CEO 91-51 -- September 13, 1991

CONFLICT OF INTEREST

FLORIDA SEED CAPITAL FUND BOARD MEMBER

SERVING ON BOARD OF DIRECTORS OF COMPANY IN WHICH

FUND INVESTED MONEY IN EXCHANGE FOR STOCK

To: Staci A. Bienvenu, Counsel to Florida Seed Capital Board (Tallahassee)

SUMMARY:

A prohibited conflict of interest would be created were a member of the Florida Seed Capital Board to become a director of and a consultant for a corporation which received funding from the Board in exchange for stock in the corporation. Under Section 112.313(7)(a), Florida Statutes, the member would have a contractual relationship with a business entity which is doing business with his agency, and he would be faced with a frequently recurring conflict or impediment to duty. Section 112.313(7)(b), Florida Statutes, which allows officials to practice in a particular profession or occupation when required or permitted by law, is inapplicable here, where the Board member's affiliation with another high technology business made him eligible for appointment to the Board. Section 112.313(3), Florida Statutes, would not be violated because at the time of the stock purchase the member had no affiliation with the corporation.

QUESTION:

Would a prohibited conflict of interest be created were a member of the Florida Seed Capital Board to serve as a compensated member of the board of directors of and a consultant for a corporation in which the Board holds stock by virtue of a monetary investment?

Your question is answered in the affirmative.

By your letter of inquiry and a telephone conversation with our staff, we are advised that Richard Fox is a member of the Florida Seed Capital Board. We further are advised that the Board (formerly known as the High Technology Innovation Research and Development Board of the State of Florida), under Section 159.445, Florida Statutes, administers the Florida Seed Capital Fund, which provides equity financing for the research and development activities of new and existing high technology small businesses in Florida. The Board invested $50,000 in each of eight small businesses in exchange for stock in the businesses. One of the businesses, Software Productivity Solutions, Inc. (SPS), received its investment in 1987 and has become a viable and growing company. The investment was made under a written contract which is still in effect. The contract grants rights to the parties and provides for the award of attorney's fees to the prevailing party in any action to enforce the agreement. The member, who receives no compensation for his service on the Board, was on the Board at the time of its unanimous approval of the SPS investment.

Since that time, you advise, SPS has offered the member a paid position on its board of directors. Pursuant to the member's request and with the member abstaining, the Board voted unanimously to approve of the member's being an SPS director while remaining a member of the Board, contingent upon receipt of an advisory opinion from us finding no conflict to be created. No further investments can be made by the Board into SPS, you advise, and it is expected that the 1992 Legislature will abolish or reconfigure the Board. You note the member in question was in the high technology (optical scanning/light manipulation) business prior to his joining the Board. SPS is a defense-related, high technology business.

You very recently advise that, in addition to being paid as a member of SPS's board of directors, the corporation will pay the member consulting fees for approximately twenty hours per week of marketing and product development work.

Section 112.313(7)(a), Florida Statutes, 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.

This provision prohibits the member from having or holding employment or a contractual relationship with a business entity which is subject to the regulation of or is doing business with his agency. It also prohibits 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.

It is apparent that the corporation is doing business with the Board by virtue of the relationship under the contract which governed the sale and purchase of the stock and which provides continuing enforceable rights and obligations between its parties. Thus, the first part of Section 112.313(7)(a) would preclude the member's serving on the corporation's board of directors. Further, holding a position of authority for both parties to a contract, where one party is a private entity and the other is a public body, creates a situation where the public officer might be tempted to place his private interests ahead of his public duties in interpreting, enforcing, and otherwise acting on the contract. See Zerweck v. State Commission on Ethics, 409 So.2d 57 (Fla. 4th DCA 1982). The conflicts discussed above under Section 112.313(7)(a) are even more manifest in light of the fact that the member will be receiving consulting fees from the corporation.

We reach our decision in this matter notwithstanding the language of Sections 112.313(7)(b) and 159.445(3)(a), Florida Statutes, which provide respectively:

This subsection shall not prohibit a public officer or employee from practicing in a particular profession or occupation when such practice by persons holding such public office or employment is required or permitted by law or ordinance.

There is created within the Department of Commerce the Florida Seed Capital Board. The board shall administer the Florida Seed Capital Fund.

The board shall consist of the Treasurer or his designee, the Comptroller or his designee, and seven members appointed by the Governor subject to confirmation by the Senate, two of whom shall represent high technology business, two of whom shall represent small business, and two of whom shall represent investment finance and business development corporations.

Section 112.313(7)(b) will not shield the member from violations of Section 112.313(7)(a) in the situation before us because it was not the directorship of the corporation (SPS) which made him eligible to be appointed to the Board, but rather his affiliation with another high technology business.

Section 112.313(3), Florida Statutes, provides:

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.

This provision of the Code of Ethics would not be violated by the Board member becoming a director of the corporation because the member was not a director of the corporation at the time of the money-for-stock transaction, and the member did not sell the stock to the Fund.

Accordingly, we find that a prohibited conflict of interest would be created were a member of the Florida Seed Capital Board to serve as a director of and consultant for a corporation in which the Board invested money in exchange for stock.