CEO 80-10 -- February 21, 1980

(Amendment to CEO 78-99)

CONFLICT OF INTEREST

SCHOOL BOARD MEMBER EMPLOYED BY NONPROFIT FOUNDATION LEASING FACILITY FROM SCHOOL DISTRICT

To: Dr. Ben J. Sheppard, Member, Dade County School Board, Miami

Prepared by: Phil Claypool

SUMMARY:

This is an amendment to CEO 78-99, in which opinion it was found that the Code of Ethics permitted a school board member to serve on the board of directors of a nonprofit foundation which was leasing a former school building from the school board. The basis of that opinion, although stated only by reference to a prior opinion, was that service without compensation on the board of a nonprofit foundation does not constitute an employment or contractual relationship with the foundation for purposes of s. 112.313(7)(a), F. S. Subsequent to the issuance of that opinion, the school board member began receiving compensation for his services to the foundation as a physician, not realizing, he maintains, that such compensation raised an issue not addressed in the previous opinion. His receiving such compensation is deemed to create a conflict of interest under s. 112.313(7)(a), which prohibits a public officer from being employed by a business entity which is doing business with his public agency, based on the fact that the foundation leases a facility for $1 per year from the school board. None of the exemptions contained in s. 112.313(12) apply in this case.

Counsel for the petitioner school board member represented to the Commission on Ethics that if a prohibited conflict of interest were to be found in this instance, the petitioner would immediately stop receiving such compensation, as he had believed that he was conforming to the original opinion in this matter and had no intention of violating the Code of Ethics. Based on this representation, that the petitioner's services would be provided without compensation and without employee benefits, he would have no "employment" with the foundation; therefore, there would be no violation of the Code of Ethics in the arrangement. Reference is made to CEO's 77-69 and 77-167.

QUESTION:

Does a prohibited conflict of interest exist if I, a school board member, am employed as a physician by a nonprofit foundation which leases a facility from the school board for $1 per year?

This question is answered in the affirmative.

This opinion is an amendment to CEO 78-99, an advisory opinion rendered by this commission to you on December 21, 1978. In that opinion we found that the Code of Ethics for Public Officers and Employees permitted a school board member to serve on the board of directors of a nonprofit foundation which was leasing a former school building from the school board.

The basis of that opinion, although stated only by reference to an earlier advisory opinion, was that service without compensation on the board of a nonprofit foundation does not constitute an employment or contractual relationship with the foundation for purposes of s. 112.313(7)(a), F. S. That section provides as follows:

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.]

In view of events which recently have come to light, the original opinion to you may be somewhat misleading because it fails to state clearly that the receipt of compensation from the foundation could constitute an employment or contractual relationship with the foundation which would be forbidden under s. 112.313(7)(a), F. S.

Subsequent to the issuance of the original opinion, it came to our attention that, as verified by your legal counsel, you recently had begun receiving compensation for your services as a physician to the foundation. In addition, the foundation was leasing a former elementary school building from the school board for the nominal sum of $1 per year; however, our original advisory opinion had found no prohibited conflict of interest were the foundation and school board to enter into such an agreement. We perceive that a different issue from that encompassed in our original opinion has been presented by the new circumstances.

Section 112.313(7)(a), F. S., quoted above, prohibits a public officer from being employed by a business entity which is doing business with his agency. Clearly, the nonprofit foundation which employs you is a "business entity," as that term is defined in s. 112.313(3). In addition, that business entity is doing business with the school board by virtue of its leasing property from the board.

The Code of Ethics provides an exemption from s. 112.313(7)(a), F. S., when the total amount of the subject transaction does not exceed $500 per year. See s. 112.313(12)(f) and CEO's 77-160, 77-183, 78-71, and 79-17. Here, the school board has chosen to lease an unused elementary school to the foundation for $1 per year -- a sum which is less than $500 per year. However, we are of the opinion that the $500 exemption was not intended by the Legislature to apply to the instant situation. It is apparent that the exemptions contained in s. 112.313(12) were adopted in order to allow public agencies to transact business in situations in which the agency could benefit, despite a conflict of interest on the part of an agency member which otherwise would prohibit the transaction. Thus, the "sole source" exemption of s. 112.313(12)(e) allows a local agency to buy from a local supplier, presumably allowing the agency to purchase more cheaply.

In CEO 79-10, we found that the competitive bidding exemption of s. 112.313(12)(b), F. S., did not apply when a public officer was bidding on the purchase of property from his agency, since the exemption referenced the "lowest or best bidder," while the agency would be attempting to attract the highest bidders for its surplus property. Similarly, we are of the opinion that the $500 exemption was intended to apply when a public officer stands to gain at most $500 per year from a given transaction or series of transactions, so that any possible conflict of interest could result in only minimal benefit to the officer. If it were to apply to situations in which the agency stood to gain only a maximum of $500 from the public officer or the officer's employer, its purpose would be defeated. In such a case the public officer would stand to gain, to his agency's detriment, by minimizing the consideration he or his employer would pay to the agency. Therefore, we are of the opinion that the $500 exemption of s. 112.313(f) does not apply here; nor does it appear that any other exemption of s. 112.313(12) would apply.

Accordingly, we find that you are prohibited by the Code of Ethics from being employed by a nonprofit foundation which leases a facility for $1 per year from the school board of which you are a member.

In our deliberations on this issue, your counsel has represented that if we were to find a prohibited conflict of interest in your receiving compensation as an employee of the foundation, you would immediately stop receiving such compensation because you believed that you were conforming to our original opinion in this matter, and you had no intention of violating the Code of Ethics.

We are of the opinion that the Code of Ethics does not prohibit your uncompensated service to the foundation as a member of the board of trustees and as a physician. Section 112.313(7)(a), F. S., prohibits your being employed by or having a contractual relationship with the foundation while it is doing business with the school board. If your services were provided without compensation and without employee benefits, you would have no "employment" with the foundation. See CEO's 77-69 and 77-167.

Accordingly, under the circumstances, the Code of Ethics does not prohibit your serving without compensation as a physician and as a member of the board of trustees of a foundation which leases a facility for $1 per year from the school board of which you are a member.