public agency and a business entity are "doing business" with one another when they have entered into a contract, lease, agreement, or other type of arrangement where one party would have a cause of action against the other in the event of a breach. CEO 86-24, CEO 07-11. The agreement between the County and the corporation evidences such an arrangement.
[8]Of course, we by no means find that the Commissioner actually would yield to such a temptation by, for example, engaging in an actual corrupt use of her public office in favor of the corporation and to the detriment of the County. However, Section 112.313(7)(a), being preventive in nature, does not require intentional wrongdoing. Its purposes include furthering full, objective, effective public service by prohibiting a public officer from wearing "two hats," one public and private, in relation to certain subject matters or realities.
[9] We have often found that service as an uncompensated director of a corporation constitutes neither employment nor a contractual relationship. See, e.g., CEO 77-16 and CEO 06-20. And, while we have recognized that membership in a nonprofit corporation (equivalent to shareholder status in a for-profit corporation) creates a contractual relationship between the member and the corporation, it is represented to us that the Commissioner (although becoming an uncompensated director) will not become a member of the corporation. Further, while a director of a corporation has a fiduciary relationship to the corporation, such a relationship is not "contractual"; rather, a cause of action for its breach sounds in tort.
[10] However, should votes/measures (regarding the network, the corporation, or other subjects) potentially more insular to the Commissioner's physician-husband present themselves in the future, you should contact us for further advice for the Commissioner.