CEO 75-119 -- May 27, 1975

CONFLICT OF INTEREST

MAYOR AS DIRECTOR AND STOCKHOLDER OF BANK WITH WHICH THE CITY DOES BUSINESS

To: Bernard Rubin, City Administrator, Port St. Lucie

Prepared by: Jeff Trammel

SUMMARY:

Section 112.313(2), F. S. (1974 Supp.), prohibits a public officer from owning a material interest in a business entity doing business with the agency of which he is an officer unless such business is contracted with full public competition and award is made to the lowest or best bidder. Where a city has purchased a certificate of deposit from a bank with which the mayor serves as a director and stockholder, no conflict exists where the certificate was purchased, as in the instant case, on a bid basis. Where the city places its payroll account with that bank, business is clearly being transacted. In this case, however, the mayor does not own a material interest in the bank and, therefore, no conflict exists under the above-cited statute.

The mayor is urged, however, to give consideration to the spirit as well as the letter of the law and is advised of the requirement that he file CE Form 3 disclosing his directorship in the bank. He should also be familiar with s. 112.3141, F. S., providing that voting conflicts be disclosed on CE Form 4.

QUESTION:

Does a prohibited conflict of interest, within the meaning of the Code of Ethics for Public Officers and Employees, exist where Mr. Schuyler Sharpe, Mayor of the City of Port St. Lucie, is serving as a director and stockholder of the Port St. Lucie Bank when the city has a certificate of deposit and a payroll account with this bank?

This question is answered in the negative.

The Code of Ethics provides in pertinent part:

No public officer or employee of an agency shall own a material interest in any business entity doing business with the agency of which he is an officer or employee, except in those cases when the business is contracted with full public competition and award is made to the lowest or best bidder or to a consultant in accordance with Chapter 287.055, Florida Statutes. [Section 112.313(2), F. S. (1974 Supp.).]

You note in your letter of inquiry that the certificate of deposit was purchased on a bid basis, thus being in conformance, strictly speaking, with the above-cited provision.

The placing of its payroll account with the Port St. Lucie Bank clearly constitutes the city's "doing business" with the bank. However, for purposes of part III, Ch. 112, F. S., a conflict of interest is created when a public officer owns a "material interest" in any business entity doing business with the agency of which he is an officer. "Material interest" is defined by s. 112.312(5) as "direct or indirect ownership of ten percent or more of the total assets or capital stock of any business entity." (Emphasis supplied.) Again, strictly speaking, neither Mayor Sharpe's directorship nor his ownership of less than 10 percent of the stock of the Port St. Lucie Bank would prohibit business transactions between the bank and the City of Port St. Lucie.

We are of the opinion, however, that membership on the board of directors of a bank carries with it strong obligations in overseeing the successful operation of the bank, obligations which in instances such as you have described might tend, or appear to tend to conflict with Mr. Sharpe's public duties as mayor. The conflict, in our opinion, is substantial and, in keeping with the spirit of the Code of Ethics, we urge that the intent of the law be given due consideration.

In any case, Mr. Sharpe should be advised that he is required to file CE Form 3 disclosing his directorship in the bank. See s. 112.313(3), supra. This form must be filed with the Circuit Court of St. Lucie County. Enclosed, for your convenience, is a copy of CE Form 3, Statement of Disclosure of Conflicts of Interest by Public Officers, Employees and Candidates.

We would also like to point out the section of the law dealing with voting conflicts of interest, s. 112.3141, F. S.

No public officer shall be prohibited from voting on any matter in his official capacity. However, when the matter being considered directly or indirectly inures to the public officer's particular private gain, as opposed to his private gain as a member of a special class or creates a conflict between such officer's private interests and his public duties he may abstain from voting on the matter and shall file a statement explaining the conflict with the appropriate officials.

We should like to point out that the phrase "public officer's particular private gain" includes within its meaning a particular private loss which may be suffered by the public officer. Abstentions from voting are thus anticipated under the terms of this law though, strictly speaking, that decision seems to be left to the discretion of the public officer. A policy of reasonable prudence would, in our view, encourage voluntary abstention in the circumstances of this case. Irrespective of this, however, where a conflict of interest of the type described in s. 112.3141, supra, exists, the facts are required to be disclosed on CE Form 4 and filed with both the city council and the Ethics Commission.