CEO 97-9 -- March 6, 1997
CONFLICT OF INTEREST
DEPARTMENT OF CORRECTIONS DEPUTY SECRETARY
DIRECTOR OF CORPORATION DOING
BUSINESS WITH DEPARTMENT
To: (Name withheld at person's request)
SUMMARY:
A prohibited conflict of interest exists where the Deputy Secretary of the Department of Corrections serves as a director of a corporation that has contracted with the Department. The Deputy Secretary would be acting in a private capacity to provide items to his public agency under Section 112.313(3), Florida Statutes. CEO's 77-49, 80-71, 81-2, 82-70, 85-89, 89-12, 94-29, and 95-26 are referenced.
QUESTION:
Does a prohibited conflict of interest exist where the Deputy Secretary of the Department of Corrections serves as a member of the board of directors of the corporation that operates Florida's prison industries programs?
Your question is answered in the affirmative.
By your letter of inquiry, an additional letter from you to our staff, and a memorandum and accompanying materials from [an attorney for the corporation hereinafter described], we are advised that . . . serves as Deputy Secretary (hereinafter "Deputy") of the Florida Department of Corrections, that he also serves as a member of the board of directors of "PRIDE" [the State's prison industries corporation referred to in Chapter 946, Florida Statutes (hereinafter "corporation")],[1] and that he was paid $500 by the corporation for each board meeting he attended.[2]
Further, we are advised that the corporation has business relationships with the Department, including numerous contracts, that the Deputy has involvement in the Department's business dealings with the corporation, that the Deputy is involved in procurement decisions for the Department, that the Deputy has represented to you that he has not been involved in decisions as to whether to contract with or buy products from the corporation since he became Deputy Secretary, but that he "may presently assist" the corporation when it has difficulties obtaining necessary inmate labor. You also advise that it is your understanding that the Deputy has had no substantive duties concerning the Department's contracts with the corporation since he was appointed as Deputy Secretary and that he has stated to you that he has no purchasing responsibilities in behalf of the Department concerning the corporation.
Corporate counsel adds that the corporation has a 501(c)(3) tax exemption from the Internal Revenue Service; has a sales tax exemption from the Florida Department of Revenue; is governed by the statutory authority of Part II, Chapter 946, Florida Statutes; is subject to the public records law (Chapter 119, Florida Statutes), with certain exemptions; is required to be audited by the Auditor General of the State; is required to file certain reports with the Governor and the Legislative branch on an annual basis; is subject to having its assets revert to the State upon corporate dissolution or upon termination of correctional work programs under certain conditions; but is not an "agency."[3] Further, the corporation's attorney states that the Department contracts with the corporation to carry out correctional work programs pursuant to contracts negotiated by the Department of Management Services (DMS) and which were originally approved by the Governor and Cabinet, and thus concludes that as to an approved work program these contracts are the only contracts which can be entered into by the Department. In addition, corporate counsel relates that discussions regarding whether a work program should be carried on at a Departmental institution are held long before the corporation's board meeting on the issue, that the superintendent of the institution makes a determination as to the desirability of the particular type of correctional work program and the availability of inmates to participate in the program, and that the corporation makes a determination as to the marketability of the product resulting from the work program. Thus, corporate counsel believes that this state of affairs, coupled with DMS's "preordination" of contracts between the Department and the corporation, results in the Deputy's position with the corporation to be without conflict.
Also, you state that you believe that the Deputy's service for the corporation should not be viewed as conflicting because, as you state further, the Department is required by Chapter 946 to contract with the corporation and with no other entity. Thus, you maintain that any concerns that the $500 payments are made to obtain influence should be unfounded. Also, you advise that to your knowledge there is no statute requiring the Secretary, or his designee, to serve on the corporation's board or to receive the director's fee.
The Code of Ethics for Public Officers and Employees provides in part:
DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officer's or employee's spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer's or employee's 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 the officer's or employee's own agency, if he or she is a state officer or employee, or to any political subdivision of any agency thereof, if he or she 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 or when such offices are on property wholly or partially owned by the legislator. This subsection shall not affect or be construed to prohibit contracts entered into prior to:
(a) October 1, 1975.
(b) Qualification for elective office.
(c) Appointment to public office.
(d) Beginning public employment.
[Section 112.313(3), Florida Statutes.]
The first part of section 112.313(3) prohibits a public employee's acting as a purchasing agent to purchase items for his public agency from a business entity of which he is a director, officer, etc.; and the second part of the statute prohibits a public employee's acting in a private capacity to provide items to his public agency. One acts in a private capacity to provide items to his public agency when he is an officer or director of a corporation which does so, regardless of whether he personally is involved with the sale. See, for example, CEO 81-2.
Under the Deputy's scenario, we find that the first part of Section 112.313(3) is not violated by virtue of contracts between the corporation and the Department in which he was not involved as a purchasing agent.[4] However, we find that a prohibited conflict was created, and would be created as to future contracts, under the second part of Section 112.313(3) by any contracts between the corporation and the Department entered into while the Deputy served both as a Departmental employee and as a director of the corporation, inasmuch as he acted, and would be acting as to future contracts, in a private capacity to sell, lease, or rent to his public agency.[5]
In addition, it does not appear that any of the exemptions contained in Section 112.313(12), Florida Statutes, would apply to negate a conflict. In particular, we note that although the Department is statutorily encouraged or required to make purchases from the corporation in various instances, the "sole source" exemption found at Section 112.313(12)(e), Florida Statutes, only is available to "political subdivisions" of the State (cities, counties, etc.) and not to State-level purchasers such as the Department. Section 112.313(12)(e) provides that no person shall be held in violation of subsection (3) . . . if
[t]he business entity involved is the only source of supply within the political subdivision of the officer or employee and there is full disclosure by the officer or employee of his or her interest in the business entity to the governing body of the political subdivision prior to the purchase, rental, sale, leasing, or other business being transacted. [emphasis supplied.]
Section 1.01(8), Florida Statutes, provides that
[t]he words 'public body,' 'body politic,' or 'political subdivision' include counties, cities, towns, villages, special tax school districts, special road and bridge districts, bridge districts, and all other districts in this state. [Emphasis supplied.]
Further, our opinions cited in your inquiry are distinguishable from the instant matter. In the Deputy's scenario, the corporation is and would be doing business with the Department (the Deputy's public agency); in CEO 95-26, the person whose conduct was at issue was the director of a city department that was separate and distinct from the city departments which were doing business with the bank of which the department director was a member of the board of directors. It is our position that public officers or employees who serve in an agency's central office, unlike those who serve in a particular division or bureau, have as their "agency" the entire department or governmental entity. See, for example, CEO 94-29. In addition, we emphasize that we fail to see how the Secretary and Deputy Secretary of the Department of Corrections have no duties in behalf of the Department in relation to the corporation such that Section 112.316, Florida Statutes, would be applicable to negate a conflict.[6] In CEO 85-89, unlike the instant inquiry where the corporation is doing business with the Department, the foundation of which the county health department director served as a member of the board of directors was not doing business with and was not regulated by the county health department.[7] CEO 82-70 and CEO 80-71, cited in your inquiry, are also distinguishable. Further, the lack of a finding of conflict in CEO 77-49, also cited in your inquiry, is based upon language that is substantially the same as that currently found in the exemption located at Section 112.313(12)(g), Florida Statutes, which concerns banks serving as depositories for local governmental funds, an exemption clearly not applicable to the situation at issue.
Also, we note that we do not find a "unity of interest" to exist in this situation. The interests of the corporation and those of the Department are sufficiently distinct and different such that Section 112.316, Florida Statutes, does not apply.
In rendering the instant opinion, we do not find that the Deputy actually misused his public position or an attribute thereof for the benefit of himself privately, the corporation, or another. The ethics statute focused on herein is preventative in nature. See Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982).
Accordingly, we find that a prohibited conflict of interest exists under Section 112.313(3), Florida Statutes,[8] where the Deputy Secretary of the Department of Corrections serves as a director of a corporation doing business with the Department.
ORDERED by the State of Florida Commission on Ethics meeting in public session on March 6, 1997 and RENDERED this ____ day of _________, 199_.
__________________________
Mary Alice Phelan
Chair
[1] The Deputy was designated by the Secretary of the Department to occupy the Secretary's seat on the board. The Secretary holds a board seat pursuant to the corporation's articles of incorporation. According to the corporation's attorney, the corporation's articles and by-laws are required to be approved by the Governor and have been so approved.
[2] You advise that the Deputy Secretary accepted two payments totaling $1,000; and you advise that he is not accepting any more payments, presumably pending the issuance of our opinion in this matter.
[3] Presumably not an "agency" under Chapter 20, Florida Statutes. See Section 946.502(2), Florida Statutes (Supp. 1996).
[4] According to the representations made to us, this would appear to be all contracts entered into between the corporation and the Department after he became Deputy Secretary.
[5] You represent that prior to becoming Deputy Secretary, he was the Assistant Secretary for Operations, Management, and Budget, where he was involved in behalf of the Department in decisions affecting the corporation's business dealings with the Department, but that he was not serving on the corporation's board when he was Assistant Secretary for Operations, Management, and Budget.
[6] It is apparent that the corporation makes extensive use of inmate labor, conducts business at Departmental institutions, sells numerous products to the Department, and otherwise interfaces with Departmental operations.
[8] Having found conflict under Section 112.313(3), Florida Statutes, it is unnecessary for us to analyze the situation under Section 112.313(7)(a), Florida Statutes. Further, please note that compensation (i.e., $500 per corporate board meeting), or lack thereof, is irrelevant to our findings under Section 112.313(3).