VOTING CONFLICT AND DISPROPORTIONATE BENEFIT

INDEPENDENT SPECIAL DISTRICT BOARD MEMBERS VOTING ON
CONVERTING THE DISTRICT TO A NONPROFIT ENTITY

To: George H. Knott, Esq. (Lee Memorial Health System)

SUMMARY:

Under the circumstances presented, the members of the Lee Memorial Health System Board of Directors will have a voting conflict if they vote to convert the independent special district to a nonprofit entity and intend to serve on the board of directors of that nonprofit entity, but they will be permitted to vote on the matter. Those System Board members will not violate the prohibition against abusing their positions to obtain a disproportionate benefit when they vote on the conversion. CEO 21-2, CEO 21-1, CEO 19-23, and CEO 91-7 are referenced.

QUESTION 1:

Will a voting conflict of interest under Section 112.3143, Florida Statutes, be negated when legislation expressly permits a board member of an independent special district to vote on converting the district to a nonprofit entity, even when the board member intends to serve the nonprofit entity as a compensated board member following the conversion?

This question is answered as follows.

This opinion is provided under the authority granted to this Commission by Section 112.322(3), Florida Statutes. This opinion was requested on behalf of the Lee Memorial Health System Board members in regard to legislation, namely Chapter 2000-439 and Chapter 2023-326, Laws of Florida, which provides specific guidance pertaining to the matters that are addressed in this opinion. While this new legislation is not part of, nor does it modify, the Code of Ethics (Part III, Chapter 112, Florida Statutes), we take this opportunity to consider how this legislation affects the application of certain ethical prohibitions over which the Commission has jurisdiction.

Pursuant to Chapter 2000-439, Laws of Florida,¹ the Lee Memorial Health System ("System") is an independent special district, governed by the Lee Memorial Health System Board of Directors ("System Board"), which operates and maintains hospitals, clinics, and other facilities providing for healthcare needs in Lee County. Chapter 2023-326, Laws of Florida, amended Chapter 2000-439 and, in part, provided for the conversion of the System from an independent special district to a nonprofit entity that would operate in accordance with Chapter 617, Florida Statutes.

Regarding a potential conversion, Chapter 2023-326 states,

[t]he system board may elect, by a majority vote of the members present and voting, to commence an evaluation of the benefits to the residents of Lee County of converting Lee Memorial Health System to a nonprofit entity if the system board and the Lee County Board of County Commissioners execute an agreement that meets the requirements of subsection (5).²

The System Board must also publish notice of and conduct a special public meeting to give the public the opportunity to comment regarding the conversion, must contract with a qualified independent entity to evaluate the potential conversion according to applicable best industry practices, and must publish all documents considered by the System Board on its website.³ Within 120 days of receiving the final report from the qualified independent entity, the System Board must vote at a public meeting to determine whether the conversion is in the best interests of Lee County residents.⁴ If it determines that it is, then it must, within 120 days of its vote, enter into an agreement with the Lee County Board of County Commissioners to dispose of all assets and liabilities, and include an enforceable commitment that all programs and services currently provided by the System will continue to be provided by the succeeding nonprofit entity.⁵ No later than 30 days after the complete transfer of all assets and liabilities, the System shall notify the Florida Department of Economic Opportunity, and the independent special district shall be automatically dissolved upon receipt of that notice.⁶

Chapter 2000-439 states that System Board members shall receive a maximum annual compensation of $10,000 if approved by the Board, but that the maximum shall increase each year according to the Consumer Price Index published by the United States Department of Labor.⁷ Chapter 2023-326 does not amend or delete this language or address compensation for board members of the succeeding nonprofit entity.

The question presented here is whether the System Board members will be faced with a voting conflict were they to vote on the conversion, considering that it appears they may then continue serving the succeeding nonprofit entity in compensated positions. Relevant to this inquiry, voting conflicts are prohibited by Section 112.3143(3)(a), Florida Statutes, which states:

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.

Furthermore, "special private gain or loss" is defined by Section 112.3143(1)(d), Florida Statutes, which states,

"Special private gain or loss" means an economic benefit or harm that would inure to the officer, his or her relative, business associate, or principal, unless the measure affects a class that includes the officer, his or her relative, business associate, or principal, in which case, at least the following factors must be considered when determining whether a special private gain or loss exists:

1. The size of the class affected by the vote.

2. The nature of the interests involved.

3. The degree to which the interests of all members of the class are affected by the vote.

4. The degree to which the officer, his or her relative, business associate, or principal receives a greater benefit or harm when compared to other members of the class.

The degree to which there is uncertainty at the time of the vote as to whether there would be any economic benefit or harm to the public officer, his or her relative, business associate, or principal and, if so, the nature or degree of the economic benefit or harm must also be considered.

Voting on the proposed conversion with intent to serve on the board of the succeeding nonprofit entity will create a special private gain or loss for the voting System Board members, considering that, at the time of the vote, they have the potential of serving in compensated positions if the conversion is approved. See CEO 91-7. Normally, this would require the System Board members to abstain from the vote, state the nature of the conflict, and file a Form 8B, "Memorandum of Voting Conflict for County, Municipal, and other Local Public Officers."

However, Chapter 2023-326 offers specific guidance on this point. First, it states, "[a] current or former member of the system board may serve on the board of the succeeding nonprofit entity."⁸ It also states,

The members of the system board and the Lee County Board of County Commissioners must disclose all conflicts of interest as required by section 112.313, Florida Statutes, including, but not limited to: (a) Whether the conversion will result in a special private gain or loss to any member of the system board or the Lee County Board of County Commissioners. (b) If any current member of the system board will serve on the board of the succeeding nonprofit entity. Such intent to serve on the board of the succeeding nonprofit entity does not disqualify any member from voting on the proposed conversion." (emphasis added)⁹

We view this language as creating an obligation to disclose conflicts of interest stemming from Section 112.313, which is additional to those disclosure obligations already created by Section 112.3143. The Legislature, despite referring to it as an example of a conflict of interest, clearly intended to permit current System Board members who intend to serve on the board of the succeeding nonprofit entity to vote on the conversion. To the extent that this provision can be construed to conflict with the general prohibition against voting conflicts found in Section 112.3143, Florida Statutes, the specific guidance in Chapter 2023-326 will control.¹⁰ Chapter 2023-326 therefore negates to the application of Section 112.3143, inasmuch as the System Board members can vote on the conversion even if they intend to serve as compensated directors of the succeeding nonprofit entity. We note, though that the System Board members must still comply with the other requirements of Sections 112.3143 (i.e., by orally discussing their conflict at the time of the vote and filing the Form 8B), and that they must comply with the entirety of Section 112.3143, including abstaining from the conversion vote, if another basis for a voting conflict exists (i.e., if they know the conversion will financially affect a principal, relative, or business associate).

In sum, Chapter 2023-326 requires the System Board members to disclose all conflicts under Section 112.313. Under Section 112.3143, those System Board members that intend to serve on the board of the nonprofit entity will have a voting conflict, but, due to the operation of Chapter 2023-326, will be permitted to vote, though they must announce the nature of their conflict at the time of the vote and file a Form 8B within 15 days of the vote with the person responsible for recording the meeting minutes.

QUESTION 2:

Does the participation of any current System Board member in a vote on a proposed conversion, as described above, constitute a disproportionate benefit prohibited by Article II, Section 8(h)(2) of the Florida Constitution?

This question is answered in the negative.

Article II, Section 8(h)(2), Florida Constitution, states:

A public officer or public employee shall not abuse his or her public position in order to obtain a disproportionate benefit for himself or herself; his or her spouse, children, or employer; or for any business with which he or she contracts; in which he or she is an officer, a partner, a director, or a proprietor; or in which he or she owns an interest. The Florida Commission on Ethics shall, by rule in accordance with statutory procedures governing administrative rulemaking, define the term "disproportionate benefit" and prescribe the requisite intent for finding a violation of this prohibition for purposes of enforcing this paragraph. Appropriate penalties shall be prescribed by law.

Implementing Article II, Section 8(h)(2) of the Florida Constitution, this Commission promulgated Rule 34-18.001, Florida Administrative Code. Rule 34-18.001(2)(a) states, "[f]or the purpose of Article II, Section 8(h)(2) of the Florida Constitution, 'disproportionate benefit' means a benefit, privilege, exemption or result arising from an act or omission by a public officer or public employee inconsistent with the proper performance of his or her public duties." (emphasis added)

In CEO 19-23, we explained that:

. . .the term "disproportionate benefit" encompasses only a benefit, privilege, exemption, or result that is "inconsistent with the proper performance" of a public officer's or public employee's public duties. In other words, if the benefit, privilege, exemption, or result arising from the public officer's or public employee's conduct is contemplated by and consistent with the standards governing his or her public conduct, a "disproportionate benefit" will not be present. And Rule 34-18.001(4) states the requisite intent needed to violate the Constitutional prohibition is a "wrongful intent" to obtain a benefit, privilege, exemption, or result "inconsistent with the proper performance" of a public officer's or public employee's public duties.

For the Commission to determine whether the requisite wrongful intent is present, it must rely on the results of a thorough investigation, which is not available in the procedure for responding to a formal opinion request. See CEO 21-1 and CEO 21-2, Question 2. Thus, we cannot opine on the intent of the public officers. Regardless of intent, this Commission would be hard pressed to determine that actions taken in accordance with specific guidance from the Legislature, as described in Question 1 above, are inconsistent with the proper performance of public duties, given the law specifically allows for this process and allows for voting in the presence of certain voting conflicts and other conflicts of interest. See CEO 19-23. Therefore, in the absence of facts indicating otherwise, voting on a proposed conversion with intent to serve on the board of the succeeding nonprofit, even where compensation may be earned, would not violate the prohibition on obtaining a disproportionate benefit in Article II, Section 8(h)(2), Florida Constitution.¹¹

Your inquiry is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on January 26, 2024, and RENDERED this 31st day of January, 2024.

____________________________________

Ashley Lukis, Chair

^[1]Chapter 00-439 repealed and replaced Chapter 63-1552, which was the original enabling legislation.