CEO 85-29 -- April 11, 1985

CONFLICT OF INTEREST

CITY COMMISSIONER EMPLOYED BY BROKERAGE FIRM DOING BUSINESS WITH CITY

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

SUMMARY:

A prohibited conflict of interest would be created under Section 112.313(7), Florida Statutes, were a brokerage firm which employs a city commissioner as a stockbroker to sell zero coupon bonds to the city, with the commissioner not participating in the sale or receiving any financial remuneration. A city commissioner is prohibited from being employed by a business entity which is doing business with his agency, unless one of the exemptions contained in Section 112.313(12), Florida Statutes, applies. Here, none of the exemptions is applicable.

A prohibited conflict of interest would be created were the brokerage firm which employs the city commissioner to be selected by the city as underwriter for one or more city bond issues. The exemption provided in Section 112.313(12)(b), Florida Statutes, for business awarded under a system of sealed, competitive bidding would not apply where an underwriter is selected based upon presentations of interested companies to the city commission, although sealed proposals are solicited by the city.

QUESTION 1:

Would a prohibited conflict of interest be created were a brokerage firm which employs a city commissioner as a stockbroker to sell zero coupon bonds to the city, with the commissioner not participating in the sale or receiving any financial remuneration?

This question is answered in the affirmative.

In your letter of inquiry and in a telephone conversation with our staff, you have advised that .... is a member of the City Commission of the City of Coral Springs and is employed as a stockbroker with a national brokerage firm. You question whether the firm can sell to the City zero coupon bonds as part of the City's investment program. The Commissioner would not participate in the sale and would not receive any financial remuneration from the sale. The purchase would be made by the City's finance department, but would be authorized by the City Commission.

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).]

This provision prohibits a city commissioner from being employed with a business entity which is doing business with his agency. In our view, the brokerage firm which employs the Commissioner would be doing business with the City Commission were the City to purchase bonds from the firm.

There are a number of exemptions to the prohibition of Section 112.313(7)(a) which are contained in Section 112.313(12), Florida Statutes. However, you have advised that the amount of the sale would exceed $500, that the sale would not be made through a system of sealed, competitive bidding, and that the brokerage firm is not the sole source of supply for bonds of this nature. Therefore, it does not appear that any of the exemptions in Section 112.313(12) would apply here.

Accordingly, we find that a prohibited conflict of interest would be created were the brokerage firm to sell zero coupon bonds to the City while the subject Commissioner is employed with that firm.

QUESTION 2:

Would a prohibited conflict of interest be created were the brokerage firm which employs a city commissioner to be selected by the city as underwriter for one or more city bond issues?

This question also is answered in the affirmative.

You have advised that in the near future the City will have several substantial bond issues. It is possible that the brokerage firm which employs the subject Commissioner would negotiate with the City for the purchase of one or more of these bond issues as an underwriter. The broker who alerts his firm to a pending bond sale which results in the firm buying the bonds customarily earns a finder's fee. You question whether it would be appropriate for the subject Commissioner to accept such a finder's fee were the brokerage firm which employs him to be selected as an underwriter.

Section 112.313(12)(b), Florida Statutes, provides an exemption from Section 112.313(7) where "business is awarded under a system of sealed, competitive bidding to the lowest or best bidder" and certain other conditions are met. You have advised that in selecting the underwriter for a bond issue the City solicits sealed proposals from interested firms. After the proposals are received, the City Commission interviews all interested companies and then selects the underwriter based on the proposals and interviews. In our view, this process does not constitute a system of sealed, competitive bidding, as the selection of the underwriter is based at least in part on the presentations of interested companies and involves more discretion on the part of the City Commission than merely awarding a contract to the lowest or best bidder based upon the sealed bids received. To similar effect is CEO 81-28, in which we advised that the competitive bidding exemption did not apply to selections made under the Consultants' Competitive Negotiation Act, Section 287.055, Florida Statutes.

Accordingly, we find that a prohibited conflict of interest would be created were the brokerage firm which employs the subject Commissioner to be selected as underwriter by the City Commission for a bond issue. Given this conclusion, we do not reach the further question of whether the Commissioner could accept a finder's fee.