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HomeMy WebLinkAbout07-597 ConfidentialADVICE OF COUNSEL December 3, 2007 07 -597 This responds to your letter of October 26, 2007, by which you requested confidential advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. .S. § 1101 et seq., would present any prohibitions or restrictions upon an A who is employed as a B and C of a personal investment division of a bank's financial services unit, with regard to voting to appoint either of two law firms as solicitor for the [political subdivision] where a different division of the financial services unit: (1) is currently providing institutional investment services to one of the law firms; and (2) is actively seeking to provide institutional investment services to the other law firm. Facts: As Solicitor for Political Subdivision D, you have been authorized by Individual E, an elected A for Political Subdivision D, to request an advisory from the State Ethics Commission on his behalf. You have submitted facts that may be fairly summarized as follows. You state that your law firm, Law Firm 1, has represented Political Subdivision D and its F for many years. You further state that the F recently issued a request for proposals "RFP ") for legal services to various law firms and attorneys within the region. Only two law firms, Law Firm 1 and Law Firm 2, submitted proposals and made presentations to the F. Individual E is a G and the B and C of the H Division within the I Group of J Bank in [city]. The I Group includes three technically separate divisions: the H Division, which generally handles individual brokerage accounts and general investment activities for personal clients; the K Division, which offers financial planning services to high net - worth clients; and the L Division, which generally handles retirement investments and other group investments made by institutional clients. You state that Law Firm 1 has its main trust account, a real estate IOLTA account, and the main firm payroll account at J Bank. In addition, Law Firm 1 has contracted with the I Group to invest and facilitate the firm's [type of investment program] through the H Division. Some individual attorneys at Law Firm 1 are clients of the H Division and the K Division. Although Law Firm 1 currently represents various J Bank officers in their personal capacities, it does not represent Individual E in his personal capacity. Confidential Advice, 07 -597 December 3, 2007 Page 2 You state that attorneys of Law Firm 2 document J Bank's commercial loans and provide legal services to J Bank's [type of area], but you are unaware as to whether Law Firm 2 represents officers of J Bank in their personal capacities or holds trust or other accounts at J Bank. You further state that while Law Firm 2 has not invested its [type of investment program] with the L Division, per information provided by Individual E, the L Division is currently pursuing such a relationship with Law Firm 2. Although Individual E does not personally handle accounts for either Law Firm 1 or Law Firm 2, he supervises financial consultants who manage personal brokerage accounts for attorneys of both firms. You state that in the past, in an attempt to avoid a conflict of interest, Individual E has made it a regular practice to abstain from voting on Political Subdivision D matters involving clients of the I Group. Based upon the above submitted facts, you ask whether the Ethics Act would permit Individual E to vote to appoint either Law Firm 1 or Law Firm 2 as Solicitor to Political Subdivision D and F. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. As an A, Individual E is a public official subject to the provisions of the Ethics Act. Sections 1103(a) and 1103(j) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. (j) Voting conflict. - -Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be Confidential Advice, 07 -597 December 3, 2007 Page 3 permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), (j). The following terms are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. 65 Pa.C.S. § 1102. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from using the authority of public office /employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official /public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. The use of authority of office is not limited merely to voting, but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In each instance of a voting conflict, Section 1103(j) of the Ethics Act requires the public official /public employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible Confidential Advice, 07 -597 December 3, 2007 Page 4 provided the disclosure requirements noted above are followed. See, Pavlovic, Opinion 02 -005. In applying the above provisions of the Ethics Act to your inquiry, it is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position - -or confidential information obtained by being in that position- -for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order 1037; (2) the use of governmental facilities, such as governmental telephones, postage, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity (Gorman, Order 1041; Rembold, Order 1303; Wilcox, Order 1306), or private customer(s) /client(s) (Miller, Opinion 89 -024; Kannebecker, Opinion 92- 10). If a business with which the public official /public employee is associated or a private customer /client would have a matter pending before the governmental body, the public official /public employee would generally have a conflict of interest as to such matter. Kannebecker, supra; Miller, supra. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion 89 -002. In considering the narrow question that you have presented, it is noted that the submitted facts do not establish the precise relationship between the I Group and J Bank. However, it is clear that the I Group, through one of its divisions, provides institutional investment services to Law Firm 1 and is actively seeking to provide such services to Law Firm 2. Individual E is an employee of the I Group. Therefore, in his capacity as an A, Individual E would have a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to the appointment of a Solicitor for Political Subdivision D where Law Firm 1 and Law Firm 2 are competing for the appointment. In each instance of a conflict of interest, Individual E would be required to abstain from participation and to fully satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Based upon the above, there is no need to address the other business relationships set forth in the submitted facts. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Conclusion: As an A for Political Subdivision D, Individual E would be considered a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. In his capacity as an A, Individual E would have a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to the appointment of a Solicitor for Political Subdivision D where: (1) two law firms, specifically, Law Firm 1 and Law Firm 2, are competing for the appointment; and (2) Individual E's employer, through one of its divisions, provides institutional investment services to Law Firm 1 and is actively seeking to provide such services to Law Firm 2. In each instance of a conflict of interest, Individual E would be required to abstain from participation and to fully satisfy the disclosure requirements of Section 1103(j) of the Confidential Advice, 07 -597 December 3, 2007 Page 5 Ethics Act. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717 - 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Robin M. Hittie Chief Counsel