CEO 83-81 -- October 27, 1983

CONFLICT OF INTEREST

WATER MANAGEMENT GOVERNING BOARD MEMBER SERVING AS OFFICER OF BANK DOING BUSINESS WITH DISTRICT

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

SUMMARY:

A prohibited conflict of interest would be created under Sections 112.313(3) and (7), Florida Statutes, were a bank of which a member of the Governing Board of a Water Management District is an officer to provide banking services for the District, unless there is compliance with the exemption of Section 112.313(12)(g). The competitive bidding exemption of Section 112.313(12)(b) does not apply as the Board member participated in the determination of bid specifications.

QUESTION:

Would a prohibited conflict of interest be created were a bank of which a member of the Governing Board of a Water Management District is an officer to provide banking services for the District as a result of a sealed, competitive bidding process?

Under the circumstances presented your question is answered in the affirmative, subject to the exception noted below.

In your letter of inquiry you advise that Mr. James H. Kimbrough is a member of the Governing Board of the Southwest Florida Water Management District and is the President and Chief Executive Officer of a bank. You also advise that for the past year the District has been considering alternative banking systems for the deposit of its funds in order to maintain a high degree of efficiency, to maximize income return, and to keep administrative costs to a minimum. As a result, the District decided to consolidate its banking needs and award its banking business through a system of sealed, competitive bidding. After receiving the bids, the staff has recommended award of the District's business to the best bidder, which is the bank of which the subject board member is the President.

The Code of Ethics for Public Officers and Employees prohibits a public officer from acting in an official capacity to purchase services from a business entity of which he is an officer, from acting in a private capacity to sell any services to his agency, and from having any employment with a business entity which is doing business with his agency. Sections 112.313(3) and 112.313(7), Florida Statutes. We are of the opinion that these provisions of the Code of Ethics would be violated where a member of the Governing Board of a Water Management District is the President of a bank which is serving as a depository of District funds.

However, the Code of Ethics provides an exemption to these prohibitions where:

The business is awarded under a system of sealed, competitive bidding to the lowest or best bidder and:

1. The official or his spouse or child has in no way participated in the determination of the bid specifications or the determination of the lowest or best bidder;

2. The official or his spouse or child has in no way used or attempted to use his influence to persuade the agency or any personnel thereof to enter such a contract other than by the mere submission of the bid; and

3. The official, prior to or at the time of the submission of the bid, has filed a statement with the Department of State, if he is a state officer or employee, or with the supervisor of elections of the county in which the agency has its principal office, if he is an officer or employee of a political subdivision, disclosing his, or his spouse's or child's, interest and the nature of the intended business. [Section 112.313(12)(b), Florida Statutes, as amended by Chapter 83-26, Laws of Florida.]

Although the award of business by the District is being handled by a sealed, competitive bidding process, and although the subject Board member has filed the disclosure form required by this exemption, we find that the exemption does not apply under the circumstances presented here. Specifically, the exemption requires that the official must have "in no way" participated in the determination of the bid specifications. From your letter of inquiry and materials submitted with that letter, it appears that the subject Board member did participate in the determination of the bid specifications as a member and chairman of the Board's audit and budget committee, which reviewed and recommended to the Board the request for proposals for banking services, and by moving and voting on the final request for proposals for banking services at a Governing Board meeting. In addition, you indicate that the subject Board member also contacted the Executive Director concerning a provision in the draft request for proposals.

Despite the fact that we find this exemption not to apply here, we are of the opinion that there is one other exemption which specifically concerns bank depositories and which potentially would apply here. That exemption provides:

The fact that a county or municipal officer or member of a public board or body, including a district school officer and an officer of any district within a county is a stockholder or an officer or director of a bank will not bar such banks from qualifying as a depository of funds coming under the jurisdiction of any such public board or body, provided it shall appear in the records of the agency that the governing body of such agency has determined that such officer or member of a public board or body as aforesaid has not favored such bank or banks over other qualified banks. [Section 112.313(12)(g), Florida Statutes, as created by Chapter 83-282, Section 6, Laws of Florida.]

This provision became effective on June 24, 1983. As we have indicated in CEO 83-48, this provision continues the validity of previous opinions in which we have advised that no prohibited conflict of interest would be created when an officer or employee of an agency is an officer, director, or stockholder of a bank which serves as a depository of that agency's funds. See, for example, CEO 77-184, CEO 77-49, and CEO 76-20.

In order for this latest exemption to apply, the Governing Board of the District must determine that the subject Board member has not favored his bank over other qualified banks; this determination is to appear in the records of the District. The language in the statute appears to remove this Commission from the determination of whether any favoritism has been involved and to leave the decision solely to the governing body of the agency. For this reason, we express no opinion on whether the circumstances presented indicate any favoritism on the part of the subject Board member.

Accordingly, we find that a prohibited conflict of interest would be created were the bank of the subject Board member to act as a consolidated depository for the District, unless the Governing Board of the District formally determines that the subject member has not favored his bank over other qualified banks.