CEO 90-28 -- April 26, 1990

CONFLICT OF INTEREST

CITY PENSION REVIEW COMMITTEE DIRECTOR SERVING ON BOARD OF DIRECTORS FOR LOCAL BANK

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

SUMMARY:

No prohibited conflict of interest is created under Sections 112.313(3) and 112.313(7), Florida Statutes, where a member of a City's Pension Review Committee serves on the Board of Directors of a local bank and the bank is held by a parent corporation which also owns an entirely separate corporate subsidiary providing investment services for the Pension Fund. CEO 88-80 is referenced.

QUESTION:

Would a prohibited conflict of interest be created were you, a member of a City's Pension Review Committee, to serve on the Board of Directors of a bank, where the bank is owned by a parent corporation that owns an entirely separate corporate subsidiary which acts as an investment manager for the pension fund?

Under the described circumstances, your question is answered in the negative.

In your letter of inquiry, you advise you are a member of the Pension Review Committee for the City of Gainesville. The Committee is an advisory committee to the Board of Trustees (comprised of the City Commission) for the General Pension Plan and advises the Trustees on investment policy, investment performance, asset allocation, and management selection. The Pension Review Committee is created by ordinance, and its members are appointed by the City Commission.

You also advise that you are on the Board of Directors of a local bank. As a member of the bank's board, you review the bank's operating statement, review the bank's financial condition, and have some limited involvement in personnel matters and in the bank's compliance with Community Redevelopment Act requirements. You receive a fee for each meeting of the Board of Directors that you attend.

You further advise that one of the equity investment managers for the City Pension Board of Trustees is a subsidiary of a parent corporation (holding company) of which the bank also is a subsidiary. The parent corporation owns the majority of stock of both subsidiary corporations. The bank on whose Board of Directors you serve, however, is a separate corporation from the corporation which serves as an equity investment manager for the Pension Fund.

In regard to your question, Section 112.313(3) and Section 112.313(7)(a), Florida Statutes, provide:

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.

(c) Appointment to public office.

(d) Beginning public employment

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.

In previous opinions, we have treated corporate subsidiaries as separate business entities in applying the Code of Ethics. See CEO 88-80 and the opinions cited therein. Therefore, Section 112.313(7)(a) and the first sentence in Section 112.313(3) would not appear to apply. Obviously, you still would be prohibited by the second sentence of Section 112.313(3) from acting in a private capacity to sell any services to the Pension Board of Trustees, but we note that your letter gives no indication that you have done so or would be called upon to do so. Our finding that no prohibited conflict of interest exists assumes, however, that all of the fund's investment activities will be conducted through an entirely separate corporation than that of the bank on whose Board of Directors you serve.

Accordingly, we find that no prohibited conflict of interest is created where you serve as a member of a City's Pension Review Committee and on the Board of Directors of a local bank which is a corporate subsidiary of a parent corporation which also owns another subsidiary which acts as an investment manager for the Pension Board of Trustees.