CEO 81-32 -- May 14, 1981

CONFLICT OF INTEREST

CITY COMMISSIONER SERVING AS INVESTMENT COUNSELOR FOR CITY PENSION BOARD

To: David Cardwell, City Attorney, Lakeland

SUMMARY:

A prohibited conflict of interest would be created were a brokerage firm which employs a city commissioner to be retained as investment counselor to a city fire fighters pension board of trustees, with the city commissioner serving as the account executive responsible for the pension fund account. Section 112.313(3), F. S., prohibits a city commissioner from acting in a private capacity to sell any services to the city which he serves or to any agency of that city. Where the city commissioner personally would be providing services to the pension board in handling the pension fund account, he would be acting in a private capacity to sell services to an agency of the city. However, no prohibited conflict of interest would be created were the brokerage firm to be retained as investment counselor to the pension board of trustees if the city commissioner did not provide any services to the pension fund. Since the city commissioner is only an employee of the brokerage firm and not an officer, director or owner of more than a five percent interest, he would not be acting in a private capacity to sell the services of the firm if the firm were to contract with the pension board. Although Section 112.313(7)(a), F. S., prohibits a city commissioner from being employed by a business entity which is doing business with his agency, that provision would not apply since the pension board is a separate city agency from the city commission.

QUESTION 1:

Would a prohibited conflict of interest be created were a brokerage firm which employs a city commissioner to be retained as investment counselor to a city fire fighters pension board of trustees, with the city commissioner serving as the account executive responsible for the pension fund account?

This question is answered in the affirmative.

In your letter of inquiry you advise that Mr. O'Reilly is employed by a national brokerage firm at its local office. You further advise that his compensation is predominantly based upon commissions earned by the firm in the course of buying and selling various securities and other investments. One of the services offered by the firm through its New York office in conjunction with its local office is the counseling and management of governmental pension fund investments.

In addition, you advise that the City by ordinance has established a fire fighters pension plan and procedures for regulating the plan, including investments and benefits. The plan is administered by a Board of Trustees which consists of the Mayor, the Chief of the Fire Department, two members elected by vote of the fire fighters, and one member, who is to be familiar with investments, appointed by the City Commission. The Mayor serves as Chairman of the Board. The Pension Board, you advise, functions as an autonomous municipal board which is not subject to the direction and control of the City Commission. The City Commission may amend or terminate the benefit plan by adoption of an ordinance, but the only other Commission involvement with the Pension Board is through the approval of the appointment of one member and the appointment of a temporary, substitute member to replace a member disqualified by a conflict of interest.

Finally, you advise that the Pension Board would like to retain the services of an investment counselor to advise the Board regarding proper and appropriate investments to be made to increase the assets of the fund. Compensation for such services would be subject to negotiation between the Board and the firm or individual selected to be the investment counselor, but likely will be based in whole or in part on commissions derived from the buying and selling of securities on behalf of the fund by the counselor as a brokerage agent. The Pension Board will solicit proposals from various firms regarding the services each would be willing to provide if selected. One of the firms to be solicited, and a likely candidate to be selected, is the brokerage firm with which the subject City Commissioner is associated.

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 a city commissioner from acting in a private capacity to sell any services to the city which he serves or to any agency of that city. As the Fire Fighters Pension Fund Board of Trustees is a City entity created by City ordinance, separate and distinct from the City Commission, the Pension Board constitutes a separate "agency" of the City, as that term is defined by Section 112.312(2), F. S. We are of the opinion that the subject City Commissioner would be acting in a private capacity to sell services to the Pension Board if his brokerage firm is selected by the Pension Board as investment counselor and if he personally provides services to the Board in handling the pension fund account.

Accordingly, we find that a prohibited conflict of interest would be created were the brokerage firm which employs the subject City Commissioner to be retained as investment counselor to the Pension Board, with the subject City Commissioner serving as the account executive responsible for the pension fund account.

QUESTION 2:

This question is answered in the negative.

In a telephone conversation with our staff, you advised that the subject City Commissioner is only an employee of the brokerage firm; he is not an officer, director, or owner of greater than a five percent interest in the firm. As he would not be personally providing any services to the Pension Board, he would not be acting in a private capacity to sell services to an agency of the City in violation of Section 112.313(3), F. S. In previous opinions, we have advised that a public officer also is "acting in a private capacity" to sell services when a business entity, of which he is an officer, director, or owner of more than a five percent interest, sells its services. See, for example, CEO's 76-65 and 78-7. However, because the subject City Commissioner is merely an employee of the brokerage firm, he would not be "acting in a private capacity" if the firm sells its services without his personal involvement.

In addition, the Code of Ethics provides:

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. (1979).]

This provision prohibits a city commissioner from being employed by a business entity which is doing business with his agency. However, as we determined in our response to your first question, the Pension Board is a separate City agency from the City Commission, which is the "agency" of the subject City Commissioner. Therefore, because the brokerage firm would be doing business with the Pension Board, rather than with the City Commission, the brokerage firm would not be doing business with the agency of the subject City Commissioner.

Accordingly, we find that no prohibited conflict of interest would be created were the brokerage firm which employs the subject City Commissioner to be retained as investment counselor to the Fire Fighters Pension Board of Trustees, so long as the subject City Commissioner does not provide any services to the pension fund.