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HomeMy WebLinkAbout1446 KEARNEYIn Re: Gary Kearney, Respondent File Docket: X -ref: Date Decided: Date Mailed: Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Paul M. Henry Raquel K. Bergen Nicholas A. Colafella Reverend Scott Pilarz 06 -027 Order No. 1446 10/23/07 11/7/07 This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding a possible violation of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., by the above -named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegation(s). A Stipulation of Findings and a Consent Agreement waiving an evidentiary hearing were subsequently submitted by the parties to the Commission for consideration. The Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement has been approved. This adjudication of the State Ethics Commission is issued under the Ethics Act and will be made available as a public document thirty days after the mailing date noted above. However, reconsideration may be requested. Any reconsideration request must be received at this Commission within thirty days of the mailing date and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code § 21.29(b). A request for reconsideration will not affect the finality of this adjudication but will defer its public release pending action on the request by the Commission. The files in this case will remain confidential in accordance with the Ethics Act. Any person who violates such confidentiality commits a misdemeanor and, upon conviction, may be subject to a fine of not more than $1,000 or imprisonment for not more than one year. Confidentiality does not preclude discussing this case with an attorney at law. Kearney, 06 -027 Page 2 I. ALLEGATIONS: That Gary Kearney, a public official /public employee, in his capacity as a Member and Chairman of the Housing Authority of Venango County, violated Section 1103(a) provision of the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. §1103(a) when he used the authority of his public position as Chairman and a Member of the Authority and as a Director of the Authority's subsidiary, Venango Housing Corporation, to participate in the authorization of payments to himself which were not authorized by the Authority; and when he used the authority of his public office to receive compensation not provided for by law when he was employed by the Authority while simultaneously serving as a Board Member. II. FINDINGS: 1. Gary H. Kearney served as a member of the Housing Authority of the County of Venango (hereafter Authority) Board of Directors from December 18, 1982, through December 31, 2004. a. Kearney served as the Chairman of the Authority board from March 18, 1987, through December 31, 2004. 2. Kearney also served as a member of the Venango Housing Corporation (hereafter Corporation) Board of Directors from at least March 2, 2000, through December 31, 2004. a. Kearney served as the Vice - President of the Corporation board from at least March 2, 2000, through December 31, 2004. b. Kearney served as a financial advisor to the Corporation from May 30, 1990, through December 31, 2004. 3. Kearney's duties and responsibilities as the Authority Chairman were set forth in the Authority By -Laws. a. The individual holding the position of Chairman was responsible for the following. 1. Presiding at all meetings of the Authority; 2. Signing all contracts, deeds, and other instruments made by the Authority; and 3. Submitting at each meeting recommendations and information he /she may consider proper concerning the business, affairs, and policies of the Authority. 4. Kearney's duties and responsibilities in relation to his position as the Vice- President of the Corporation Board of Directors were established in the original By -Laws of the Corporation. a. The individual holding the position of Vice - President was responsible for the following: 1. Performance of duties as prescribed by the board or President. 2. Performance of all duties of the President in [the] President's absence. Kearney, 06 -027 Page 3 5. The Venango County Commissioners created the Authority via Resolution presented at the May 31, 1977, regular Commissioner's meeting. a. The County Commissioners created the Authority pursuant to the authority granted them in the Pennsylvania "Housing Authorities Law." 6. The objective of the Authority is to provide decent, safe, and affordable housing for low to moderate income families in Venango County with the exception of the Oil City and Franklin areas. a. The Authority accomplishes this objective through the operation of the Public Housing Program, the Section 8 Choice Voucher Program, and the Section 8 New Construction Program. 1. The Public Housing Program operated by the Authority consists of a twenty unit complex located at 19 Rockwood Ave, Oil City, PA known as Cherry Hill Apartments. 2. From April 2001 through January 2005, the Authority was approved by HUD for the issuance of vouchers for approximately 394 units in Venango County in association with the Section 8 Choice Voucher Program. 3. The Section 8 New Construction Program operated by the Authority consists of a one hundred unit, privately owned complex located at 10 Arbor Circle, Franklin, PA known as Evergreen Arbors Estates. b. The Oil City and Franklin areas operate independent housing authorities. 7 A five - member Board of Directors governs the Authority. a. Authority board members are appointed to five -year terms by the Venango County Commissioners. 8. The Housing Authorities Law mandates that board members may not be compensated for their service. a. Authority board members are entitled to receive necessary expenses, including traveling expenses incurred, in the discharge of their duties. 9. The Housing Authorities Law states, in part, that, No member or employee of an Authority shall acquire any interest, direct or indirect, in any housing project or in any property included or planned to be included in any project, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or services to be furnished or used in connection with any housing project." a. Any member or employee of an Authority that has any such interest in any contract for material or services to be furnished or used in connection with any housing project must immediately disclose the same in writing to the Authority. b. The required disclosure must be entered in writing in the Authority minute books. 1. Failure to disclose the interest and document the disclosure in the Authority minutes constitutes misconduct in office. Kearney, 06 -027 Page 4 10. Under the Pennsylvania Sunshine Act, Housing Authorities are considered public agencies and are required to take all official actions and conduct all deliberations leading up to official actions at public meetings. a. The Sunshine Act requires that written minutes be kept of all public meetings. b. Minutes must include the following: 1. The date, time, and place of the meeting; 2. The names of members present; 3. The substance of all official actions and a record of roll call votes; and 4. The names of all citizens who appeared officially at the meeting and the subject of their testimony. 11. During Kearney's tenure, voting at Authority meetings occurred via individual roll call vote after a motion had been properly made and seconded. a. Any abstentions cast during [a] vote were specifically noted in the minutes. 12. Although Kearney as the Authority Chairman was to preside over Authority meetings, Edwin Evans, Authority Executive Director, normally carried out these actions. a. Authority members did not normally question or challenge Evans's actions, explanations, or suggestions at Authority meetings. b. Authority members did not question Evans as a result of Evans's tenure with the Authority and Evans reporting that annual audits conducted of the Authority revealed no discrepancies. 13. Tamala Ross, Deputy Executive Director, or Robbi Terrill, Section 8 Program Coordinator took minutes of the Authority meetings. a. Drafts of meeting minutes were provided to Evans for content review prior to presentation of the minutes at the upcoming Authority meeting. b. Evans routinely altered the content of the minutes and returned them to Ross or Terrill for correction. c. The minutes were routinely approved for accuracy at the subsequent Authority meeting. 14. From at least January 2001 to January 2005, Authority board members were not provided with meeting packets for review prior to the actual meeting. a. Authority members received a meeting agenda, the previous meeting minutes, and various reports immediately prior to or during the actual meeting for review. b. Authority members were not supplied with bill lists or listings of checks issued from Authority accounts for review nor were checks issued presented to the Authority members verbally or physically. Account Number Financial Institution Account Name 677 National City Bank Venango County Housing Authority 651 -6 Citizens Bank Housing Authority of Venango County 39 Northwest Savings Bank Housing Authority of Venango County 92 First National Bank Housing Authority of the County of Venango Kearney, 06 -027 Page 5 15. From at least January 2001 to January 2005, no official motion or vote was taken by the Authority members to formally approve checks issued from Authority accounts. a. The Authority board routinely approved the Secretary /Treasurer's report which included various financial information such as audits, five year plans, etc. b. The Authority board routinely approved Year End Financial Reports which noted, among other things, the amounts of assistance payments issued and administrative fees received during the fiscal year. c. The Authority board routinely approved Program Budget reports on an annual basis noting subsidies requested from HUD. 16. From at least January 2001 through January 2005 the Authority maintained various accounts at the following financial institutions shown below: a. Account No. 677 was the account utilized for the Public Housing Program (Cherry Hill Apartments). 1. Funds received by the Authority from HUD for operation of the public housing program were deposited electronically into the account. 2. Tenant rent received, if any, was also deposited into the account. b. Account No. 651 -6 was the account utilized for the Section 8 Choice Voucher Program and the Section 8 New Construction Program (Evergreen Arbors). 1. Funds received by the Authority from HUD for operation of both programs were deposited electronically into the account. aa. Funds received for each Program were deposited separately into the account. c. Account No. 39 was the account utilized to segregate HAPS and Administrative Fees issued to the Authority for the Section 8 New Construction Program from HAPS and Administrative Fees received for the Section 8 Choice Voucher Program. 1. Checks from the account representing funds received for the Section Eight New Construction Program were subsequently issued to Evergreen Arbors Associates representative of HAPs due and to the Venango Housing Corporation representative of Administrative Fees received /due. Account Number Account Description Statement Addressed To 1001 Corporate Gold Card Edwin A. Evans /Housing Authority Venango Kearney, 06 -027 Page 6 d. Account No. 92 was initially utilized as an interest generating account for the Authority. 1. After June 28, 2002, the account was utilized as a general checking account. 17. From at least January 2001 through approximately January 2005, Kearney and Evans maintained sole signature authority over Authority accounts. a. Checks issued from Authority accounts required two signatures. b. Facsimile signature stamps were utilized to authorize Authority checks. 18. At least three sets of facsimile stamps existed in the name of Kearney and Evans for the authorizing of Authority checks. a. Kearney maintained a set of stamps at his home. a. Tamala Ross, Authority Deputy Executive Director, maintained a set in her office until approximately November 2004. 1. Ross returned the stamps to Evans at or about that time. c. Evans maintained one set of stamps in his office at the Authority. 19. In addition to the Authority accounts maintained at National City Bank, Citizen's Bank, Northwest Savings Bank, and First National Bank, the Authority maintained at least one account with American Express as shown below: a. Credit card /line of credit accounts are viewed as cash accounts for auditing purposes. b. No activity occurred on the card between the dates of October 2001 through January 2005 with the exception of annual membership fees incurred. 20. From January 2001 through January 2005, Ross or Terrill received and processed invoices /bills (including HAPs) requiring payment by the Authority. a. Once processed, checks were generated for payment via Authority computers or typewriter. 1. Checks issued from the Citizen's Bank account, including typical monthly bills, Section 8 voucher payments, and transfers of funds associated with the Section 8 New Construction Program into the Authority account at Northwest Savings Bank were generated via computer. 2. Checks issued from the National City account, including checks issued in association with the Public Housing Program (expenses, wages paid, etc.), were generated via typewriter. 21. Ross and Terrill generated Authority checks at Evans's direction. a. Evans had ultimate supervisory responsibility over Ross and Terrill. Kearney, 06 -027 Page 7 22. Ross and /or Terrill affixed Kearney's and Evans's names via the facsimile stamps to the checks they generated per Evans's direction. a. Ross and /or Terrill generated checks only from the Citizens Bank Account (No. 651 -6) and the National City Bank Account (No. 677). 1. Ross and /or Terrill stamped the checks only until Ross turned in her set of facsimile stamps to Evans in November 2004. b. Evans maintained sole custody over Northwest Savings Bank Account (No. 39) and First National Bank Account (No. 92). 23. Ross and /or Terrill did not affix the facsimile stamps to checks representing transfers of funds for the Section 8 New Construction Program from the Citizens Bank account into the Northwest Savings Bank account. a. Evans routinely took possession of checks representing transfers of funds for the Section 8 New Construction Program immediately after production, affixed the facsimile signatures, and deposited the funds. 24. Pennsylvania Department of State, Corporation Bureau records note the formation of the Venango Housing Corporation (hereafter Corporation) under entity number 759497 on July 9, 1982. a. The purpose of the Corporation per Corporation Bureau filings notes, "housing project." 25. Mandates of the Articles of Incorporation include, among others, the following: a. Section 7: If the Corporation is ever dissolved, title to or other interest in any real or personal property owned by the Corporation shall vest in the Authority for use by the Authority as approved by HUD or its successors and assigns (HUD) or be transferred to or vested in another entity approved by HUD. b. Section 10(f): The Corporation shall not be entitled to receive any compensation in connection with the financing of any project, except for its expenses and any such expenses shall be subject to the approval of HUD. 26. A three - member Board of Directors governs the Corporation. a. Directors are appointed to the Corporation board by the Authority board. b. Directors are not compensated for their service on the Corporation board. 27. During Kearney's tenure, the Corporation did not hold regularly scheduled meetings. a. All documented meetings of the Corporation board have occurred at the Venango Human Services Center, Route 322, Franklin, PA. 28. Section 3.8 of the Corporation By -Laws in effect during Kearney's tenure allow that any action that may be taken by the board of directors at a meeting may be taken without a meeting provided that written consent setting forth the action to be taken is signed by each director and filed with the Secretary. Kearney, 06 -027 Page 8 a. No such written consents exist to substantiate that any official action was taken by the Corporation outside of a meeting setting. 29. Section 4.1 of the Corporation By -Laws effective during Kearney's tenure addresses the choosing of officers for the Corporation. a. Officers are elected from the board of directors from their own number. b. Two or more offices may be held by the same person provided that the duties of the President and Secretary may not be performed by the same person. 30. Section 4.4 of the Corporation By -Laws effective during Kearney's tenure set forth the duties and responsibilities of the Corporation Secretary as shown below: a. The Secretary is responsible for among other duties, attending all meetings of the board of directors and recording all votes and minutes of the proceedings in a book to be kept for that purpose. 31. Section 4.7 of the By -Laws effective during Kearney's tenure mandate that officers are not to receive any stated salaries for their services to the Corporation. a. Corporation By -Laws in effect during Kearney's tenure do not prohibit directors from serving the Corporation in any other capacity and receiving compensation. 32. Section 5.4 of the Corporation's By -Laws in existence during Kearney's tenure states the following in association to the Corporation's relationship to the Authority: a. The Corporation must receive the approval of the Authority of each low - income housing project to be assisted by the Corporation and of the projected program and projected expenditures of the Corporation; b. The Corporation must receive the approval of the Authority of each issue of obligations of the Corporation not more than sixty days prior to the date of the issue and approval of any amendments to the terms thereof prior to the issuance thereof; c. The Authority shall have the right of access at any time to all books and records of the Corporation; and d. The Corporation shall have an annual financial audit by an independent certified accountant, which audit and the Corporation's activities shall be subject to review by the Authority, at such times as required by HUD. e. The Corporation had the authority to engage in or assist in carrying out the development or operation of low- income housing projects (including, without limitation, assistance by borrowing and lending funds, and refunding of prior loans) which had been approved by the Authority. f. The Corporation is to act in the best interests of the Authority in executing the duties of the Corporation. 33. Expense or transfer of Corporation funds is required to be approved at an open and public meeting. Account Number Account Name Account Address 901 Venango Corporation Housing PO Box 988 Oil City, 16301 PA 411 Venango Corporation Housing PO Box 988 Oil City, 16301 PA Kearney, 06 -027 Page 9 34. Per minutes of the two official Corporation meetings held over the existence of the Corporation, voting at Corporation meetings occurred via a combination of group "aye /nay" vote and individual roll call vote. a. Examples of both voting methods are present in Corporation minutes. b. Minutes reflecting roll call votes note the specific vote of each individual director. c. Kearney did not serve on the board when either of the two official Corporation meetings were held. 35. The Corporation had no overhead or operational expenses associated with its existence. a. The Corporation had no employees. b. The Corporation operated from the same physical address as did the Authority. 36. No official motion or vote was taken by the Corporation directors to formally approve checks issued from Corporation accounts. a. No bill lists, invoices received, or checks issued were presented for review or approval at any Corporation meetings or at any Authority meetings at which Corporation business was discussed. 37. From at least January 2001 through January 2005 the Corporation maintained accounts at National City Bank as shown below: a. Account No. 901 was initially established by Evans to serve as a checking account to be utilized in association with the refinancing of Evergreen Arbors. 1. Account No. 901 was the Corporation's primary account. b. Account No. 411 was a secondary account with minimal activity. 1. During the above referenced time frame only three deposits totaling $590.57 were entered into the account. 2. All debits from the account during the above - referenced time frame were attributed to monthly service charges and inactive account fees. 38. From at least January 2001 through approximately January 2005, Kearney and Evans maintained sole signature authority over Corporation accounts. a. Checks issued from Corporation account (account no. 901) required two Account Number Account Description Statement Addressed To 11000 Corporate Platinum Card Edwin A. Evans/Venango Housing 12005 Corporate Optima Account Edwin A. Evans/Venango Housing 81008 Business Capital Line Edwin A. Evans/Venango Housing Kearney, 06 -027 Page 10 signatures. b. Facsimile signature stamps were utilized to authorize Corporation checks. 39. Evans, as the Corporation President, authorized, approved, and issued Corporation checks of his own volition. a. Evans utilized Kearney's facsimile stamp with Kearney's permission. b. Kearney did not object to Evans's use of Kearney's facsimile stamp. 40. Evans had sole control of the checks and check registers for the Corporation accounts. a. Evans prohibited Ross and Terrill access to Corporation checks and financial records. b. All Corporation checks issued from April 2001 through January 2005 with the exception of check numbers 2185, 2283, 2824, and 2825 bear handwritten information in the "Date," "Pay To The Order Of," "Amount," etc. sections of the checks. 1. The handwriting on checks issued is Evans's. 41. In addition to the Corporation accounts maintained at National City Bank, the Corporation maintained three separate accounts with American Express as shown below: a. Credit card /line of credit accounts are viewed as cash accounts for auditing purposes. b. No activity occurred on the card ending in Account No. 11000 between the dates of October 2001 through November 2004 with the exception of annual membership fees charged. 42. At the June 16, 1982, regular Authority meeting, Matthew Domber, a private citizen, presented a proposal to the Authority board regarding the construction of a low to moderate income family housing complex (eventually known as Evergreen Arbors). a. The nine building, one hundred living unit complex was to be constructed on a thirty -acre tract of land on what was known as Gurney Hill. b. The project was to be financed through HUD Section 11(b) funding. 1. Section 11(b) funding consists of tax - exempt revenue bonds backed by the Federal Housing Administration. 2. In order to receive tax - exempt status, a certified housing authority had Kearney, 06 -027 Page 11 to agree to act as the financing agency. c. The Authority was to have no financial responsibility for the bonds or the project in the event of financial difficulty. 1. The Authority was to be responsible for acting as the financing agency in the issuance of the tax - exempt bonds. 2. The Authority was to be responsible for administrating the ACC, enforcing the terms of the contract, making monthly Section 8 payments to the owner, reviewing the owner's determination of tenant income and eligibility, and making annual physical inspection of the project. 43. At the July 14, 1982, Authority regular meeting, the development of the Corporation as an instrumentality of the Authority to issue the Section 11(b) bonds was discussed and approved by the board. a. The board unanimously authorized, via Resolution at the July 14, 1982, meeting, the development of the Corporation (a non - profit entity) to act as an instrumentality of the Authority for the purpose of assisting and financing housing facilities for eligible tenants in the project and to cooperate with HUD pursuant to its program under Section 8 of the Act. 44. The Corporation Articles of Incorporation and By -Laws were approved by the Authority board at the July 14, 1982, [sic] via the same Resolution. a. The Articles of Incorporation for the Corporation document the appointment of Evans, Edward Albert, and Beverly Snyder as the initial directors of the Corporation. 1. Albert and Snyder were Authority board members at that time. 2. Evans signed the Articles of Incorporation as the incorporator of the Corporation. b. Evans, Albert, and Snyder signed the Corporation By -Laws on July 14, 1982. 45. Immediately following the adjournment of the July 14, 1982, Authority meeting, the first meeting of the Corporation Board of Directors was held. a. The Corporation directors approved and adopted the Corporation By -Laws as approved and submitted by the Authority. b. The Corporation directors unanimously approved a motion that the Corporation's bond counsel make all filings with HUD which were or might become necessary to obtain HUD's designation of the Corporation as an instrumentality public housing agency. c. Evans was elected as President of the Corporation at said meeting. 46. On October 7, 1982, the Authority entered into an Annual Contributions Contract (ACC) with HUD regarding the Evergreen Arbors project. a. The ACC between the Authority and HUD established the Authority's role as the Contract Administrator for the Evergreen Arbors project. 1. Under the ACC, HUD agreed to provide financial assistance to the Kearney, 06 -027 Page 12 Authority for the purpose of making HAPs. b. The ACC was signed by Albert as the Authority Chairman. 47. At the October 20, 1982, Authority regular meeting, Evans reported on the ACC and the closing regarding the Evergreen Arbors Project. a. The ACC entered into between the Authority and HUD was for a term of twenty years. b. The closing on the project occurred on October 6 th and 7 t ", 1982, in Pittsburgh, PA. 1. Construction notes totaled $4,974,500.00. 2. Mortgage Insurance Bonds totaled $5,295,000.00. c. Evans and Authority Solicitor Terry Whitling were present at the closing to represent the Authority. 48. Construction of the Evergreen Arbors complex began during or about the fall of 1982. a. The project was completed during or about the fall of 1983. 49. Evergreen Arbors Associates (the project owner) utilizes the services of Arbors Management, Inc. for the management of the Evergreen Arbors project. a. Arbors Management is a full service property management company. b. Arbors Management is responsible for approving bills, preparing HAP requests, rent input, accounting, etc. 50. Arbors Management utilizes the services of an on -site manager at the Evergreen Arbors project to address day -to -day operational issues. a. The on -site manager is responsible for marketing of the units, renting the units, interviewing applicants, addressing tenant complaints, performing tenant certification, and determining tenant eligibility among other duties. 51. The responsibility of the Authority as the contract administrator is limited to issuance of the monthly HAP to Evergreen Arbors and conduction of annual inspections. a. Annual inspections include actual unit inspections and inspections of required forms /documentation regarding tenant certification, eligibility, etc. 52. From its inception in July 1982 until May 1990, the Corporation received /generated no consistent income from any source as a result of issuing the 11(b) bonds which financed the construction of Evergreen Arbors. a. The Corporation accounts at National City Bank, Account Numbers 901 and 411, were opened in May 1990 and March 1996 respectively. 53. On or about July 3, 1989, James E. Schoenberger, General Deputy Assistant Secretary for Housing -HUD, issued a memorandum for all State Housing Finance Agencies and Public Housing Agencies and all HUD Regional Administrators, Category A, B, and C Office Managers regarding the refunding of bonds issued to Kearney, 06 -027 Page 13 finance Section 8 Financing Adjustment Factor Projects. a. The memo noted that long -term tax - exempt interest rates continued to be highly favorable to advance refunding which would provide substantial Section 8 subsidy savings to the government and lock in future low mortgage rates for the project owner. b. The memo additionally noted HUD's interest in working with entities to complete the refunding initiative promptly while market conditions were feasible. 54. Evans took steps as the Corporation President to initiate the refunding /refinancing requested by HUD. a. Evans contacted Sanwa -BKG and requested a proposal be drawn for the possible refinancing. 55. In or about August 1989, Evans requested advice from HUD concerning the proposal of Sanwa -BGK to act as the exclusive agent of the Corporation to organize the refinancing of the original 11(b) issue associated with Evergreen Arbors. a. The request from Evans was in response to the July 3, 1989, memorandum issued by Schoenberger. 56. Suzanne S. McLaughlin, Attorney- Advisor, Office of Chief Counsel -HUD, issued correspondence to Evans dated August 24, 1989, which addressed the proposed refinance of Evergreen Arbors. a. McLaughlin advised that Schoenberger's memo suggested that HUD would be "pretty flexible" in considering various possible approaches to achieve refinancing. b. McLaughlin further advised that Schoenberger's memo indicated that HUD would not participate in a Public Housing Agency's selection of an underwriter or consultant. 1. Due to this clause, McLaughlin advised that she could not assist Evans in evaluation of the Sanwa -BGK proposal. 57. Minutes of the September 20, 1989, Authority board meeting documents Evans's disclosure of the proposed refinancing for Evergreen Arbors to the Authority Board. a. Evans reported that he had received written notice from HUD mandating that Evergreen Arbors be refinanced and that refinancing would reduce the original interest rate obtained. b. Evans reminded the board that the Corporation had been formed to bond finance the project. 1. Evans advised that the Corporation board (at that time) was composed of himself as President, Beverly Snyder as Vice- President, and Albert as Secretary. c. Evans stated that the refinancing would not [affect] or change in any way the duties performed or monies received by the Authority. 58. At the September 20, 1989, meeting, the Authority Board voted unanimously for Evans to proceed with the necessary steps to refinance Evergreen Arbors in Individual Office President Position Financial Coordinator Evans Sterrett Vice - President Financial Coordinator Albert Secretary Financial Coordinator Whitling Solicitor Attorney Kearney, 06 -027 Page 14 accordance with the HUD mandate. a. The minutes note no vote or approval by the board to increase Evans's compensation or to grant Evans "allowable expenses" in association with efforts taken to refinance Evergreen Arbors. 59. Minutes of the April 18, 1990, Authority Board meeting [document] Snyder's resignation from both the Authority and Corporation Boards. a. Authority Board member Mary Sterrett was appointed as the Vice - President of the Corporation by unanimous vote at the April 18, 1990, Authority Board meeting. 60. A meeting of the Corporation Board was held on May 30, 1990. a. Minutes note the meeting attended by board members Evans, Albert and Sterrett; Corporation Solicitor Terrance Whitling; and Kearney as a non - board member. 61. Under the "President's Report" section of the minutes, Evans informed the board that the Corporation had an agreement with Sanwa -BGK to complete the bond refinancing. a. Evans advised that, "... Sanwa -BGK and Venango Housing Corporation entered into an agreement in writing where by [sic] they would do everything that was necessary to refund the bonds...". b. Evans noted that the re- financing was occurring as a result of the July 3, 1989, Schoenberger memo. c. Evans identified parties involved in the refinancing as follows: Counsel - Brown & Wood; Bond Counsel- Rogers & Wells; and Trustee -Chase Lincoln First Bank National Association. 1. Additional parties involved in the refinancing but not noted in the minutes included: Underwriter -BGK Securities Co., L.P.; Trustee's Counsel- Nixon, Hargrave, Devans, and Dolye; and Escrow Agent- Mellon Bank, N.A. 62. After discussion of the bond refinancing, the Corporation Board unanimously passed a Resolution dated May 30, 1990, approving the refinancing of the Evergreen Arbors project. a. The Resolution was signed by Evans as the President of the Corporation. b. The resolution acknowledged the Corporation Board's approval of the entities involved to complete all tasks required to complete the refinancing. 63. At the May 30, 1990, Corporation Board meeting Board Members Evans, Sterrett, and Albert, along with Kearney and Whitling, were approved to hold the positions noted below: Individual Office Position Kearney N/A Financial Advisor Kearney, 06 -027 Page 15 Minutes document on at least two separate occasions that Evans, Sterrett, Albert, and Kearney are to serve in the positions noted above. b. Minutes document on at least two separate occasions that Evans, Sterrett, Albert, and Kearney are to be compensated for their services in said positions. c. Kearney had no background which would qualify him for a position as Financial Advisor in the bond market. a. 64. Evans subsequently called for a motion for Resolution that each member acting as a Financial Coordinator, Financial Advisor, or Attorney be compensated for their services. a. The vote to approve the Resolution passed unanimously (3 -0) with no abstentions noted. 1. Kearney was not serving as a Corporation board member at that time. b. Minutes do not document actual services to be performed or the amount or type of compensation to be received by any individual noted. 65. On May 30, 1990, an Emergency Meeting of the Authority was held immediately after the adjournment of the Corporation meeting. a. Authority board members in attendance at the meeting were Kearney, Sterrett, [and] Albert. 1. Two positions were vacant on the Authority board at that time. b. Also present at the meeting were Evans and Whitling. 66. Minutes note that prior to the adjournment of the May 30, 1990, Emergency Meeting, an Executive Session was held to discuss personnel matters. a. Typed minutes of the alleged Executive Session exist. 67. Although typed minutes of the alleged Executive Session exist, the authenticity of the minutes is questionable. a. No copy (original, official, or photocopy) of the existing Executive Session minutes is present in the Authority minute book which contains the May 30, 1990, regular meeting minutes. 68. Minutes of the Executive Session document Evans's explanation that the resolution to be discussed was in relation to the refinance of Evergreen Arbors. a. Evans referenced the Board to his letter dated August 21, 1989, addressed to John Bates, Chief Counsel, HUD - Pittsburgh Office and to HUD's alleged response from Suzanne McLaughlin, Attorney- Advisor, Office of Chief Counsel -HUD. 1. No copy (original, official, or photocopied) of the letter allegedly sent to Bates is present in the Authority minute book which contains the May 30, 1990, regular meeting minutes. Kea�rne , 06 -027 Page 16 69. In the correspondence dated August 21, 1989, allegedly sent to Bates, Evans outlined that since approximately $5,200,000.00 was anticipated to be refinanced and that the Corporation was to be compensated one percent or $52,000.00, the terms of Evans's agreement were that as Financial Agent and Coordinator, Evans receive forty percent of the principal amount at closing and a continued $6,000.00 quarterly after closing until all responsibilities associated with Evans's functions were complete. a. The correspondence noted that Evans had recently spoken to McLaughlin regarding the refinancing and his activity as refinancing agent as President of the Corporation. b. The correspondence noted that due to the magnitude of the requests on the Corporation and Evans to accomplish the goals suggested by HUD, the monetary terms of the agreement must be settled before Evans would exert the additional time needed for the effort. 70. Correspondence received from McLaughlin dated August 24, 1989, was presented to the Board as a response to Evans's August 21, 1989, letter allegedly sent to Bates. a. The correspondence from McLaughlin noted that Evans had requested advice concerning the proposal of Sanwa -BGK to act as exclusive agent of the Corporation to arrange the refinancing of the original Evergreen Arbors 11(b) bond issue. b. Additionally noted was that while HUD was going to be "pretty" flexible in considering various possible approaches to achieve refinancing, HUD would not participate in PHA (public housing authority) selection of an underwriter or consultant. 71. After referencing the Board to the August 21, 1989, and August 24, 1989, correspondence, Evans requested that the Authority transfer the fees received as Administrative costs to the Corporation to accomplish the requests of HUD per Schoenberger's July 3, 1989, memorandum. a. Executive Session minutes note that the intent of the transfer was to compensate Evans for his responsibility as President and Financial Agent and Coordinator of the Corporation in the amount as stated in the August 21, 1989, letter to Bates for the magnitude of responsibilities after the mentioned meeting in New York. 72. The Board subsequently approved a resolution transferring the administrative fee of the 11 b Evergreen Arbors to the Corporation to accomplish the requests of HUD for compensation of Evans acting as President, Financial Agent, and Coordinator of the Corporation for the continuous responsibility for the term of the refinanced 11 b bonds after closing at $6,000.00 quarterly. a. The vote approving the Resolution passed 3 -0 with Kearney, Sterrett, and Albert voting affirmatively. 73. Although minutes of the May 30, 1990, Authority Executive Session document approval for Evans to receive compensation in the amount of $6,000.00 quarterly for services performed as President, Financial Advisor, and Coordinator of the Corporation in association with the bond refinance, Evans did not receive checks from either entity in the amount specified on a quarterly basis. Kearney, 06 -027 Page 17 a. The amount referenced in the minutes was to represent compensation to be paid to the Corporation quarterly. b. Kearney participated in the vote approving the issuance of compensation to the Corporation. 74. At his Civil Service hearing on July 18, 2005, Evans provided testimony under oath regarding the August 21, 1989, letter to Bates and the May 30, 1990, Authority Executive session as follows: a. The letter Evans addressed to Bates requesting compensation represented compensation to be paid to the Corporation, not Evans personally. 1. Evans's use of language including "1" and "my" in the letter to Bates was in reference to his position as an officer of the Corporation. 2. Evans's intention in writing the letter was for the compensation to go to the Corporation. b. The resolution passed by the Authority during the May 30, 1990, Executive Session was not approved for the purpose of paying Evans compensation. 1. Evans believed it was approved as payment to him as President of the Corporation and indicated it could be interpreted as compensation. 2. Evans was not paid the $6,000.00 quarterly amount. 75. Evans represented McLaughlin's August 24, 1989, letter to the Board as HUD's approval to the terms and conditions set forth by Evans in his August 21, 1989, [letter] addressed to Bates. a. The Board approved the Resolution authorizing the transfer of the administrative fees based on Evans's representation of McLaughlin's letter as an approving response by HUD to the August 21, 1989, letter addressed to Bates. 76. The August 21, 1989, letter Evans purportedly sent to Bates was never received at the HUD Pittsburgh Office. a. Each section /division of the HUD Pittsburgh Office, including the Office of Chief Counsel, maintains a log documenting correspondence coming into its respective section /division. 1. Noted in the log is the date received, the individual to whom the correspondence is addressed, and a due date for response. b. The correspondence log for the Office of Chief Counsel notes no receipt of Evans's August 21, 1989, letter. 77. The August 24, 1989, letter to Evans from McLaughlin was not responsive to Evans's August 21, 1989, letter allegedly sent to Bates. a. McLaughlin did not view or review the August 21, 1989, letter to Bates. 1. The letter was not received at the Office of Chief Counsel for review. b. The subject matter of the two letters did not agree. Kearney, 06 -027 Page 18 78. Evans's factual misrepresentation of correspondence allegedly issued to and received from HUD and Evans's misrepresentation of his responsibilities regarding the actual refinancing prompted the Board to approve the transfer of administrative fees received from HUD by the Authority to the Corporation. a. Evans's misrepresentation of correspondence to and from HUD gave the Board the impression that HUD approved Evans's terms and conditions regarding compensation for the Corporation. b. Evans's misrepresentation of his responsibilities regarding the actual refinancing gave the Board the impression that Evans's workload would be dramatically increased. 1. Evans's responsibilities regarding the refinancing were limited to meeting with the Corporation Solicitor, choosing various entities to complete the refinancing (i.e. the underwriter, investment banker, bond counsel, etc.), organizing paperwork and documents regarding the initial bond issue, and signing the actual refinancing documents. 2. Evans had no ongoing responsibilities regarding the refinancing after the closing for the bond refinancing. 79. Evans generated two contracts between the Authority and the Corporation dated March 20, 1990, and May 30, 1990, respectively regarding the refinancing of Evergreen Arbors. a. The contracts were to serve as evidence that the Authority would remunerate the Corporation the ongoing administrative fee from HUD for the Evergreen Arbors project for the consecutive years of the Refinancing Agreement annually. b. Both contracts were signed by Kearney on behalf of the Authority and by Evans on behalf of the Corporation. 80. The contracts were duplicate documents with the exception of the contract date. a. The initial contract signed by Kearney and Evans was dated March 20, 1990. b. The second contract signed by Kearney and Evans was dated May 30, 1990. 1. The date of March 20, 1990, was deleted with correction fluid and the date of May 30, 1990, was typed in its place. 81. Neither of the contracts generated were ratified at any meeting of the Authority or the Corporation. a. Neither the Authority nor the Corporation held meetings on March 20, 1990, at which the initial contract could have been ratified. b. Minutes of the Corporation and Authority Emergency Meeting of May 30, 1990, document no approval by either board to enter into such a contract. 82. The closing of the bond refinance was held on June 14, 1990. a. Evans and Albert attended the closing in dual capacities with each individual representing both the Authority and Corporation. HUD Deposits Citizen's Bank* Transfers to Northwest Savings Bank ** Payment From Northwest Savings Bank to Evergreen Arbors ** Admin Fee Transfer From Northwest Savings Bank To Corporation ** Date Evergreen Check Date Amt Check Check Amt Check Check Amt 91,215.00 Arbors`. No 80,548.00 No Date No Date 04- 01- 01 0.00 - 15,560.00 - 239 04 -01 -01 94,956.00 - - 04 -01 -02 05 -01 -01 14,323.00 80538 05 -01 -01 14,323.00 240 05 -01 -01 76,901.00 - - - 06 -01 -01 91,215.00 80931 06 -01 -01 91,215.00 241 06 -01 -01 76,305.00 - - - 06 -29 -01 91,215.00 81329 07 -01 -01 91,215.00 242 07/01/01 79,744.00 243 07 -02 -01 7,425.00 08 -01 -01 91,215.00 81731 08 -01 -01 91,215.00 245 08 -01 -01 84,334.00 246 08 -22 -01 7,425.00 08 -31 -01 91,215.00 82181 09 -01 -01 91,215.00 247 09 -01 -01 82,795.00 - - - 10 -03 -01 91,215.00 82525 10 -01 -01 91,215.00 248 10 -01 -01 77,216.00 - - - 11 -01 -01 91,215.00 82893 11 -01 -01 91,215.00 249 11/01/01 75,135.00 - - - 11 -30 -01 91,215.00 82935 12 -01 -01 91,215.00 250 12 -01 -01 82,654.00 251 12 -11 -01 7,425.00 Total 652,828 11 -07 -02 74,239.00 652,828 11 -01 -02 83,853.00 730,040 11 -01 -02 5,000.00 22,275 01 -02 -02 91,215.00 83315 01 -01 -02 91,215.00 252 01 -01 -02 53,875.00 253 01 -18 -02 7,425.00 02 -01 -02 91,215.00 83665 02 -01 -02 91,215.00 254 02 -01 -02 80,548.00 - - - 03 -01 -02 15,560.00 84329 03 -05 -02 15,560.00 255 03 -01 -02 87,227.00 - - - 04 -01 -02 91,215.00 84736 04 -01 -02 91,215.00 256 04 -01 -02 75,904.00 - - - 05 -01 -02 91,215.00 84799 05 -01 -02 91,215.00 257 05 -01 -02 94,555.00 - - - 06 -01 -02 91,215.00 85180 06 -01 -02 91,215.00 258 06 -01 -02 83,384.00 - - - 07 -01 -02 91,634.00 85903 07 -01 -02 91,634.00 259 07 -01 -02 101,049.0 260 07 -01 -02 7,415.50 0 08 -01 -02 91,628.00 86245 08 -01 -02 91,628.00 261 08 -01 -02 89,294.00 262 08 -30 -02 7,415.50 09 -01 -02 91,628.00 86306 09 -01 -02 91,628.00 263 09 -01 -02 82,539.00 - - - 10 -01 -02 0.00 86649 10 -01 -02 91,628.00 264 10 -01 -02 94,154.00 - - - 11 -01 -02 74,239.00 87675 11 -07 -02 74,239.00 265 11 -01 -02 83,853.00 266 11 -01 -02 5,000.00 12 -03 -02 91,628.00 87726 12 -01 -02 91,628.00 267 12 -01 -02 87,466.00 268 12 -09 -02 7,415.50 Kearney, 06 -027 Page 19 83. From approximately July 1990 through at least January 2004, Evans transferred administrative fees received by the Authority from HUD for administration of Evergreen Arbors to the Corporation. a. Evans transferred the entire HUD monthly subsidy received (HAPs and Administrative Fees) from the Authority account at Citizen's Bank (aka Mellon Bank) to the Authority account at Northwest Savings Bank via check on a monthly basis. 1. Occasional transfers in excess of the total subsidy provided by HUD were made regarding months in which HUD reduced the subsidy provided to account for overpayment during the fiscal year. b. Evans subsequently issued one check monthly from the Northwest Savings Bank Account to Evergreen Arbors' representative of monthly HAPs due. c. Evans issued occasional checks throughout the fiscal year from the Authority account at Northwest Savings Bank to the Corporation account at National City Bank representative of the transfer of administrative fees due. 1. Evans did not issue the checks to the Corporation on any set schedule (i.e. monthly, bi- monthly, quarterly, etc.). d. Evans maintained sole custody and control of the Authority's account at Northwest Savings Bank and the Corporation's account at National City Bank. 84. From April 2001 through January 2005, transfers of funds between the Authority accounts at Citizen's Bank and Northwest Savings Bank, and transfers of funds between the Authority account at Northwest Savings Bank and the Corporation's account at National City Bank. 01 -02 -04 91,682.00 93193 01 -01 -04 91,682.00 286 01 -02 -04 64,084.00 287 01 -08 -04 7,578.75 02 -02 -04 91,682.00 93559 02 -01 -04 91,682.00 288 02 -01 -04 79,192.00 - - 03 -03 -03 - 03 -01 -04 91,682.00 93953 03 -01 -04 91,682.00 289 03 -02 -04 102,503.00 - - 91,628.00 - 04 -01 -04 59,729.00 94335 04 -01 -04 59,729.00 290 04 -01 -04 88,208.00 - - 89767 - 05 -03 -04 91,682.00 94732 05 -01 -04 91,682.00 291 05 -01 -04 89,090.00 - - * ** - 06 -01 -04 91,682.00 95307 06 -01 -04 91,682.00 292 06 -01 -04 89,135.00 - - 91,693.00 - 07 -01 -04 86,146.00 95756 07 -01 -04 86,146.00 293 07 -01 -04 84,951.00 294 07 -01 -04 7,578.75 08 -02 -04 86,146.00 96206 08 -01 -04 86,146.00 295 08 -02 -04 69,389.00 297 08 -26 -04 7,578.75 09 -01 -04 24,236.00 96639 09 -01 -04 86,146.00 296 09 -01 -04 91,270.00 - - 73,293.00 - 10 -01 -04 86,146.00 97111 10 -01 -04 86,146.00 298 10 -01 -04 82,600.00 - - - - 11 -01 -04 86,146.00 97518 11 -01 -04 24,236.00 299 11 -01 -04 58,159.00 300 11 -01 -04 7,578.75 12 -01 -04 86,146.00 97907 12 -01 -04 86,146.00 301 12 -01 -04 89,036.00 - - - Total 973,105 973,105 987,617 30,315 01 -03 -05 86,146.00 98374 01 -01 -05 86,146.00 302 01 -03 -05 57,129.00 303 01 -03 -05 7,578.75 Total 86,146 86,146 57,129 7,578.75 01 -02 -03 91,628.00 88169 01 -01 -03 91,628.00 269 01 -01 -03 60,435.00 270 01 -22 -03 7,415.50 02 -03 -03 91,628.00 88560 02 -01 -03 91,628.00 271 02 -01 -03 85,895.00 - - - 03 -03 -03 91,628.00 88957 03 -01 -03 91,628.00 272 03 -03 -03 89,635.00 - - - 04 -01 -03 91,628.00 89342 04 -01 -03 91,628.00 273 04 -01 -03 80,302.00 - - - 05 -01 -03 91,628.00 89767 05 -01 -03 91,628.00 274 05 -01 -03 95,698.00 - - - 06 -02 -03 91,628.00 * ** * ** * ** 275 06 -01 -03 88,500.00 - - - 07 -01 -03 91,693.00 90658 07 -01 -03 91,693.00 276 07 -01 -03 91,404.00 277 07 -01 -03 7,578.75 08 -01 -03 91,682.00 91114 08 -01 -03 91,682.00 278 08 -01 -03 68,290.00 279 08 -08 -03 5,000.00 09 -02 -03 91,682.00 91523 09 -01 -03 91,682.00 280 09 -02 -03 80,769.00 281 09 -24 -03 7,578.75 10 -01 -03 91,682.00 91930 10 -01 -03 91,682.00 282 10 -01 -03 73,293.00 - - - 11 -03 -03 91,682.00 92404 11 -01 -03 91,682.00 283 11 -01 -03 95,032.00 - - - 12 -01 -03 91,682.00 93060 12 -01 -03 91,682.00 284 12 -01 -03 81,681.00 285 12 -02 -03 7,578.75 Total 1,099,871 1,008,243 990,934 35,151.75 HUD Deposits Citizen's Bank* Transfers to Northwest Savings Bank ** Payment From Northwest Savings Bank to Evergreen Arbors ** < Admin Fee Transfer From Northwest Savings Bank To Corporation ** Date Evergreen Check Date Amt Check Check Amt Check Check Amt Arbors No No Date No Date Total 912,392 1,004,020 1,013,848 34,671.50 Kearney, 06 -027 Page 20 *HUD deposit dates are dates posted on the bank statement * *Other dates represent dates on actual checks * * *No check to NWSB in June 2003 —Catch up for check issued in October 2002 when no EA monies received from HUD a. Evans transferred a total of $129,992.00 in administrative fees received by the Authority for the administration of Evergreen Arbors to the Corporation spanning the time frame of April 2001 through January 2005. 1. A balance of $3,741.84 existed in the Corporation account as of April 1, 2001. b. Evans affixed both his name stamp and Kearney's name stamp to all of the checks noted above. 1. Kearney did not object to Evans's use of Kearney's name stamp. 85. In addition to the transfer of administrative fees received by the Authority for the administration of Evergreen Arbors to the Corporation, Evans transferred /deposited at least $58,626.12 into the Corporation account at National City Bank from the Authority account at First National Bank from May 2002 through January 2005 as shown below: Check No. Check Date Check Amount ', Payee Signatories Deposit Date Description Check Origin Check No. Check Date Check Amount Payee Signatory Evans Computer Purchase Deposit Date 05/22/01 American Express Acct 12005 5122 05/22/01 $2,000.00 Venango Housing Corp. National Grange Mutual Ins. Co. 7038377 07/04/01 2,433.42 Venango Housing Corp. N/A 07/16/01 Pa Assoc. of Notaries 51239 05/29/01 36.73 Venango Housing Corp. N/A 08/02/01 A. Crivelli Chevrolet 012686 07/18/01 20.00 Venango Housing Corp. N/A 08/02/01 American Express Acct 81008 9012 03/28/02 2,500.00 Venango Housing Corp. Evans 03/28/02 Total 1052 04/27/04 $6,990.15 Venango Housing Corp. Evans /Kearney 04/27/04 1002 05/10/02 $1,521.12 Venango Housing Corp. Evans /Kearney 05/10/02 Computer Purchase 1009 11/04/02 1,500.00 Venango Housing Corp. Evans /Kearney 04/09/03 Alloc Plan 2002 Housing 1028 04/01/03 1,500.00 Venango Housing Corp. Evans /Kearney 04/09/03 Alloc Plan Fiscal Yr 2003 1047 03/20/04 995.00 Venango Housing Corp. Evans /Kearney 04/02/04 Acct 2004 Adm Plan 1050 03/02/04 995.00 Venango Housing Corp. Evans /Kearney 04/02/04 Acct 2004 Adm Plan 1049 04/02/04 1,500.00 Venango Housing Corp. Evans /Kearney 04/27/04 Bond Restructure 2004 1052 04/27/04 1,500.00 Venango Housing Corp. Evans /Kearney 04/27/04 Bond Restructure 2004 1053 05/13/04 900.00 Venango Housing Corp. Evans /Kearney 05/13/04 Housing Allocation Plan 1055 05/13/04 900.00 Venango Housing Corp. Evans /Kearney 05/13/04 Housing Allocation Plan 1069 12/14/04 30,315.00 Venango Housing Corp. Evans /Kearney 12/15/04 Acct 200511 1074 12/21/04 17,000.00 Venango Housing Corp. Evans /Kearney 01/06/05 Tr 112005 Total $58,626.12 Ck Date Ck No Ck Amt. Payee Description Signatories* Check Disposition 12/21/2001 2283 $ 172.00 Gary H. Kearney Account Info Evans /Kearney Cashed Out 2/27/2002 2332 $ 750.00 Gary H. Kearney Corp Acct Fee 750# Evans /Kearney Deposit (064061187) 3/1/2002 2334 $ 750.00 Gary H. Kearney Corp Acct Fee #2 -750 Evans /Kearney Deposit (064061187) 8/31/2003 2592 $ 750.00 G. H. Kearney Acct 2003 Evans /Kearney Deposit (064061187) 9/2/2003 2594 $ 750.00 G. H. Kearney Acct 2003 Evans /Kearney Deposit (064061187) Total $3,172.00 Kearney, 06 -027 Page 21 a. Authorizing signatures were affixed to all of the checks noted above with facsimile stamps of Evans's and Kearney's signatures. 1. Evans affixed both his name stamp and Kearney's name stamp to all of the checks noted above. 2. Kearney posed no objection to Evans's use of Kearney's facsimile stamp. b. Interest accrued on the account is not included in the deposit totals. 86. Remaining deposits into the Corporation account at National City Bank totaling $6,990.15 spanning the time frame of May 2001 through January 2005 consist of American Express convenience checks and refund checks issued as shown below: a. Evans signed both American Express convenience checks as the authorizing signatory. b. Interest accrued on the account is not included in the deposit totals. 87. From at least April 2001 through January 2005, Evans routinely utilized the Corporation account at National City Bank (Account No. 901) to issue payments to Kearney without specific board approval totaling $3,172.00 as shown below: *Signature Stamps utilized to authorize checks Ck Date Ck No Ck Amt.,' Payee Description Signatories* Check Disposition Deposit (064061187) 5/29/2002 1004 $750.00 G H Kearney None Evans /Kearney 6/5/2002 1006 $750.00 G H Kearney None Evans /Kearney Deposit (064061187) 12/20/2002 1020 $400.00 G H Kearney None Evans /Kearney Deposit (064061187) 2/7/2003 1023 $750.00 G H Kearney None Evans /Kearney Deposit (064061187) 2/28/2003 1025 $750.00 G H Kearney None Evans /Kearney Deposit (064061187) 12/17/2003 1040 $500.00 G H Kearney Accounting (Illegible) Evans /Kearney Deposit (064061187) 2/6/2004 1044 $750.00 G H Kearney Admin Plan 5555 Evans /Kearney Deposit (064061187) 3/3/2004 1046 $750.00 G H Kearney Admin Plan 5555 Evans /Kearney Deposit (064061187) 8/25/2004 1060 $750.00 G H Kearney Plan Acct A004 Evans /Kearney Deposit (064061187) 9/7/2004 1063 $750.00 G H Kearney Plan Acct A004 Evans /Kearney Deposit (064061187) 12/15/2004 1067 $250.00 G H Kearney Acct 200411 Evans /Kearney Deposit (064061187) 12/14/2004 1068 $250.00 G H Kearney Acct 200412 Evans /Kearney Deposit (064061187) Total $7,400.00 Kearney, 06 -027 Page 22 a. None of the five checks received by Kearney were approved by the Corporation board or the Authority board at any official board meeting. 1. Although in existence since July 1982, minutes of only two official Corporation meetings exist. aa. Corporation minutes note no official action by the respective board members to approve any checks issued by Evans from the Corporation account. b. No minutes of Authority board meetings document Corporation meetings held concurrently with Authority meetings. 1. No official votes by the Corporation board to approve checks issued from Corporation accounts are present in Authority minutes. c. Four of the five checks were deposited into Kearney's personal bank account at Northwest Savings Bank (Account No. 187). 1. The remaining check was cashed by Kearney. 88. In addition to checks issued /received from the Corporation account at National City Bank, from at least May 2002 through December 2004, Evans routinely utilized the Authority account at First National Bank (Account No. 92) to issue payments to Kearney without specific board approval totaling $7,400.00 as shown below: None of the twelve checks received by Kearney were approved by the Corporation board or the Authority board at any official board meeting. 1. Although in existence since July 1982, minutes of only two official Corporation meetings exist. aa. Corporation minutes note no official action by the respective board members to approve any checks issued by Evans from the Corporation account. b. No minutes of Authority board meetings document Corporation meetings held concurrently with Authority meetings. a. Kearney, 06 -027 Page 23 1. No official votes by the Corporation board to approve checks issued from Corporation accounts are present in Authority minutes. c. All twelve checks were deposited into Kearney's personal bank account at Northwest Savings Bank (Account No. 187). 89. Funds available in the Authority account at First National Bank (Account No. 92) from May 2002 through December 2004 were transferred from the Authority Mellon /Citizens Bank Account (for the Section 8 Choice Voucher Program) and the Authority National City Bank Account (for the Public Housing Program). a. On April 12, 2002, check number 084761, dated April 11, 2002, in the amount of $53,976.90 from the Authority Mellon /Citizens Bank account was deposited into the Authority First National Bank Account. 1. The check bore the facsimile stamps of Kearney and Evans as authorizing signatories. aa. The existing balance prior to the deposit was approximately $36.62. b. On July 9, 2004, check number 4540, dated July 9, 2004, in the amount of $31,066.00 from the Authority National City Bank account was deposited into the Authority First National Bank account. 1. The check bore the facsimile stamps of Kearney and Evans as authorizing signatories. 90. Kearney received compensation from the Authority First National Bank account not allowable by law per conflict of interest regulations encompassed in HUD ACC contracts associated with the Public Housing Program and HUD Section 8 Choice Voucher HAP contracts. a. Funds received by Kearney from the Authority First National Bank account originated in accounts established for the Public Housing Program and Section 8 Choice Voucher Program. 91. Kearney appeared as a witness at Evans's Civil Service Commission hearing conducted in Room 1511 Qf the State Office Building located at 300 Liberty Street, Pittsburgh, PA on July 18 and 19 2005. a. The purpose of the hearing was to assist the Civil Service Commission in determining if Evans had been properly removed in accordance with Section 807 of the Civil Service Act and whether Evans's removal was due to discrimination. 92. At the Civil Service hearing on July 18, 2005, Kearney provided testimony under oath regarding the following: a. Kearney received no compensation from the Corporation while serving as an appointed financial advisor. b. Kearney was appointed as Vice - President of the Corporation after Albert's death. c. Kearney was allowed an administrative fee once appointed as the Corporation Vice - President. Kearney, 06 -027 Page 24 d. Kearney received $3,000.00 per year for serving as the Corporation Vice - President. 93. Corporation By -Laws prohibit officers of the Corporation [from] being compensated in their officer position. 94. Kearney, as Vice - President of the Corporation, realized a financial gain of $10,572.00 as the result of accepting Corporation and Authority checks not specifically approved by the Corporation or Authority boards for service as an officer on the Corporation board of directors, an action prohibited by Corporation By -Laws. a. Kearney received five checks totaling $3,172.00 from the Corporation National City Bank account between the dates of December 21, 2001, and September 2, 2003. b. Kearney received twelve checks totaling $7,400.00 from the Authority First National Bank account between the dates of May 29, 2002, and December 14, 2004. c. Kearney's facsimile name stamp was utilized to affix one of two authorizing signatures to all seventeen checks received. THE FOLLOWING FINDINGS RELATE TO ALLEGATIONS THAT KEARNEY RECEIVED COMPENSATION NOT PERMITTED BY LAW WHEN HE WAS EMPLOYED WITH THE AUTHORITY AND LISTED AS AN INDEPENDENT CONTRACTOR WHILE SERVING ON THE AUTHORITY BOARD OF DIRECTORS 95. From January 2001 into January 2005, the Authority employed Jane White and Rick Myers at various times in addition to Evans, Ross, and Terrill. a. Terrill and White were both employed in Civil Service positions as Management Aides until approximately September 26, 2001. 1. In their position as Management Aides, Terrill and White were responsible for various clerical /administrative duties and HQS inspections. aa. White resigned from employment with the Authority effective September 26, 2001. bb. Terrill was promoted to Section 8 Coordinator subsequent to White's resignation. cc. One Management Aide position remained vacant until approximately July 2005. dd. The second Management Aide position is currently vacant. b. Myers was employed as an independent contractor in the position of Maintenance Supervisor with the Authority (a non -civil service position) during the above listed time frame. 1. Evans initially hired Myers into the position in approximately 1989. aa. Myers did not complete an application for employment. Kearney, 06 -027 Page 25 2. Myers was responsible for maintenance of the Cherry Hill complex including painting, minor repairs, landscaping, grounds maintenance (landscaping), etc. c. Evans, as Executive Director, was responsible for the ultimate supervision of all Authority employees. 96. As the Maintenance Supervisor, Myers initially reported to Evans regarding his work assignments. a. Myers began reporting to Ross for work assignments in the late 1990s. 97. Evans established Myers's salary at the rate of $8.00 per hour in 1989. a. Myers' salary had increased to $8.50 per hour by 2001. 98. As a contract employee, Myers received his salary on a weekly basis. a. Myers was paid from the National City Account (Account No. 6801677) established for the Public Housing program. 1. Myers's salary originated from a line item in the Cherry Hill Public Housing budget which provided for contract services. 2. Myers was issued an IRS Form 1099 annually to document his wages received. 99. Myers routinely worked forty hours per week at the Authority from his initial hiring until approximately September 2001. a. Myers's weekly hours were reduced to an average of twenty hours per week as of September 2001. b. Myers's hours were reduced as a result of Kearney gaining employment with the Authority. 100. Prior to obtaining employment with the Authority, Kearney was employed by Pennzoil /Pennzoil - Quaker State Company from approximately May 24, 1976, to approximately July 1, 2001. a. Kearney was employed at the Rouseville Pennzoil location for the majority of his career. b. Kearney held positions of Clerk, Clerk/Senior, Clerk VII, Supervisor /Production, and Supervisor /Packaging during his tenure. 101. On July 5, 2000, Kearney received correspondence documenting his separation from employment by Pennzoil - Quaker State Company and /or any affiliated company. a. In connection with his separation, Kearney was offered an opportunity to participate in the Company's Involuntary Separation Benefit Plan No. 888 in exchange for execution of a Waiver and Release. b. Kearney signed the Severance Benefit Plan Waiver and Release on July 5, 2000. Kea�rne , 06 -027 Page 26 102. Through the Company's Involuntary Separation Benefit Plan No. 888, Kearney was entitled to receive a severance benefit equal to two weeks of base pay for each year of service with the Company with any partial year rounded up. a. Kearney was entitled to receive fifty weeks of base pay based on his years of service with the Company. b. Severance benefits were to be paid on a bi- weekly basis. 103. Kearney's last day of work with Pennzoil - Quaker State Company was July 5, 2000. a. Kearney's severance package began on July 15, 2000, and ended on June 29, 2001. b. Kearney's retirement from Pennzoil - Quaker State Company was effective July 1, 2001. 104. Kearney received correspondence dated March 21, 2001, from Edward Pesso, Pennzoil - Quaker State Company Benefits Administrator detailing the amounts of Kearney's retirement benefits at age 65 and at age 59.4 (Kearney's age at the time of his retirement). a. Kearney had a total vested retirement benefit of $1,320.32 per month payable at age 65. b. Kearney had a total vested retirement benefit of $1,214.69 per month payable at the early age of 59.4. c. Kearney opted to begin receiving his retirement early at age 59.4. 105. Kearney received correspondence dated July 19, 2001, from Pennzoil - Quaker State Company Manager of Benefits, Raymond Fischer, detailing Kearney's retirement benefit of $1,214.69 (gross) monthly via two checks. a. Kearney was to receive one check per month from Chase Manhattan Bank in the gross amount of $849.01 and one check from the Variable Annuity Life Insurance Company (VALIC) in the gross amount of $365.68. b. Kearney also elected to obtain retiree medical coverage for himself and his spouse which resulted in $175.52 being deducted monthly from the Chase pension check. 106. As a result of Kearney losing his employment with Pennzoil - Quaker State Company, Evans hired Kearney to act as an Independent Contractor for the Authority. a. Kearney began his employment as an Independent Contractor with the Authority on or about September 10, 2001. 1. Kearney did not complete an application for the position. b. Evans set Kearney's wage at $8.60 per hour. 1. Kearney's wage was set $.10 per hour higher than Myers' wage although Myers had been employed with the Authority for approximately twelve years at the time of Kearney's hiring. c. The position into which Kearney was hired was not publicly advertised. Kearney, 06 -027 Page 27 107. At the time of Kearney's hiring, no vacancy existed at the Authority for the performance of services ultimately provided by Kearney. a. Two Management Aide positions were available as a result of White resigning and Terrill being promoted to Section 8 Coordinator. 1. Kearney did not perform the functions of Management Aides during his employment with the exception of conducting HQS inspections. b. No vacancy existed for any maintenance type personnel. 1. Myers was completing maintenance type responsibilities for the Authority at that time. 108. In September 2001, Evans reduced the number of hours Myers was permitted to work from forty hours per week to twenty hours per week. a. Evans effectively created a position for Kearney by reducing Myers's hours from forty to twenty hours per week. 109. Evans did not present Kearney's hiring to the Authority for any vote or approval. a. Authority meeting minutes from March 2001 through September 2004 note no discussion, vote, or approval for Kearney to perform any services for the Authority in a compensated capacity. 110. Correspondence dated September 1, 2001, addressed to Evans documented the subject of Kearney performing services for the Authority and detailed the following information: a. Kearney wished to experience the "full spectrum" of the Authority with Evans's permission. b. Kearney intended to pass the Civil Service Test so that he would be properly qualified to perform some of the duties of an employee of the HA, on a part time basis, as a `temporary employee'." c. Kearney offered to take temporary leaves of absence from the Authority board while doing the experiment so that, this is not perceived as a conflict of interest." d. Kearney signed the letter in his capacity as the Chairman of the Authority. e. Kearney delivered the correspondence to the Authority in an envelope with "Ed (for your files)" written on it. 111. Although the correspondence documented a date of September 1, 2001, the correspondence and the envelope it was delivered in documented a "Received" date stamp of October 3, 2002. a. The letter submitted by Kearney was done so approximately one year and one month after Kearney began performing services for the Authority in the capacity as an independent contractor. b. Kearney dated the letter September 1, 2001, to give the impression that the letter had been submitted prior to his employment with the Authority. Kearney, 06 -027 Page 28 112. Kearney performed painting and minor repairs in apartments at the Cherry Hill Complex (the Public Housing program) and HQS inspections for the Section 8 Choice Voucher program. a. Kearney reported to Ross and /or Evans in his position. 113. Kearney performed services for the Authority from approximately September 10, 2001, through January 16, 2005, as an independent contractor while serving as a member of the Authority board. a. Kearney took no leaves of absence as during his entire tenure as an Authority board member. 114. Kearney was officially removed from the Authority board by an Order of Court from the Venango County Court of Common Pleas dated January 16, 2005. a. The Order documented that Kearney's seat be filled by Steve Eakin effective January 1, 2005. 115. As a contract employee, Kearney received his salary on a weekly basis. a. Kearney was paid from the National City Account (Account No. 677) established for the Cherry Hill Public Housing program. 1. Kearney's salary originated from a line item in the Public Housing budget which provided for contract services. 2. Kearney was also paid for HQS inspections performed for the Section 8 Choice Voucher program through the Cherry Hill Public Housing program account. b. Kearney was issued an IRS Form 1099 annually to document his wages received. 116. Kearney completed weekly time cards in his position and submitted the time cards to Ross for processing. a. Ross did not generate a payroll for Kearney unless Kearney submitted a time card documenting hours worked. 117. Between the dates of September 10, 2001, and January 14, 2005, Kearney received approximately $24,071.28 for services performed as an independent contractor for the Authority while serving as a member of the Authority board. a. Of the one hundred fifty -four checks issued to Kearney, at least one hundred fifty -two were authorized with facsimile stamps of Kearney and Evans. 1. Kearney either stamped or permitted Authority employees to stamp his facsimile signature on payroll checks Kearney received. aa. Kearney never raised any concern or disputed the use of his stamp by Authority employees. 2. Check number 3860 could not be located to positively determine the authorizing signatories. 3. Authorizing signatories for check number 3890 were illegible. Meeting Date Kearney Present Kearney's Vote For Budget Approval Final Vote For Budget Approval Fiscal Year End Date 03/21/01 Yes Yes 4 -0 06/30/02 03/20/02 Yes Yes 3 -0 06/30/03 03/19/03 Yes Yes 5 -0 06/30/04 03/17/04 Yes N/A N/A 06/30/05 Kearney, 06 -027 Page 29 b. Of the one hundred fifty -four checks issued to Kearney, eighty -five were deposited into Kearney's personal account at Northwest Savings Bank (Account No. 187) and sixty -eight were cashed. 1. The ultimate disposition of check number 3860 could not be determined. 118. From at least 2001 through 2003 the Authority board approved the submission of Form HUD - 52723, Operating Fund Calculation of Operating Subsidy reports to HUD. a. The form notes the operating costs of the Authority for the Public Housing Program and the operating amount the Authority is requesting from HUD for the upcoming year. b. The reports were based on the Authority fiscal year of July 1 through June 30. c. The information in the reports is generated via Authority staff. 119. Once received and reviewed by HUD, HUD amends the figures on the form as necessary and submits correspondence to the Authority along with the amended form advising the Authority of the amount allocated for the upcoming fiscal year. a. Funds for contract services (i.e. independent contractors) are included in the allotment authorized by HUD. 120. As an authority board member, Kearney participated in board actions approving the Form HUD - 52723, Operating Fund Calculation of Operating Subsidy report and its submission to HUD as shown below: a. Authority minutes note the approval of Form HUD - 52723, Operating Fund Calculation of Operating Subsidy reports as the approval of the Cherry Hill budget. b. Although submitted in 2004, Authority minutes note no specific approval by the Authority board for the submission of the report to HUD for fiscal year ending June 30, 2005. 121. Kearney specifically participated in and approved the vote to submit the report to HUD in 2002 and 2003 while he was employed with the Authority. a. Kearney participated in the vote and approval of the Cherry Hill budget from which his wages as an independent contractor with the Authority originated. 122. Attached to Form HUD - 52723, Operating Fund Calculation of Operating Subsidy reports filed with HUD for fiscal years ending June 30, 2004, and June 30, 2005, is Form HUD- 52574, PHA/IHA Board Resolution Calculation of Performance Funding System Operating Subsidy. Kearney, 06 -027 Page 30 a. The form is required to be certified by the Authority board Chairman. b. Kearney signed the forms as the Authority Chairman on March 19, 2003, and March 17, 2004. 123. By signing the form, Kearney certified, among other information, that the following was true and accurate: a. All regulatory and statutory requirements had been met; b. The Authority had sufficient operating reserves to meet the working capital needs of its developments; c. Proposed budget expenditures were necessary in the efficient and economical operation of the housing for the purpose of serving low- income residents. d. The budget indicated a source of funds adequate to cover all proposed expenditures; and e. All proposed rental charges and expenditures would be consistent with law. 124. Payment of Kearney as an independent contractor from the Cherry Hill operating fund while serving as an Authority board member was not consistent with provisions of law. a. Payment to Kearney was in contradiction to HUD Conflict of Interest Provisions set forth for the Public Housing Program. b. HUD warnings on the form indicate possible prosecution under 18 U.S.C. 1001, 1010, 1012; and 31 U.S.C. 3729, 3802 for false claims and statements. 125. Kearney received approximately $24,075.96 as a result of being hired into an independent contractor position with the Authority and being compensated from the Cherry Hill Operating Fund at a time when Kearney was serving as a member of the Authority board of directors. a. The position into which Kearney was hired was created specifically for Kearney. b. Compensation received by Kearney was not permitted by law per HUD conflict of interest provisions established for the Public Housing Program and the Section 8 Choice Voucher Program as well as mandates provided within Housing Authorities Law. III. DISCUSSION: As a member of the Housing Authority of Venango County ( "Authority ") from December 18, 1982, through December 31, 2004, and Chairman of the Authority Board from March 18, 1987, through December 31, 2004, Respondent Gary Kearney, hereinafter also referred to as "Respondent," "Respondent Kearney," and "Kearney," was a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. The allegations are that Kearney, as a Member and Chairman of the Housing Authority of Venango County, violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § Kearney, 06 -027 Page 31 1103(a), when he used the authority of his public position as Chairman and a Member of the Authority and as a Director of the Authority's subsidiary, Venango Housing Corporation, to participate in the authorization of payments to himself which were not authorized by the Authority; and when he used the authority of his public office to receive compensation not provided for by law when he was employed by the Authority while simultaneously serving as a Board Member. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest: § 1103. Restricted Activities (a) Conflict of interest. —No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The term "conflict of interest" is 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. 65 Pa.C.S. § 1102. Section 1103(a) of the Ethics Act prohibits a public official /public employee 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. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are reproduced above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. The Housing Authority of Venango County ( "Authority ") was created in 1977 pursuant to the Pennsylvania "Housing Authorities Law." The Authority operates: (1) a Public Housing Program, consisting of a twenty unit complex known as the "Cherry Hill Apartments "; (2) a Section 8 Choice Voucher Program; and (3) a Section 8 New Construction Program, consisting of a one hundred unit, privately owned housing complex known as "Evergreen Arbors Estates" (also referred to herein as "Evergreen Arbors "). The Venango Housing Corporation ( "Corporation ") was formed in 1982 at the direction of the Authority Board. The Corporation was formed to act as an instrumentality Kearney, 06 -027 Page 32 of the Authority for the purpose of assisting with and financing housing facilities for eligible tenants and to cooperate with HUD pursuant to its Section 8 program. The Authority Board of Directors ( "Authority Board ") consists of five Members. Respondent Kearney served as a member of the Authority Board from December 18, 1982, through December 31, 2004. Kearney served as the Chairman of the Authority Board from March 18, 1987, through December 31, 2004. The Housing Authorities Law mandates that Authority Board Members may not be compensated for their service. Authority Board Members are entitled to receive necessary expenses incurred in the discharge of their duties. The Corporation Board of Directors ( "Corporation Board ") consists of three members, all of whom are appointed by the Authority Board. Kearney served as a Member and Vice - President of the Corporation Board from at least March 2, 2000, through December 31, 2004. Kearney served as a financial advisor to the Corporation from May 30, 1990, through December 31, 2004. Corporation Board members are not compensated for service on the Corporation Board. Additionally, Corporation By -Laws prohibit officers of the Corporation from being compensated in their officer positions. During the time period relevant to these proceedings, Edwin Evans ( "Evans ") served as Authority Executive Director and as a director and President of the Corporation. Authority Board members did not normally question or challenge Evans's actions, explanations, or suggestions at meetings, due to Evans' tenure with the Authority and Evans reporting that annual audits conducted of the Authority revealed no discrepancies. From at least January 2001 through approximately January 2005, Kearney and Evans maintained sole signature authority over Authority accounts. During that time period, Authority account number 677 at National City Bank was utilized for the Public Housing Program (Cherry Hill Apartments). Authority account number 651 -6 at Citizens Bank was utilized for the Section 8 Choice Voucher Program and the Section 8 New Construction Program (Evergreen Arbors). Authority account number 39 at Northwest Savings Bank was utilized to segregate HAPS and Administrative Fees issued to the Authority for the Section 8 New Construction Program from HAPS and Administrative Fees received for the Section 8 Choice Voucher Program. Authority account number 92 at First National Bank was initially utilized as an interest generating account for the Authority. After June 28, 2002, the account was utilized as a general checking account. Authority Members were not supplied with bill lists or listings of checks issued from Authority accounts for review nor were checks issued presented to the Authority members verbally or physically. From at least January 2001 to January 2005, no official motion or vote was taken by the Authority Members to formally approve checks issued from Authority accounts. As Authority Executive Director, Evans prepared or directed the preparation of Authority checks. Checks issued from Authority accounts required two signatures. Facsimile signature stamps in the names of Kearney and Evans were utilized to authorize Authority checks. From at least January 2001 through approximately January 2005, Kearney and Evans maintained sole signature authority over Corporation accounts. Checks issued from the Corporation's primary account, account number 901, required two signatures. Facsimile signature stamps were utilized to authorize Corporation checks. Evans had sole control of the checks and check registers for the Corporation accounts. Evans, as Corporation President, authorized, approved, and issued Corporation checks of his own volition. Evans utilized Kearney's facsimile stamp with Kearney's permission. Kearney did not object to Evans's use of Kearney's facsimile stamp. Kearney, 06 -027 Page 33 Expenditures or transfers of Corporation funds were required to be approved at an open and public meeting. However, no official motion or vote was taken by the Corporation directors to formally approve checks issued from Corporation accounts. No bill lists, invoices received, or checks issued were presented for review or approval at any Corporation meetings or at any Authority meetings at which Corporation business was discussed. Per the Stipulated Findings, there have been only two official Corporation meetings held over the existence of the Corporation, and Kearney did not serve on the Board when the two official Corporation meetings were held. Additionally, although Section 3.8 of the Corporation By -Laws in effect during Kearney's tenure allowed that any action that could be taken by the Board at a meeting could be taken without a meeting provided that written consent setting forth the action to be taken would be signed by each director and filed with the Secretary, no such written consents exist to substantiate that any official action was taken by the Corporation outside of a meeting setting. The Stipulated Findings detail actions taken in 1989 and 1990 relative to the Authority's refinancing of Evergreen Arbors. The parties have stipulated that Evans made factual misrepresentations to the Authority Board, which prompted the Board to approve the transfer of administrative fees received from HUD by the Authority to the Corporation. Kearney participated in the Authority Board's unanimous vote approving the issuance of such compensation to the Corporation. The Corporation Board, which included Evans as President, unanimously passed a Resolution approving the refinancing of the Evergreen Arbors project and also took action to designate Kearney to a compensated position as a "Financial Advisor," even though Kearney had no background that would qualify him as a Financial Advisor in the bond market. Evans generated two contracts between the Authority and the Corporation regarding the refinancing of Evergreen Arbors. The contracts were to serve as evidence that the Authority would pay to the Corporation the ongoing administrative fee from HUD for the Evergreen Arbors project for the consecutive years of the Refinancing Agreement annually. Both contracts were signed by Kearney on behalf of the Authority and by Evans on behalf of the Corporation. Neither contract was ratified at any meeting of the Authority or the Corporation. As detailed in Fact Finding 84, during the time frame of April 2001 through January 2005, Evans transferred a total of $129,992.00 in administrative fees received by the Authority for the administration of Evergreen Arbors to the Corporation. Evans affixed both his name stamp and Kearney's name stamp to all of the checks noted in Fact Finding 84 by which these fees were transferred. Kearney did not object to Evans's use of Kearney's name stamp. As detailed in Fact Finding 85, from May 2002 through January 2005, Evans also transferred /deposited at least $58,626.12 into the Corporation account at National City Bank from the Authority account at First National Bank (account number 92). From May 2002 through December 2004, funds available in the Authority's said account were transferred from other Authority accounts for the Section 8 Choice Voucher Program and the Public Housing Program. Evans affixed both his signature stamp and Kearney's signature stamp to all of the eleven checks by which the aforesaid funds were transferred. Kearney posed no objection to Evans's use of Kearney's facsimile stamp. The parties have stipulated that Kearney, as Vice - President of the Corporation, realized a financial gain of $10,572.00 as the result of accepting Corporation and Authority checks not specifically approved by the Corporation or Authority Boards for Kearney's service as an officer on the Corporation Board, an action prohibited by Corporation By- Laws. Specifically, Kearney received: • Five checks totaling $3,172.00 from the Corporation National City Bank account (account number 901) between the dates of December 21, 2001, and September 2, 2003; and Kearney, 06 -027 Page 34 • Twelve checks totaling $7,400.00 from the Authority First National Bank account (account number 92) between the dates of May 29, 2002, and December 14, 2004. Per the Stipulated Findings, the above checks were for Kearney's service as Vice - President of the Corporation and were not for services as a Financial Advisor. Evans issued all of the aforesaid payments to Kearney without specific approval of the appropriate Board. Kearney's facsimile name stamp was utilized to affix one of two authorizing signatures to all of the aforesaid seventeen checks received by Kearney. Sixteen of the seventeen checks were deposited into Kearney's personal bank account. The remaining check was cashed by Kearney. Funds received by Kearney from the Authority First National Bank account originated in accounts established for the Public Housing Program and Section 8 Choice Voucher Program. The parties have stipulated that the compensation Kearney received from the Authority First National Bank account was not allowable by law, per HUD conflict of interest regulations. We shall now review the Fact Findings relating to allegations that Kearney received compensation not permitted by law when he was employed as an independent contractor with the Authority while serving on the Authority Board. The Housing Authorities Law prohibits a housing authority member from having a direct or indirect interest in any contract for services to be furnished or used in connection with any housing project. (Fact Finding 9). Evans hired Kearney to act as an Independent Contractor for the Authority. Kearney performed services as an independent contractor for the Authority from approximately September 10, 2001, through January 16, 2005, while simultaneously serving as a member of the Authority Board. Kearney took no leaves of absence during his entire tenure as an Authority Board member. At the time of Kearney's hiring, no vacancy existed at the Authority for the performance of services provided by Kearney. Kearney did not complete an application for the position, and the position was not publicly advertised. Evans created the position for Kearney by reducing another Authority employee's hours. Evans did not present Kearney's hiring to the Authority for any vote or approval. Authority meeting minutes from March 2001 through September 2004 note no discussion, vote, or approval for Kearney to perform any services for the Authority in a compensated capacity. Kearney received his salary from the Authority's National City Bank Account (Account No. 677) established for the Cherry Hill Public Housing program. Kearney's salary originated from a line item in the Public Housing budget, which provided for contract services. Kearney was also paid through the Cherry Hill Public Housing program account for inspections performed for the Section 8 Choice Voucher program. Between the dates of September 10, 2001, and January 14, 2005, Kearney received approximately $24,071.28 for services performed as an independent contractor for the Authority while serving as a member of the Authority Board. Compensation received by Kearney was not permitted by law per HUD conflict of interest provisions established for the Public Housing Program and the Section 8 Choice Voucher Program as well as mandates provided within the Housing Authorities Law. Of the one hundred fifty -four checks issued to Kearney, at least one hundred fifty -two were authorized with facsimile stamps of Kearney and Evans. Kearney either stamped or permitted Authority employees to stamp his facsimile signature on payroll checks Kearney received. Kearney never raised any concern or disputed the use of his stamp by Authority employees. Kearney, 06 -027 Page 35 As an Authority Board member, Kearney participated in the vote and approval of the Cherry Hill budget from which his wages as an independent contractor with the Authority originated. Kearney participated in approving the submission of HUD reports (Form HUD - 52723) in 2002 and 2003, which formed the basis for HUD allocations including funds for contract services provided by Kearney. As Authority Chairman, Kearney also signed related HUD Forms (Form HUD - 52574) in 2003 and 2004, certifying that all regulatory and statutory requirements had been met and all proposed expenditures would be consistent with law. Payment of Kearney as an independent contractor from the Cherry Hill operating fund while serving as an Authority Board member was not consistent with provisions of law. Payment to Kearney was contrary to HUD Conflict of Interest Provisions set forth for the Public Housing Program. Approximately one year and one month after Kearney began performing services for the Authority in the capacity as an independent contractor, Kearney submitted to Evans a backdated letter stating that he wished to experience the "full spectrum" of the Authority with Evans's permission and that he intended to pass the Civil Service Test so that he would be properly qualified to perform some of the duties of an employee of the HA, on a part time basis, as a 'temporary employee'," and offering to take temporary leaves of absence from the Authority Board while doing the experiment so that this is not perceived as a conflict of interest." Kearney signed the letter in his capacity as Chairman of the Authority. Kearney backdated the letter to give the impression that the letter had been submitted prior to his employment with the Authority. Kearney was officially removed from the Authority Board by a court order dated January 16, 2005. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations as follows: 3. The Investigative Division will recommend the following in relation to the above allegations: a. That an unintentional violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. § 1103(a) occurred when Gary Kearney, in his position as a Member of the Housing Authority of Venango County, received compensation not provided for by law when he was simultaneously employed both as a Member of the Authority and an employee thereof; and b. That an unintentional violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. § 1103(a) occurred when Gary Kearney as Chairman and a Member of the Housing Authority of Venango County and as a Director of the Authority's subsidiary, the Venango Housing Corporation, received payments which were not otherwise authorized by the Authority. 4. Kearney agrees to make payment in the amount of $5,000.00 in settlement of this matter payable to the Commonwealth of Pennsylvania and forwarded to the Pennsylvania State Ethics Commission to be paid over Kea�rne , 06 -027 Page 36 a period of time to be agreed upon by the parties hereto commencing within thirty (30) days of the issuance of the final adjudication in this matter. 5. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter; and make no specific recommendations to any law enforcement or other authority to take action in this matter. Such, however, does not prohibit the Commission from initiating appropriate enforcement actions in the event of Respondent's failure to comply with this agreement or the Commission's order or cooperating with any other authority who may so choose to review this matter further. Consent Agreement, at 1 -2. In considering the Consent Agreement, we determine that all elements of the recommended unintentional violations of Section 1103(a) have been established. With respect to Kearney's unlawful simultaneous service as an Authority Board member and compensated independent contractor of the Authority, Kearney used the authority of his public position as a member and Chair of the Authority Board to facilitate his receipt of compensation to which he was not entitled. (See, McGuire v. State Ethics Commission, 657 A.2d 1346 (Pa. Cmwlth. 1995)). Specifically, Kearney used the authority of his public office when he: (1) participated in the vote and approval of the Cherry Hill budget from which his wages as an independent contractor with the Authority originated; (2) participated in Board actions approving Form HUD - 52723, which was the basis for HUD providing funds to the Authority for contract services including Kearney's; (3) signed Form HUD -52574 in his capacity as Authority Chairman, certifying that all regulatory and statutory requirements had been met and all proposed expenditures would be consistent with law; and (4) permitted his signature stamp to be used to affix one of two authorizing signatures on payroll checks he received from the Authority (see, Futules, Order 1231). The element of a private pecuniary benefit is established by the unlawful payments totaling approximately $24,071.28, which Kearney received from the Authority between the dates of September 10, 2001, and January 14, 2005, for services performed as an independent contractor for the Authority while serving as a member of the Authority Board. Such compensation was prohibited by the Housing Authorities Law and HUD conflict of interest provisions. Through the Consent Agreement, the parties have agreed to an unintentional violation of Section 1103(a) as to Kearney's receipt of the aforesaid unauthorized compensation. Intent is not a requisite element of a violation of Section 1103(a) of the Ethics Act. Yocabet v. State Ethics Commission, 531 A.2d 536 (Pa. Cmwlth. 1987). Nevertheless, we accept the Consent Agreement and hold that an unintentional violation of Section 1103(a) of the Ethics Act occurred when Kearney, in his position as a member of the Authority Board, received compensation not provided for by law when he simultaneously served both as a member of the Authority and as an employee /independent contractor thereof. The Consent Agreement additionally proposes that an unintentional violation of Section 1103(a) of the Ethics Act occurred when Kearney, as Chairman and a member of the Authority and as a Director of the Authority's subsidiary, the Corporation, received payments which were not otherwise authorized by the Authority. Per the Stipulated Fact Findings, Kearney, as Vice - President of the Corporation, realized a financial gain of $10,572.00 as the result of accepting Corporation and Authority checks not specifically approved by the Corporation or Authority Boards for Kearney's service as an officer on the Corporation Board. Specifically, Kearney received: (1) five Kearney, 06 -027 Page 37 checks totaling $3,172.00 from the Corporation National City Bank account (account number 901) between the dates of December 21, 2001, and September 2, 2003; and (2) twelve checks totaling $7,400.00 from the Authority First National Bank account (account number 92) between the dates of May 29, 2002, and December 14, 2004. Kearney used the authority of his public office as an Authority Board member when he: (1) permitted his signature stamp to be used to affix his signature as an authorizing signature to checks by which Authority funds were transferred to the Corporation; and (2) permitted his signature stamp to be used to affix his signature as an authorizing signature to all of the Authority and Corporation checks by which he received the aforesaid compensation for serving as Vice - President of the Corporation. By permitting his signature stamp to be used as set forth above, Kearney facilitated his receipt of compensation to which he was not entitled. All such compensation received by Kearney was unauthorized. The Corporation by -laws prohibit compensation for service as an officer of the Corporation. Additionally, the compensation received by Kearney included HUD program funds, which Kearney received contrary to HUD conflict of interest regulations. Per the Consent Agreement of the parties, we hold that an unintentional violation of Section 1103(a) of the Ethics Act occurred when Kearney, as Chairman and a member of the Authority and as a Director of the Authority's subsidiary, the Corporation, received payments which were not otherwise authorized by the Authority. Kearney has agreed to make payment in the amount of $5,000.00 in settlement of this matter, payable to the Commonwealth of Pennsylvania and forwarded to this Commission to be paid over a period of time to be agreed upon by the parties commencing within thirty (30) days of the issuance of the final adjudication in this matter. We determine that the Consent Agreement submitted by the parties sets forth the proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, Kearney is directed to make payment in the amount of $5,000.00, payable to the Commonwealth of Pennsylvania and forwarded to this Commission, to be paid over a period of time to be agreed upon by the parties, commencing within thirty (30) days of the issuance of this Order. Compliance with the Consent Agreement and this Order will result in the closing of this case with no further action by this Commission. Noncompliance will result in the institution of an order enforcement action. IV. CONCLUSIONS OF LAW: 1. As a member of the Housing Authority of Venango County ( "Authority ") from December 18, 1982, through December 31, 2004, and Chairman of the Authority Board from March 18, 1987, through December 31, 2004, Respondent Gary Kearney ( "Kearney ") was a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. 2. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, in his position as a member of the Authority Board, received compensation not provided for by law when he simultaneously served both as a member of the Authority and as an employee /independent contractor thereof. 3. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, as Chairman and a member of the Authority and as a Director of the Authority's subsidiary, the Venango Housing Corporation, received payments which were not otherwise authorized by the Authority. In Re: Gary Kearney, Respondent ORDER NO. 1446 File Docket: 06 -027 Date Decided: 10/23/07 Date Mailed: 11/7/07 1 Gary Kearney ( "Kearney "), a public official as a member of the Housing Authority of Venango County ( "Authority ") from December 18, 1982, through December 31, 2004, and Chairman of the Authority Board from March 18, 1987, through December 31, 2004, unintentionally violated Section 1103(a) of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a), when he, in his position as a member of the Authority Board, received compensation not provided for by law when he simultaneously served both as a member of the Authority and as an employee /independent contractor thereof. 2. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, as Chairman and a member of the Authority and as a Director of the Authority's subsidiary, the Venango Housing Corporation, received payments which were not otherwise authorized by the Authority. 3. Per the Consent Agreement of the parties, Kearney is directed to make payment in the amount of $5,000.00, payable to the Commonwealth of Pennsylvania and forwarded to the Pennsylvania State Ethics Commission, to be paid over a period of time to be agreed upon by the parties, commencing within thirty (30) days of the issuance of this Order. a. Compliance with the Consent Agreement and this Order will result in the closing of this case with no further action by this Commission. b. Non - compliance will result in the institution of an order enforcement action. BY THE COMMISSION, Louis W. Fryman, Chair