CEO 85-80 -- October 24, 1985

CONFLICT OF INTEREST

COUNTY HOUSING FINANCE AUTHORITY EXECUTIVE DIRECTOR OWNING CORPORATION PREPARING LENDER INFORMATION PACKAGES FOR DEVELOPERS

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

SUMMARY:

A prohibited conflict of interest was created under Section 112.313(7), Florida Statutes, where the executive director of a county housing finance authority owned and was an officer of a corporation which provided consulting services to real estate developers, and where in two instances the corporation prepared applications for the issuance of bonds by the authority. When the corporation undertook to develop or package information for a developer for presentation to the authority, the executive director's involvement with the corporation impeded the full and faithful discharge of his public duties.

QUESTION:

Was a prohibited conflict of interest created where the executive director of a county housing finance authority owned and was an officer of a corporation which provided consulting services to real estate developers, and where in two instances the corporation prepared applications for the issuance of bonds by the authority?

Your question is answered in the affirmative.

In your letter of inquiry you advise that .... formerly served as the Executive Director of the Orange County Housing Finance Authority, which was created by the County for the purposes set forth in Chapter 159, Part IV, Florida Statutes. Initially the Authority contracted with him as a consultant, but ultimately the Authority employed him as a full-time Executive Director while allowing him to continue outside consulting services to the extent that his activities were not in conflict with the policies or activities of the Authority. The Executive Director was a one-half owner and an officer of a corporation which provided consulting services to real estate developers through providing market and site analysis, project financial data, debt analysis, and format vendor packages.

In a telephone conversation with our staff, the Executive Director advised that each developer submitting an application to the Authority would be given a checklist of items which the Authority members required for consideration. The checklist required information concerning the developer and the developer's background and experience, the availability of sewer and water for the project, and a market study quantifying the feasibility of the project, as well as information regarding the project, such as a site plan, evidence of local government approval, income and expense analyses, and construction cost estimates.

In December, 1984, a client for whom the corporation provided services for use before another housing finance agency submitted a package of information for acceptance by the Orange County Housing Finance Authority. The Executive Director had no direct contact with the client and had no personal knowledge that the client intended to present the lender package to the Authority. Upon receiving the package, he recognized the style of the presentation and confirmed with the managing director of the corporation that the corporation had prepared the package. The Executive Director then disclosed to the Authority his corporation's involvement. The developer had been informed that the corporation would not represent it before the Authority.

In February, 1985, another developer who had asked the corporation to prepare a package to obtain bond financing without indicating where he would ask for that financing presented to the Authority material prepared by the corporation. The corporation had informed the developer that it would not represent or present his lender package before the Authority. Although the developer had removed the letterhead and logos of the corporation from the material, the Executive Director recognized the style of the application format and disclosed the involvement of his corporation to the Authority.

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), Florida Statutes (1983).]

When the agency referred to is that certain kind of special tax district created by general or special law and is limited specifically to constructing, maintaining, managing, and financing improvements in the land area over which the agency has jurisdiction, or when the agency has been organized pursuant to chapter 298, then employment with, or entering into a contractual relationship with, such business entity by a public officer or employee of such agency shall not be prohibited by this subsection or be deemed a conflict per se. However, conduct by such officer or employee that is prohibited by, or otherwise frustrates the intent of, this section shall be deemed a conflict of interest in violation of the standards of conduct set forth by this section. [Section 112.313(7)(a)1, Florida Statutes (1983).]

You have inquired whether the exemption of Section 112.313(7)(a)1 would apply to officers and employees of the Housing Finance Authority. We are of the opinion that it does not, as the Authority is granted no taxing power by Chapter 159, Florida Statutes, and therefore cannot constitute a "special tax district" and as the Authority has not been organized pursuant to Chapter 298, Florida Statutes.

The first portion of Section 112.313(7)(a) prohibits a public employee from having any employment with a business entity which is subject to the regulation of, or is doing business with, his agency. However, it does not appear that the consulting corporation could be considered to be regulated by the Housing Finance Authority. Nor was the consulting corporation doing business with the Authority, as opposed to the developers who were its clients.

Section 112.313(7)(a) also prohibits a public employee from having any employment or contractual relationship that will create a continuing or frequently recurring conflict of interest or that would impede the full and faithful discharge of his public duties. If the corporation had limited its actions only to developers who would not appear before the Authority, we would not hesitate to conclude that the Executive Director's involvement in the corporation would not present him with a conflict of interest. However, when a developer appears before the Authority presenting information developed or packaged by the Executive Director's corporation, the Executive Director is placed in a conflict between the interests of his corporation's client and the interests of the Authority. His involvement with the corporation in these instances, therefore, impedes the full and faithful discharge of his public duties.

The Executive Director has advised that contracts between the corporation and its clients specified that the corporation would not represent the clients before the Authority because of the potential for conflict of interest on the part of the Executive Director. In our view, this provision was a step in the right direction, as representing a developer before the Authority clearly would enhance the conflict of interest. However, such a provision would not be sufficient to preclude any conflict of interest.

The Executive Director has advised that his activities in the corporation were limited in scope and that a managing director was responsible for the day-to-day operations of the company. We also should observe that we have no information which would indicate that the Executive Director ever acted against the interests of the Authority in favor of those of a client. However, Section 112.313(7) does not prohibit only knowing or intentional actions; instead, the statute

establishes an objective standard which requires an examination of the nature and extent of the public officer's duties together with a review of his private employment to determine whether the two are compatible, separate and distinct or whether they coincide to create a situation which 'tempts dishonor.' [Zerweck v. State Commission on Ethics, 409 So.2d 57, 60 (Fla. 4th DCA 1982).]

You have advised with respect to another incident that the Executive Director was an independent contractor with a separate corporation which assisted a developer by participating in preparing an information package on the developer's land that was presented to the Seminole County Board of County Commissioners. Although the Orange County Housing Finance Authority had agreed to sell and administer bonds for projects approved by Seminole County, this project never came before the Authority. The Executive Director advised our staff that neither the Authority nor its staff had anything to do with respect to this project and that he had no involvement in the project in either a private or a public capacity. As the Authority had no involvement in this incident, we see no basis to conclude that the Executive Director's relationship with that corporation presented him with a conflict of interest.

Accordingly, we find that a prohibited conflict of interest was created by virtue of the Executive Director's interest in a consulting corporation which provided services to developers relative to applications for the issuance of bonds by the Housing Finance Authority.