CONFLICT OF INTEREST; DOING BUSINESS WITH ONE'S AGENCY

WATER MANAGEMENT DISTRICT GOVERNING BOARD
MEMBER'S COMPANIES DOING BUSINESS WITH DISTRICT

To: Name withheld at person's request (Fort Lauderdale)

SUMMARY:

Advice is provided to a potential appointee to the governing board of a water management district concerning contracts between his companies and the district. CEOs 16-7, 11-2, 06-28, 02-14, 95-895-8, 90-39, and 81-28 are referenced.¹

QUESTION 1:

Do contracts between companies of a member of the governing board of a Water Management District and the District, entered into prior to the member's appointment to the governing board, create a prohibited conflict of interest for the member?

Question 1 is answered as set forth below.

In your letter of inquiry and additional information provided to our staff, you relate that you make inquiry in behalf of an individual who anticipates being appointed to the governing board of the South Florida Water Management District (WMD) and who has interests in several companies or enterprises, some of which are doing business with the WMD under contracts or agreements already in existence. More particularly, you state that there is an active agreement (executed or entered into in 2015) between a corporation, of which the individual is the founder and the majority shareholder, and the WMD, for time and materials regarding a stormwater treatment area; that there is a second agreement, between a wholly-owned subsidiary of the corporation and the WMD, for debris-hauling services, executed or entered into in 2017, which has a term of five years (expires 2022), but which has yet to be activated (has yet to begin delivery of services); and that there is a third contract, for reservoir stormwater treatment, entered into in February 2019.²

Relevant prohibitions in the Code of Ethics for Public Officers and Employees (Part III, Chapter 112, Florida Statutes) provide:

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:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes.]

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. [Section 112.313(7)(a), Florida Statutes.]

We find that the contracts mentioned above do not create a prohibited conflict of interest under either Section 112.313(3) or Section 112.313(7)(a), Florida Statutes. As to Section 112.313(3), it expressly provides that its prohibitions do not apply to contracts entered into prior to appointment to public office, the contracts were entered into in 2015, 2017, and February 2019, and the individual has yet to be appointed to the WMD governing board. Concerning Section 112.313(7)(a), while it does not contain an express exemption or "grandfather clause," as does Section 112.313(3), the Commission on Ethics has applied Section 112.316, Florida Statutes, to exempt or "grandfather" such contracts from Section 112.313(7)(a), reasoning that there is no conflict regarding business entered into between one's private company and his public agency when he held no public position and thus had no public duties which he could have been tempted to dishonor.³ See, among others, CEO 95-8 (school board member's corporations doing business with school district) and CEO 90-39 (water management district board applicant employed with laboratory receiving funds from the district).⁴

QUESTION 2:

Would contracts between the individual's companies and the WMD, entered into after he is appointed to the governing board, create a prohibited conflict under Section 112.313(3) or Section 112.313(7)(a)?

Question 2 is answered in the affirmative, unless an exemption (e.g., sealed competitive bidding)⁵ under Section 112.313(12), Florida Statutes, applies.

Continuing, you relate that after appointment to the governing board the individual's companies will not enter into additional contracts with the WMD, unless the contracts are awarded under sealed competitive bidding; and that the individual will not be involved, directly or indirectly, concerning the development of the scope of work of any such contract, that he will not be involved in any discussion or decision of the award of such a contract, and that the individual will file the appropriate disclosure form (CE Form 3A, Interest in Competitive Bid for Public Business) prior to or at the time of his company's submission of a bid.⁶

QUESTION 3:

Would the WMD's purchase or lease of a parcel of real property owned by an entity in which the individual is a partner create a prohibited conflict under Section 112.313(3) or Section 112.313(7)(a), if the property is a "sole source?"

Question 3 is answered in the negative, provided that Section 112.313(12)(e), Florida Statutes, is complied with.⁷ Section 112.313(12)(e) provides:

. . . no person shall be held in violation of subsection (3) or subsection (7) if:

(e) 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 or her 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.

You state that as part of the restoration of Biscayne Bay, the WMD is studying and considering the purchase or lease of a parcel which is owned by an entity in which the individual is a minority partner. As part of its analysis, the WMD will determine the necessity of the purchase of the parcel and the parcel's specifics or uniqueness for the WMD's purpose (efforts toward restoration of the Bay).

Important to whether the property is a sole source will be objective determinations by WMD staff in this regard, coupled with the individual refraining from discussing the property's desirability for the project with WMD staff or any fellow governing board member and his refraining from voting and participating as a governing board member regarding project matters. See CEO 11-2 (water management district governing board member employee of landowner party to water project agreement with district), CEO 16-7 (water management district basin board member owner of company providing growth modeling to district), and CEO 06-28 (assistant principal selling real property to school district).

Your questions are answered accordingly.⁸

ORDERED by the State of Florida Commission on Ethics meeting in public session on April 12, 2019, and RENDERED this 17th day of April, 2019.

____________________________________

Guy W. Norris, Chair

^[1]Prior opinions of the Commission on Ethics may be obtained from its website (www.ethics.state.fl.us).

^[2]As to the February 2019 contract, you state that it was originally bid in August 2014, in a sealed competitive process; that a company that is not a company of the individual was the low bidder and was awarded the contract, but that the individual's corporation was the second lowest bidder, by less than one half of one percent; and that in December 2018 the individual's corporation was contacted by staff of the WMD and informed that the lowest bidder company had been removed from the project (which allegedly was behind schedule). The individual's corporation, as the original second lowest bidder, was already familiar with the project, and the WMD moved quickly to ensure that the project would progress as soon as possible in order for the WMD to have use of the stormwater treatment area, prior to full project completion. After several meetings and reviews, the WMD and the individual's corporation entered into the contract, which authorized a payment amount up to the amount that remained on the original contract with the original lowest bidder company. You relate that this contracting process between the WMD and the individual's corporation began well before any announcement of the individual's potential appointment to the governing board.

^[3]Renewals or extensions of a grandfathered contract, occurring after a public officer's appointment, will not be grandfathered, unless the renewal or extension is expressly provided for (with a term or time period of the extension certain) in the original contract, and unless the renewal or extension occasions no change in the contract. See CEO 02-14, among others.

^[4]Section 112.316, Florida Statutes, provides:

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.

^[5]The exemption requires sealed, competitive bidding; invitations to negotiate (ITNs), requests for proposals (RFPs), or similar procurement mechanisms sometimes referred to as "bidding" do not satisfy the exemption. See, among others, CEO 81-28.

^[6]The competitive bidding exemption, found in Section 112.313(12)(b), Florida Statutes, states:

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

^[7]CE Form 4A/Part B (Disclosure of Business Transaction, Relationship or Interest/Disclosure of Interest in Sole Source of Supply) is the form to be used for the disclosure required by Section 112.313(12)(e).

^[8]In addition to the individual refraining from involvement as required to come within the exemptions of Section 112.313(12)(b) and Section 112.313(12)(e), he also must comply with Sections 112.3143(3)(a) and 112.3143(4), Florida Statutes, the voting/participation conflicts law, regarding any votes/matters of the governing board which would inure to his special private gain or loss, to that of his companies, or to that of any other person or entity as listed in these statutes. CE Form 8B (Memorandum of Voting Conflict for County, Municipal, and other Local Public Officers) should be used in conjunction with these statutes.