CONFLICT OF INTEREST

FLORIDA DEPARTMENT OF TRANSPORTATION EMPLOYEE EVALUATING
APPLICATION OF BUSINESS ENTITY SEEKING TO DO BUSINESS
WITH THE DEPARTMENT WHEN SUCH ENTITY HOLDS HIS
PENSION FUNDS

To:        Jorge Rodriguez (Plantation)

SUMMARY:

For a project manager with the Florida Department of Transportation, a prohibited conflict of interest would be created under Section 112.313(7)(a), if he serves on a selection team considering a contract with his former employer, an entity which still holds his pension funds. However, were the project manager to remove himself from the contract's selection team, no conflict would exist, even should the company be awarded the contract. The proportionately small size of his pension, relative to the size of the company, and the fact that it is already a vested right, will trigger the application of Section 112.316, Florida Statutes, to negate any conflict of interest under Section 112.313(7)(a). Referenced are CEOs 13-16, 13-11, 05-18, 05-08, and 91-47.¹

QUESTION 1:

Would a prohibited conflict of interest be created were you, an employee of the Florida Department of Transportation, to participate in selecting an engineering consulting firm for a particular contract, when you have funds in a pension held by a possible applicant?

Under the circumstances presented, your question is answered as set forth below.

In your letter of inquiry and in additional email exchanges between you and our staff, you indicate you are a project manager at the Florida Department of Transportation. You indicate that in your Departmental capacity, you have begun advertising to acquire the services of an engineering consulting firm to enter into a contract with the Department. You indicate you were formerly employed by one entity which has expressed an interest in the contract.

You describe this former employer as a large company which employs over 11,000 people and which manages a pension fund for each of its employees. In particular, you state the employees' pensions are invested in stock in the company, meaning the value of their pensions will rise or fall depending on its financial performance.

You state that when you left your former employer, you were informed that the company would continue to manage your pension funds and would release the funds once you retired. You emphasize you did not have the option to receive a distribution of the funds or roll the funds over into another account. You indicate you have only a fixed number of shares invested in the company through your pension and that you have no role in determining how those shares are managed. You indicate the value of your shares totaled approximately $40,000 in 2012.²

In this context, you inquire, first, whether you may participate in the selection team for this contract-knowing that your former employer likely will be an applicant-and, second, whether you will be in violation of any provision in the Code of Ethics if the contract is awarded to your former employer.

Pertinent to your inquiries is Section 112.313(7)(a), Florida Statutes, which 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 from being employed by or holding a contractual relationship with any entity that is "doing business with" his agency or is being "regulated" by his agency. The fact that your former employer is holding pension funds on your behalf would create a contractual relationship between your former employer and yourself. However, until and unless the company is awarded the contract, it will not be "doing business with" your public agency. Therefore, the first part of Section 112.313(7)(a) is not implicated here.

The second part of Section 112.313(7)(a) prohibits a public officer from having any private interest which will create a "continuing or frequently recurring conflict" with the performance of his public duties or which will "impede the full and faithful discharge" of his public duties. As explained in Zerweck v. State Commission on Ethics, 409 So. 2d 57, 61 (Fla. 4th DCA 1982), this second part of the statute requires comparing the public employee's official duties to their private interest "to determine whether the two are compatible, separate and distinct or whether they coincide to create a situation which 'tempts dishonor.'" You indicate that if your former employer is selected for this particular contract, your pension funds will increase, as your employer's stock value will rise accordingly. In other words, if your former employer is selected for this particular contract, you could receive an indirect financial benefit. This divergence between your private interests and your public responsibility of objectivity would create a conflict under the second part of Section 112.313(7) were you to remain a part of the selection team.³ However, this conflict would be averted were you to remove yourself from the selection process.

Your question is answered accordingly.

QUESTION 2:

Would a prohibited conflict of interest exist if the company were awarded the contract, where you do not participate in the selection process?

Your question is answered in the negative.

Even if you remove yourself from the selection process, if the company is awarded the contract, you will have a contractual relationship with a business entity doing business with your public agency. This would appear to create a conflict under the first part of Section 112.313(7)(a)-the bar on having contractual relationships with those doing business with one's agency.

However, in the past, we have applied Section 112.316, Florida Statutes, to negate a violation of the first part of Section 112.313(7)(a). Section 112.316 states:

CONSTRUCTION.--It is not the intent of this part, nor shall it be construed, to prevent any officer or employee of a state agency or county, city, or other political subdivision of the state or any legislator or legislative employee from accepting other employment or following any pursuit which does not interfere with the full and faithful discharge by such officer, employee, legislator, or legislative employee of his or her duties to the state or the county, city, or other political subdivision of the state involved.

In CEO 05-08, we applied Section 112.316 to a situation where a county commissioner owned stock in a large, publicly traded corporation which was doing business with the county. Although we found this relationship raised concerns under the first section of Section 112.313(7)(a), we applied Section 112.316 to alleviate any violation, noting the county commissioner owned only 0.002% of the corporation's stock and that the corporation was a large, publicly traded company. We also noted that there was no indication the county commissioner was responsible for steering business to the corporation or that he would experience any personal, private benefit from the corporation's relationship with the county. See also CEO 05-18.

In addition, in CEO 13-11, we applied Section 112.316 to another relevant scenario. There, the executive director of a port authority held a severance package with a former employer. Concerns under Section 112.313(7)(a) were raised when the port authority began to "regulate" the former employer, which was moving cargo through the port terminals. However, we applied Section 112.316 and found a prohibited conflict did not exist. Essential to our decision was that the severance package was vested and certain, and would not change despite the port authority's regulation of the former employer. Thus, because the executive director of the port authority did not have the ability to affect the severance package, we determined no conflict of interest could be found.

Here, similar to the corporation in CEO 05-08, you indicate your former employer is a large company employing over 11,000 people, each having pension funds invested in the company. This means your percentage of ownership in the company-via your shares invested through the pension plan-is extremely small. Moreover, by removing yourself from the selection process, you will have eliminated any ability to affect the value of the company's stock or your pension. This is similar to the situation in CEO 13-11, where the executive director of the port authority had no ability to affect the severance package held by his former employer. Under these circumstances, we find Section 112.316 negates application of the first part of Section 112.313(7)(a).

Your question is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on March 7, 2014, and RENDERED 12th day of March, 2014.

____________________________________

Morgan R. Bentley, Chairman

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

^[2] You indicate you have no other contractual relationships with your former employer besides the pension plan.

^[3] In reaching this decision, we do not mean to imply that you would intentionally misuse your position for your own private gain. We are simply finding that-in serving on a selection team where an applicant holds your pension funds-you will be placed in a position which "tempts dishonor," which is all that is required to violate the statute. As we have said before in CEO 13-16, Section 112.313(7)(a) is prophylactic in nature and is designed to prevent situations where a public officer's private economic considerations could influence his ability to faithfully discharge his public duties.