CEO 81-27 -- May 14, 1981

CONFLICT OF INTEREST

SCHOOL DISTRICT EMPLOYEE OWNING COMPANY WHICH SELLS COPYRIGHTED ITEMS TO SCHOOL DISTRICT

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

SUMMARY:

No prohibited conflict of interest would be created were a company owned by a school district employee to sell copyrighted educational testing and remediation materials which it manufactures to the school district or to individual schools within the district. Although Section 112.313(3), F. S., would prohibit an employee of a school district from acting in a private capacity to sell goods or services to the district or to schools within the district, the sole source exemption of Section 112.313(12)(e), F. S., would apply where there are no similar materials available on the market other than the copyrighted materials sold by the employee's company. If such sales are made, the appropriate disclosure should be filed on CE Form 4A, "Disclosure of Business Transaction, Relationship, or Interest."

QUESTION:

Would a prohibited conflict of interest be created were a company in which you are an officer and shareholder to sell a copyrighted educational testing and remediation system to the school district which employs you as a school psychologist?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you advised that you and .... are employed by the Dade County Board of Public Instruction as school psychologists; in that position, each of you has been assigned to three schools within the School District. As a school psychologist, you advised, you do not have any purchasing authority or authority to influence purchases.

You further advised that you and .... are officers, directors, and one-third shareholders in a corporation which has been formed for the purpose of manufacturing a copyrighted system of educational testing and remediation materials. The system has been designed for use by teachers rather than psychologists in testing learning abilities and remediating learning disabilities in children of mental ages through age six and consists of a series of games of progressive difficulty. The developer of this system, Dr. Joseph R. Grassi, has given exclusive manufacturing rights to your corporation. So far as you are aware, there is no similar system available.

You question whether your corporation may sell this product to the Dade County School District, either through an independent marketing organization acting as a sales agent for the corporation or through the efforts of you and .... directly. In this respect, you advise that it is likely that, if the School District wishes to purchase these materials, it would do so through its central purchasing office but that it is possible that sales could be made to individual schools through special grant programs.

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

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his 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 his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he 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. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

[Section 112.313(3), F. S. (1979).]

This provision prohibits an employee of a school district from acting in a private capacity to sell goods or services to the school district which employs him or to any of the schools within that district. We have advised previously that a public employee is acting in "a private capacity" to sell goods or services whenever a corporation of which he is an officer, director, or owner of more than a five percent interest sells such goods or services. CEO's 76-23 and 78-7. Thus, this provision of the Code of Ethics would prohibit you from being employed by the School District if your corporation were to sell the materials you have described to the School District or to schools within the District.

However, the Code of Ethics provides several specific exemptions to the above-quoted provision. One of these exemptions occurs where

[t]he business entity involved is the only source of supply within the political subdivision of the officer or employee, and there is full disclosure of the officer's or employee's interest in the business entity to the governing body of the political subdivision. [Section 112.313(12)(e), F. S. (1979).]

In a previous opinion, CEO 78-24, we advised that the apparent legislative purpose behind this exemption is to alleviate the hardships which otherwise would be imposed by the Code of Ethics upon a political subdivision if an agency were required to forgo some goods or services, or to purchase goods or services at additional cost, in order to avoid creating conflicts of interest for its officers or employees. Thus, in that opinion, we found that the exemption applied to permit a company, owned by a county employee, which had the exclusive manufacturing rights to a patented item to sell the item to the county. Similarly, in the situation you have referenced, your corporation has the exclusive manufacturing rights to the copyrighted educational system and is the sole source of supply for these particular materials. While there may be other methods of testing and remediating learning disabilities, so that your company would not be the sole source of supply of all types of these materials, as noted above, no other systems are similar. Thus, unless the statutory exemption were to apply, the School District would be foreclosed from purchasing the materials manufactured by your company.

Accordingly, so long as you make disclosure of your interest in the company to the Board of Public Instruction as provided in Section 112.313(12)(e), above, we find that no prohibited conflict of interest would be created were your company to sell the copyrighted materials which it manufactures to the School District or to individual schools within the District. We have enclosed a copy of CE Form 4A, "Disclosure of Business Transaction, Relationship, or Interest," for use in making the required disclosure.