CEO 78-42 -- July 20, 1978

CONFLICT OF INTEREST

FINANCIAL EXAMINER WITH DEPARTMENT OF BANKING AND FINANCE EMPLOYED PART TIME AS REAL ESTATE SALESMAN

To: (Name withheld at the person's request.)

Prepared by: Phil Claypool

SUMMARY:

The Code of Ethics for Public Officers does not prohibit a financial examiner employed by the State Department of Banking and Finance from privately being employed part time as a real estate salesman so long as he is not involved in arranging financing for his clients or otherwise making referrals to mortgage brokers. Although s. 112.313(7)(a), F. S. 1977, prohibits a public employee from being employed by or having a contractual relationship with a business agency which is subject to the regulation of his public agency, the Division of Finance, Department of Banking and Finance, regulates the mortgage brokerage industry rather than real estate sales. As real estate salesmen generally do not contract directly with mortgage brokers and as the subject employee has advised that he will not engage in any financing of real estate transactions, this provision is not deemed to be violated by the proposed private employment. Neither is there deemed to be a frequently recurring conflict between private interests and public duties, as further prohibited by s. 112.313(7)(a), so long as the employee/salesman does not have contact with mortgage brokers in the course of his private endeavor.

QUESTION:

Would a prohibited conflict of interest be created were a financial examiner employed with the Department of Banking and Finance, Division of Finance, which regulates the mortgage brokerage industry, to be employed part time as a real estate salesman?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you advise that ____ is a financial examiner with the Department of Banking and Finance, Division of Finance, and that he is seeking the division's approval for part-time employment as a real estate salesman. You also advise that the Division of Finance regulates the mortgage brokerage industry and the subject employee's duties as a financial examiner include making detailed audits and examinations of mortgage brokers to insure compliance with the Mortgage Brokerage Act and preparing extensive written reports of such audits or examinations for submission to the financial supervisor for review.

In addition, you advise that although real estate salesmen generally do not contract directly with mortgage brokers, they do have occasion to deal with them directly and indirectly in the execution of real estate transactions. When financing is necessary for a particular transaction, for example, the real estate salesman may arrange for financing as an incidental service to his real estate responsibilities, and in such cases it is not uncommon to make a referral to a mortgage broker. Thus, you raise the possibility that a particular mortgage broker with whom the subject employee has dealt as a real estate salesman might be the subject of an investigation audit, for instance, to be performed by the subject employee in his capacity of financial examiner for the division.

In a telephone conversation with our staff, the subject employee advised that if his part-time employment is approved, he intends to associate with a particular real estate broker. He further advised that he has discussed his situation with the broker, who has agreed to assist in the financing of any real estate transactions which are consummated by the subject employee, in order to eliminate the possibility of his dealing with a mortgage broker.

The Code of Ethics for Public Officers and Employees provides in relevant part:

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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), F. S. 1977.]

Insofar as this provision may apply to the subject employee's situation, it contains two prohibitions.

First, it prohibits a public employee from being employed by or having a contractual relationship with a business entity which is subject to the regulation of his agency. Therefore, the subject employee is prohibited from being employed by or otherwise entering into a contractual relationship with a mortgage broker, since mortgage brokers are regulated by his agency. However, as you have advised, real estate salesmen do not generally contract directly with mortgage brokers and, as the subject employee has advised, he will not be involved in the financing of transactions consummated by him. The fact that the subject employee will be employed by, or at least have a contractual relationship with, a real estate broker does not present a conflict of interest because real estate brokers are regulated by the Florida Real Estate Commission. [Chapter 475, F. S. 1977.]

Secondly, the above-quoted provision prohibits a public employee from having any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and his public duties or that would impede the full and faithful discharge of his public duties. We are of the opinion that the part-time employment as a real estate salesman of a financial examiner with the Division of Finance does not necessarily result in such a prohibited conflict of interest because of the fact that a real estate salesman need not have a direct involvement with mortgage brokers. When that person's private employment as a salesman is of such a nature that he is not involved with arranging the financing of a real estate transaction, there could be no conflict with the performance of his public duties because he would have no occasion to contact a mortgage broker. Here, although the subject employee's part-time employment apparently would result in attempts to arrange financing for his clients in the usual course of events, he has agreed with his broker that he will not be involved in the financing of transactions. As long as that agreement is upheld, we see no reason why his acting as a real estate salesman would create a continuing or frequently recurring conflict of interest or would impede the full and faithful discharge of his public duties.

Accordingly, we find that the Code of Ethics for Public Officers and Employees does not prohibit the subject financial examiner from being employed part time as a real estate salesman where he will not be involved in arranging financing for his clients or otherwise making referrals to mortgage brokers.