CEO 79-16 -- March 22, 1979

CONFLICT OF INTEREST

CITY POLICE OFFICER OWNING INTEREST IN CORPORATION REGULATED BY CITY SHERIFF'S OFFICE

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

Prepared by: Phil Claypool

SUMMARY:

A public officer or employee is prohibited by s. 112.313(7)(a), F. S. 1977, from having employment or a contractual relationship with a business entity which is subject to the regulation of his agency. In CEO's 78-10 and 78-93, it was determined that this provision would be violated were a police officer to be employed by a pawnshop subject to the regulation of the sheriff's department, which employs the subject police officer. As a corporate charter constitutes a contract between the corporation and its stockholders, it is further found that a prohibited conflict of interest would be created were the subject police officer to own shares of stock in a corporation which is a licensed pawn outlet subject to the regulation of his law enforcement agency.

QUESTION:

Would a prohibited conflict of interest be created when a police officer owns shares of stock in a corporation that is regulated by his law enforcement agency?

Your question is answered in the affirmative.

The basic facts of this situation have been set forth in CEO's 78-10 and 78-93. In CEO 78-93, we revoked CEO 78-10 and advised that a police officer may not own and operate as a proprietorship a pawnshop that is regulated by his law enforcement agency. ____ now questions whether or not a conflict of interest would exist if he were to incorporate his pawnshop business, with him owning shares in the corporation but taking no part in its management or operation. Further, ____ wishes to know, if he would not be allowed to own 100 percent of the shares of such a corporation, what percentage of the shares he could own without a conflict existing.

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 an employee . . . . [Section 112.313(7)(a), F. S. 1977.]

This provision prohibits a public officer or employee from having employment or a contractual relationship with a business entity which is subject to the regulation of his agency. In CEO's 78-10 and 78-93, we determined that pawnshops located in the City of Jacksonville are subject to the regulation of the Jacksonville Sheriff's Office, which employs the subject police officer. Therefore, the remaining question is whether the ownership of shares of stock in such an enterprise constitutes employment by, or a contractual relationship with, that business.

A corporate charter constitutes a contract between the corporation and its stockholders. Douglass v. State Bank of Orlando, 82 So. 593 (Fla. 1919). See also 7 Fla. Jur. Corporations s. 24, and 18 Am. Jur.2d Corporations ss. 84 and 85, and cases cited therein. "The relations between a corporation and its stockholders is contractual." 18 Am. Jur.2d Corporations s. 463.

As the relationship between a shareholder and a corporation is contractual, the subject police officer would have a contractual relationship with any corporation in which he owned stock. Accordingly, we find that a prohibited conflict of interest would be created were the subject police officer to own shares of stock in a corporation which is a licensed pawn outlet subject to the regulation of his law enforcement agency.