CEO 91-19 -- April 19, 1991

CONFLICT OF INTEREST

CITY COMMISSION CANDIDATE EMPLOYED BY AFFILIATE OF CORPORATION CONTRACTING WITH CITY FOR THIRD PARTY ADMINISTRATION OF HEALTH INSURANCE PLAN

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

SUMMARY:

No prohibited conflict of interest exists under Section 112.313(3), Florida Statutes, where a candidate for the city commission is employed by a company which serves as the local affiliate for a company which has contracted with the city to serve as third party administrator for the city's health insurance plan, as the city commissioner's employer is providing services to the contractor, not the city. CEO 86-55. Nor would the commissioner have an employment relationship with a business entity which is doing business with the city as prohibited by the first portion of Section 112.313(7)(a), Florida Statutes, because his employer is doing business with the contractor rather than the city. CEO's 88-43, 85-18, and 84-8 are referenced, and CEO 77-48 is distinguished factually. However, the situation presented would result in a continuing or frequently recurring conflict between the official's private interests and the performance of his public duties, and thus be prohibited by the second portion of Section 112.313(7)(a), Florida Statutes.

QUESTION:

Does a prohibited conflict of interest exist where I, a potential candidate for the City Commission, am an employee of a company that is the local affiliate of a firm that was awarded a contract by the City to administer the City's health insurance plan?

Under the circumstances presented, your question is answered in the affirmative.

You advise that you are considering seeking a seat on the Coral Springs City Commission, and also that you are employed by a company that acts as the local affiliate for a firm that was recently awarded a contract to administer the City of Coral Springs' health insurance plan. The contractor supplies third party administration for the City's health insurance plan, and, as the local affiliate for the contractor, your employer acts as local liaison to the City and receives a servicing fee from the contractor for this service. You advise that your employer and the contractor are separate, independent business entities, with neither having any ownership interest in the other. Further, all payments and claims between the City and the contractor are handled out of the contractor's regional office.

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 of 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), Florida Statutes (1989).]

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 (1989).]

Section 112.313(3) does not apply in this case because the services which you provide as an employee of the local affiliate are rendered to the contractor contracting with the City to administer the City's health insurance plan. Although this section would prohibit you as a Commission member from acting in a private capacity to sell any services to the City or to any agency of the City, the services are being provided to another private entity. Were you to provide services directly to the City, a conflict would exist. See CEO 86-55, where we determined that this provision was not violated where a town council member's brokerage house provided services to an investment company which had contracted with the town's pension board. Therefore, under the circumstances presented, there is no prohibited conflict of interest under Section 112.313(3), Florida Statutes.

Section 112.313(7)(a), Florida Statutes, would prohibit you from having any employment or contractual relationship with a business entity which is doing business with the City. However, we have advised that the provision would not prohibit a public officer from being employed by or having a contractual relationship with a business entity which is doing business with another business entity, which in turn is doing business with the officer's public agency. See CEO 88-43, CEO 85-18, and CEO 84-8, where we reached a similar conclusion.

Somewhat analogous to your situation is CEO 77-48, where we opined that a housing authority commissioner did not have a conflict of interest under the first portion of Section 112.313(7)(a), Florida Statutes, where he had a contractual relationship with a business entity which was doing business with his agency. There, the housing commissioner was licensed as an insurance agent for the insurance company which wrote insurance for the employees of the housing authority. However, in that situation, the Commission determined that the housing commissioner would receive no remuneration from the insurance company on its policy with the housing authority because the commissioner was not the agent of record on the housing authority account. Nor did it appear that there was any particular reason for the commissioner to favor this particular insurance company over any of the numerous other companies which had licensed him as an agent.

These considerations are not present in your situation, as your employer does receive remuneration from the contractor and your employer acts as the local contact for the contractor. Therefore, while we do not find that you have a conflict under the first portion of Section 112.313(7)(a), Florida Statutes, we believe that our opinion in CEO 77-48 is factually distinguishable from your situation.

Section 112.313(7)(a) also prohibits an officer from having an employment or contractual relationship which creates a continuing or frequently recurring conflict between his private interests and the performance of his public duties. We believe that this provision is implicated under the circumstances presented by your situation. Although you advise that all payments and claims are handled directly between the City and the contractor's regional office, as the local affiliate your employer has responsibility for maintaining a working relationship with the City's management staff to make certain that the City is satisfied with the services being provided by the contractor, as well as reviewing with the City the management reports provided to it by the contractor. We also note that your employer's letterhead states that it is an affiliate of the contractor, thus, giving the appearance that your employer serves as the contractor's agent. As a City Commissioner and an employee of the contractor's affiliate, you frequently could be faced with competing interests that may on occasion conflict. We are therefore of the view that this situation creates a continuing or frequently recurring conflict of interest under Section 112.313(7)(a), Florida Statutes.

We do not believe that you would be faced with a conflicting situation if your employer divested itself of all contact with the City in regard to administration of the City's health plan, and no longer received compensation from the contractor. If this were to occur, it would be our opinion that you would not have a conflict of interest under Section 112.313(7)(a), Florida Statutes, as your employment would no longer result in a continuing or frequently recurring conflict between your private interests and the performance of your public duties, or that would impede the full and faithful discharge of your public duties.

Accordingly, we find that a prohibited conflict of interest exists where you, a candidate for the City Commission, are employed by a firm which serves as the local affiliate for a corporation which has contracted with the City to provide third party administration of the City's health insurance plan.