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HomeMy WebLinkAbout87-052-C ZontekIn re: Daniel Zontek STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG. PENNSYLVANIA 17120 File Docket: 87 -052 -C Date Decided: June 28, 1993 Date Mailed: July 7, 1993 Before: James M. Howley, Chair Daneen E. Reese, Vice Chair Dennis C. Harrington Austin M. Lee Allan M. Kluger Joseph W. Marshall, III The State Ethics Commission received a complaint regarding a possible violation of the State Ethics Act, No. 170 of 1978, P.L. 883. Written notice, of the specific allegation(s) was served at the commencement of the investigation. A Findings Report was issued and served, upon completion of the investigation, which constituted the Complaint by the Investigation Division. An Answer was filed and a hearing was waived. The record is complete. This adjudication of the Commission is hereby issued which sets forth the individual Allegations, Findings of Fact, Discussion, Concldsions of Law and Order. This adjudication is final and will be made available as a public document fifteen days after issuance. However, reconsideration may be requested which will defer public release of this adjudication pending action on the request by the Commission. A request for reconsideration, however, does not affect the finality of this adjudication. A reconsideration request must be received at this Commission within fifteen days of issuance and must include a'detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §2.38. The files in this case will remain confidential in accordance with Section 8(a) of Act 170 of 1978 during the fifteen day period and no one unless the right to challenge this Order is waived, may violate confidentiality by releasing, discussing or circulating this Order. However, confidentiality does not preclude discussing this case with an attorney at law. Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor subject to a fine of not more than $1,000 or imprisonment for not more than one year, 55 P.S. 409(e). Zontek, 87 -052 -C Page 3 3. The By -Laws of the North Huntingdon Township Municipal Authority in effect during 1981 -1989 provided in part as follows in relation to the voting procedures of the board, the officer positions thereof and the duties and responsibilities of such officers: a. The members of the Authority shall constitute the Board of Directors of the Authority. A majority of the members shall constitute a quorum of the Board for the purpose of conducting the business of the Authority, and for all other purposes, and any and all action may be taken by vote of the majority of the members present, provided those present constitute a majority of the whole board. b. The officers of the Board shall consist of a Chairman, a Vice - Chairman Secretary, Treasurer and Assistant Secretary and Treasurer, who shall perform the usual and customary duties of such officers. In case of the absence of any officer, the Board may appoint any other member of the Board to.temporarily serve in his stead. The term of office of said officers shall be for the period of one (1) year or until their respective successors are elected. The annual election of officers shall be held on the first Thursday of February each year. c. The Chairman shall preside at all meetings of the Board and shall have general control over the affairs of the Authority, subject to the direction of the board from time to time. d. The Secretary shall keep a record of all votes and minutes of the meetings of the Board. He shall have the custody of all books, records and papers of the Authority. In the absence of the Secretary, the Assistant Secretary shall perform his duties. e. The Treasurer shall keep accounts of all monies of the Authority received or disbursed, and shall deposit all monies and valuables in the name and to the credit of the Authority in such banks, Trust Companies or Depositories, and in such accounts, as are required by law, and as the Board shall designate. The monies in such accounts shall be paid out on the warrant or other order of the Chairman of the Authority, and such other person or persons as the Board may from time to time authorize to execute such warrants or orders. In the absence of the Treasurer, the Assistant Treasurer shall perform his duties. 4. The members of the North Huntingdon Township Municipal Authority were appointed to the Authority Board by the North Zontek, 87 -052 -C Page 5 such members. Date 1982 1983 1984 1985 1986 1987 1988 1989 Amount $ 2,828.00 3,550.00 3,600.00 3,600.00 3,600.00 3,600.00 3,600.00 3,600.00 11. Daniel Zontek was compensated by North Huntingdon Township Municipal Authority as follows: 12. The North Huntingdon Township Board of Commissioners never authorized the payment of any salary or compensation to the members of the North Huntingdon Township Municipal Authority. 13. The Authority members were originally compensated in the form of expense payments. a. At first the payments were for a fixed rate with no relationship to actual expenditures. b. In 1980, the Authority decided to pay expenses only as actually incurred. c. Subsequently in 1982, the Authority members set a fixed compensation for all officers and appointed each member to an officer position. d. Authority member Thomas Mance was removed from an officer position in August 1988. 14. Daniel Zontek served as an appointed member of the Western Westmoreland Municipal Authority. a. Mr. Zontek has served in this position since 1988. He was originally appointed to the Authority in 1980 but subsequently resigned. He was reappointed in 1985 and 1988. b. Mr. Zontek represented North Huntingdon Township on the Authority. 15. The Western Westmoreland Municipal Authority was created pursuant to the Pennsylvania Municipality Authorities Act of 1945 by way of agreement of December 15, 1971 between various municipalities. Zontek, 87 -052 -C Page 7 authorized to be executed by the Authority. SECTION 5. Treasurer. The Treasurer shall have the care and custody of all funds of the Authority and shall deposit the same in the name of the Authority in such bankxor banks as the Board of the Authority may select. The Treasurer shall sign all orders and checks for the payment of money, and shall pay_ out and disburse such moneys under the direction of the Board of the Authority. Except as otherwise authorized by resolution of the Board of the Authority, all such orders and checks shall be countersigned by the Chairman. He shall keep regular books of accounts showing receipts and expenditures, and shall render to the Board of the Authority at each regular meeting (or more often when requested) an account of his transactions and also of the financial condition of the Authority. He shall give such bond for the faithful performance of his duties as the Board of the Authority may determine and pay for. SECTION 6. Assistant Secretary- Treasurer. The Assistant Secretary- Treasurer shall perform all the duties of either the Secretary or Treasurer, in the absence or incapacity of the Secretary or Treasurer, and in the case of the death or resignation of the Secretary or Treasurer, the Assistant shall perform such duties as are imposed upon such deceased or resigning Secretary or Treasurer until such time as the Board of the Authority shall appoint a new Secretary or Treasurer. The Assistant Secretary- Treasurer may be a person who is not a member of the Board of the Authority. However, in any event, the Assistant Secretary- Treasurer shall give such bond for the faithful performance of his duties as the Board of the Authority may determine and pay for. SECTION 7. Additional Duties. The officers of the Authority shall perform such other duties and functions as may from time to time be required by the Board of the Authority or the By- Laws or rules and regulations of the Authority. SECTION 8. Election or Appointment. The Chairman, Vice Chairman, Secretary, Treasurer and Assistant Secretary - Treasurer shall be elected at the annual meeting of the Board of the Authority and shall hold office for one (1) year or until such successors are elected and qualified. SECTION 9. Vacancies. Should the office of Chairman, Vice Chairman, Secretary, Treasurer or Assistant Secretary - Treasurer become vacant, the Board of the Authority shall elect a successor at the next meeting, and such election shall be for the unexpired term of said office. SECTION 10. Additional Personnel. The Authority may from Zontek, 87 -052 -C Page 9 current officers. Mr. Snyder stated that he is not prepared to say unequivocally that compensation would pass legal challenge. Mr. Painter said that the vehicle for simplicity would be for documentation that all board members would be officers. Mr. Painter asked the chair to entertain the motion to authorize the solicitor for the best recommendation for allowing officers and board members to be compensated. Mr. Mulvihill seconded the motion, and the motion carried unanimously. The second part of Mr. Painter's suggestion is the amount to be compensated. It was budgeted in 1984 for $100.00 a month. A motion was not forthcoming at this particular meeting. ` Members present were Robert F. Borgo, Roy E. Eisaman, Don Ewing, Daniel Zontek, Terry L. Painter, Robert W. Zentner, Bernard H. Mulvihill, Thomas Mance and Barbara Johnson. 18. On August 20, 1986 a Motion was made by Terry Painter, seconded by Daniel Zontek to amend the by -law of the Authority in relation to the officer positions. a. The amendment delineated the officers of the Authority as the Chairman, Vice Chairman, Secretary, Treasurer and the Chairmen of the following Committees: Personnel, Finance & Budget, Sludge Disposal, Insurance, Grounds & Maintenance, Legal & Engineering Service, all of which with the exception of the Assistant Secretary- Treasurer shall be a member of the Board. The amended by -laws further provided that each member could only hold one position. The motion passed by a vote of 8 -1 (Zentner voting no). 19. As a result of the amendment six additional officer positions were created bringing the total number of officers to ten, one position for each board member. 20. The duties of the officers pursuant to the amended by -law were as follows: SECTION 1. Officers. The officers of the Authority shall be a Chairman, a Vice Chairman, a Secretary, a Treasurer and an Assistant Secretary- Treasurer, and the Chairmen of each of the following Committees: Personnel, Finance and Budget, Sludge Disposal, Insurance, Grounds and Maintenance, and Legal and Engineering Services. All of which, with the exception of the Assistant - Secretary- Treasurer, shall be members of the Board of the Authority. Zontek, 87 -052 -C Page 11 of the Authority shall appoint a new Secretary or Treasurer. The Assistant Secretary- Treasurer may be a person who is not a member of the Board of the Authority. However, in any event, the Assistant Secretary- Treasurer shall give such bond for-the faithful performance of his duties as the Board of the Authority may determine and pay for. SECTION 7. Chairman of Committees. The Chairmen of the Personnel Committee, Finance and Budget Committee, Sludge Disposal Committees, Insurance Committee, Grounds and Maintenance Committee and the Legal and Engineering Services Committee shall preside at all meetings of the respective committees and shall be responsible for reporting the recommendations of the Committee to the Board of the Authority for action by the Board. 21. On August 20, 1986 a motion was made by Terry Painter, seconded by Daniel Zontek for officers to be compensated at a rate of $300 a month. The motion passed 6 -3 with Mulvihill, Johnson, Mance, Painter, Ewing and Zontek voting yes and Bor -- , Zentner and Eisaman voting no. 22. On September 17, 1986 Mr. Mulvihill made a motion, seconded by Bor - -, to rescind the compensation fixed at the August meeting and to change the amount to $150 a month. The motion passed 6 -2 with Mulvihill and Borgo, Johnson, Eisaman, Ewing and Zentner voting yes and Zontek and Mance voting no. Mr. Zontek and Mance subsequently changed their vote to yes. 23. During his term of service on the Western Westmoreland Municipal Authority Daniel Zontek voted in favor of his appointment to the officer positions in which he served. 24. During his term of service on the Western Westmoreland Municipal Authority Daniel Zontek either made, seconded or voted in favor of motions establishing the amount of compensation to be paid to Authority Members, serving in officer positions and motions to pay said compensation. 25. Records of the Western Westmoreland Municipal Authority indicate that Daniel Zontek received compensation from the Authority as follows: .Date Amount 1986 1987 1988 1989 $ 750.00 $ 1,800.00 $ 1,800.00 $ 1,800.00 26. Daniel Zontek resigned from the Western Westmoreland Municipal Zontek, 87 -052 -C Page 13 of the violation occurred prior thereto. Since the occurrences in this case transpired prior to the effective date of Act 9 (June 26, 1929), we must apply the provisions of Act 170 of 1978, P.L. 883, to determine whether the Ethics Act was violated. Under Section 3(a), quoted above, this Commission has determined that use of office by a public official to obtain a financial gain for himself or a member of his immediate family or a business with which he is associated which is not provided for in law transgresses the above provision of law. Thus, use of office by a public official to obtain a financial gain which is not authorized as part of his compensation is prohibited by Section 3(a): Hoak /McCutcheon v. State Ethics Commission, 77 Pa. Commw. 529, 466 A.2d 283 (1983); Yacobet v. State Ethics Commission, 109 Pa. Commw. 432, 531 A.2d 536 (1987). Similarly, Section 3(a) of the Ethics Act would prohibit a public official /employee from using public office to advance his own financial interests; Koslow v. State Ethics Commission, 116 Pa. Commw. 19, 540 A.2d 1374 (1988), allocatur denied, Pa. , 553 A.2d 971 (1988). Preliminarily, we will address seriatim a number of arguments that have been proffered for a finding of no violation of the Ethics Law: authorization in the Municipality Authorities Act, non - determinative voting, lack of power to order restitution, and discharge in bankruptcy. It is argued that the activity was not violative of the Ethics Law because of specific authorization by the Municipality Authorities Act. Although it would perhaps be more appropriate to discuss the Municipal Authorities Act at the subsequent juncture of analyzing the allegation in the context of Section 3(a) of Act 170 of 1978, we will now address the legal argument since it has been proffered. The linchpin of the argument is that the Municipal Authorities Act does allow the authority members to establish and set this type of compensation and vote for their appointments and the payment of the compensation to themselves. The Municipality Authorities Act provides in part as follows Every Authority is hereby granted, and shall have and may exercise all powers necessary or convenient for the carrying out of the aforesaid purposes, including but without limiting the generality of the foregoing, the following rights and powers: * (f) To make by - laws for the management and Zontek, 87 -052 -C Page 15 Subsection C provides that all actions of an authority may be taken by a vote of the majority of the members present and further empowers an authority to fix and determine the number of officers, agents and employees of the authority and the respective, powers, duties and compensation and appoint to such office or offices any member of the board with such powers, duties and compensation as the board may deem proper. However, the generalized language does not form a basis for a' specific authorization to appoint oneself to an authority office or position and then vote to set the salary for such position. See, Swick /Aman, Opinion 91 -006. As to the phraseology which authorizes all actions to be taken by a vote of the majority of the members present, such language is merely a statement that a majority vote is sufficient to take official action•. That phraseology does not countenance or authorize voting by authority members in cases where they have a conflict. If it were the intent of the General Assembly to allow municipal authority members to vote in matters wherein they had a personal financial interest, the General Assembly would have done so with very clear specific language. For example, the Second Class Township Code as to three member boards makes it clear that the members of those boards may specifically vote for themselves to enumerated township compensated positions. See, 53 P.S. §65514. Thus, if the General Assembly had the intent for municipal authority members to vote in all instances through a majority vote of the members present, specific language would have been utilized for such purpose. The phraseology merely directs that official action occur by a vote of the majority of the members present but does not condone a blanket voting in cases where conflicts would exist as to the individual member so voting. Regarding the language concerning the fixing of officers, agents and employees with compensation and appointments to those positions by board members, we must once again note the express absence of any language which would authorize an individual member of a municipal board to vote for his own appointment or to vote for the setting of the compensation for his own position. Absent such an express authorization, we have concluded that it is contrary to the Ethics Law for a municipal authority board member to vote for his own appointment and compensation. See, Swick /Arran, supra. It is important to note that the Municipality Authorities Act, 53 P.S. §309B, does require that the compensation of an authority board member must be deteLmined by the appointing authority. Such was not done in this case. As we noted in Swick /Arran, we are particularly concerned about those instances where a municipal board attempts to create so called officer positions and set the compensation for those positions and appoint board members as a means of circumventing the statutory limitations that the compensation for a municipal authority board member be set by the governing body. We therefore Zontek, 87 -052 -C Page 17 properly scheduled is non - dischargeable under 11 U.S.C. §523(a)(3)); In Re Taite, 76 B.R. 764 (Bkrty. C.D. Cal. 1987) (Civil penalties for violations of the California Business and Profession Code are automatically non - dischargeable under §523(a)(7)); In Re Daugherty, 25 B.R. 158 (E.D. Tenn. 1982) (Civil penalty for violations of the Tennessee Mineral Surface Mining Law was excepted by §523(a)(7) from discharge); and In Re Tauscher, 7 B.R. 918 (E.D. Wis. 1981) (Penalties for violations of the Fair Labor Standards Act of 1938 were non - dischargeable pursuant to §523(a)(7)). Thus, it does not matter whether the action occurred pre - petition and the fine is imposed post - petition. Sections 523(a)(3) and (7) specifically override any such argument by providing that the civil penalty herein is specifically excepted from discharge. We therefore reject the foregoing argument as totally spurious. Having rejected the various arguments which have been proffered, we must now review the allegation in this case in the context of the facts of record to determine whether there has been a violation of Section 3(a) of Act 170 of 1978. The issue before us is whether Zontek as a member of the North Huntingdon Township Municipal Authority (NHTMA) violated Section 3(a) of Act 170 of 1978 by using public office to obtain a financial gain when he voted to appoint himself as an authority officer and voted to set the salary for that position and second, whether Zontek as a member of the Western Westmoreland Municipal Authority (WWMA) violated Section 3(a) when he voted to set his salary in 1986 and 1987. A review of the record indicates that Zontek served as a member of the NHTMA _from 1979 until the present. The NHTMA was established to construct and operate a municipal water /sewer system and steam production /electric generation facilities with North Huntingdon Township being the governing authority. Although the NHTMA originally had seven members, the complement was reduced to five members with officer positions consisting of a chairman, vice - chairman, secretary, treasurer, and assistant secretary /treasurer. The minutes of NHTMA on December 4, 1979 reflect that Zontek made an unsuccessful motion to increase board member expense reimbursements. During his term of service on the North Huntingdon Township Municipal Authority Daniel Zontek either made, seconded or voted in favor of motions to establish the amount of compensation or expenses to be paid to Authority members serving in officer positions. The record does reflect that Zontek held officer positions with NHTMA between 1982 and 1988. On August 18, 1988, action was taken to remove Mance as secretary followed by a motion by Mance to have the NHTMA members and officers forego their current salary of $300 a month which motion was defeated with Mance voting in favor of the motion and Zontek and the other three Zontek, 87 -052 -C Page 19 Zontek also made, seconded or voted in favor of motions to set and pay compensation for such officer positions. In addition, there are several instances of action by the board members including Zontek, although his vote was non - determinative, to vote to pay the monthly bills including their compensation. In applying the provisions of Section 3(a) of Act 170 of _1978 quoted above to the instant matter, we find that Zontek violated the Ethics Law by voting in favor of motions to create so- called officer positions and set the compensation for such positions. See, Abraham, Order No. 827; Koelsch, Order No. 828; and Abbott, Order No. 829. It is clear that there has been a use of office by Zontek in voting in favor of these various motions. As a result of such use of office, Zontek received a financial gain consisting of the compensation which he received on a monthly basis as a result of his voting in favor of successful motions to set such compensation. Lastly, the financial gain received was other than compensation provided for by law. On this issue, we need only summarize our review of the Municipality Authorities Act as to whether the compensation was other than provided for in law. As noted above, although it is true that the Municipality Authorities Act does allow a municipal authority board to fix and determine the number of officers and appoint board members to those offices (53 P.S. §309C) and further provides that the authority may appoint officers and fix their compensation (53 P.S. §305B(g)), a board member may not vote for his own appointment as an officer nor set the salary for his officer position, even assuming the officer positions are bona fide positions. See, Swick /Aman, supra. Finally, the setting of the compensation for the board members themselves must be set by the governing authority as per 53 P.S. §309B. In the context of the NHTMA and WWMA, it is clear that the board members were trying to fix their compensation as board members. In this context we must look at the substance over form. Baehr Brothers v. Commonwealth of Pennsylvania, 487 Pa. 233, 409 A.2d 326 (1977). It is clear from the record before us that the substance of this transaction was for the NHTMA and WWMA authority board members to receive compensation and in order to achieve that result the NHTMA and WWMA board used officer positions. Thus, although the form of the transaction was the utilization of the officer positions, the substance was the NHTMA and WWMA board compensating their board members in derogation of the Municipality Authorities Act which requires that such action be done by the appointing authority. Having found that the substance of the NHTMA and WWMA board action was to compensate authority members through officer positions, it is clear that such is not compensation which is provided for by law. In fact, such compensation is strictly prohibited by the Municipality Authorities Act, 53 P.S. 5309B. Zontek, 87 -052 -C Page 21 3. Zontek violated Section 3(a) of Act 170 of 1978 when he used public office to obtain a financial gain for himself which was other than compensation provided for by law when he voted to set his salary in 1986 and 1987 as a board member of the WWMA. 4. The financial gain received by Zontek as a WWMA board member in violation of Section 3(a) of Act 170 of 1978 amounted to $2550.00.