HomeMy WebLinkAbout08-509 ConfidentialADVICE OF COUNSEL
January 25, 2008
08 -509
This responds to your letter of December 13, 2007, by which you requested
confidential advice from the State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65
Pa.C.S. § 1101 et seq., would present any prohibitions or restrictions upon the A of the
Board of Directors ( "Board ") of Governmental Body B (hereinafter the Authority "), who is a
C in a [type of business], with regard to voting on applications for a round of funding from
the Authority, where said [type of business]'s client(s) would be among the applicants for
that round of Authority funding.
Facts: As D of the Authority, you request an advisory from the State Ethics
Commission on behalf of Individual E, a Member and A of the Board. You have submitted
facts that may be fairly summarized as follows.
The Authority provides low interest F financing and a limited amount of grant
funding for eligible [types of projects]. The authority to approve such loans and grants is
vested with the Board. The Board annually approves $[amount] in project funding. Low
interest financing is awarded based upon G ranking. Grant funding is awarded to eligible
ranked projects based upon need. The Board currently meets [number] times a year to
award project funding.
Authority staff ranks the potential projects. Authority staff then makes a
recommendation for approval to the Board based upon project rankings.
You state that the primary duty of a Board Member is to vote on the award of funds
for F projects. You further state that the Board may modify an approval at a Board
meeting. Any project that does not rank sufficiently to receive an award of funds is not
denied funds but rather is retained for ranking at the next Board meeting, for up to one
year from the date of the funding application.
Individual E serves as the H to the Board. In a private capacity, Individual E is a C
of [name of business] (hereinafter referred to as the Firm "), a [type of business] that
concentrates in [area of business]. Sometimes, a client that the Firm provides services to
in matters unrelated to the Authority will seek financing from the Authority. You state when
a Firm client pursues Authority financing for a project, current practice dictates that
Individual E: (1) make a disclosure to the Authority with regard to the actual or potential
Confidential Advice, 08 -509
January 25, 2008
Page 2
conflict of interest as to such project; (2) recuse himself from voting on all projects pending
before the Board at the meeting where such project may be approved; and (3) avoid all
contact with the Authority on any matter related to such client's pursuit of financing from
the Authority.
Based upon the above submitted facts, you ask whether the Ethics Act would
require Individual E to abstain from voting on all projects pending before the Board for a
particular round of funding where he would have a potential or actual conflict of interest as
to an application for funding in that round, or whether the Ethics Act would permit
Individual E to disclose to the Authority such an actual or potential conflict of interest and
then abstain from voting on only the individual application for funding that would be the
basis for the actual or potential conflict of interest.
Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based
upon the facts that the requester has submitted. In issuing the advisory based upon the
facts that the requester has submitted, this Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts that have not been
submitted. It is the burden of the requester to truthfully disclose all of the material facts
relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense
to the extent the requester has truthfully disclosed all of the material facts.
It is further noted that, pursuant to Sections 1107(10) and (11) of the Ethics Act, 65
Pa.C.S. §§ 1107(10), (11), an opinion /advice may be given only as to prospective (future)
conduct. To the extent you have inquired as to conduct that has already occurred, such
past conduct may not be addressed in the context of an advisory opinion. However, to the
extent you have inquired as to future conduct, your inquiry may and shall be addressed.
As a Member and A of the Board, Individual E is a public official subject to the
provisions of the Ethics Act.
Sections 1103(a) and 1103(j) of the Ethics Act provide:
§ 1103. Restricted Activities
(a) Conflict of interest. —No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
(j) Voting conflict. —Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or by
any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed with
the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a matter
before it because the number of members of the body required
to abstain from voting under the provisions of this section
makes the majority or other legally required vote of approval
unattainable, then such members shall be permitted to vote if
disclosures are made as otherwise provided herein. In the
case of a three - member governing body of a political
Confidential Advice, 08 -509
January 25, 2008
Page 3
subdivision, where one member has abstained from voting as
a result of a conflict of interest and the remaining two members
of the governing body have cast opposing votes, the member
who has abstained shall be permitted to vote to break the tie
vote if disclosure is made as otherwise provided herein.
65 Pa.C.S. §§ 1103(a), (j).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate family
or a business with which he or a member of his immediate
family is associated. The term does not include an action
having a de minimis economic impact or which affects to the
same degree a class consisting of the general public or a
subclass consisting of an industry, occupation or other group
which includes the public official or public employee, a
member of his immediate family or a business with which he or
a member of his immediate family is associated.
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business." Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self - employed individual, holding company, joint
stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated." Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or has
a financial interest.
65 Pa.C.S. § 1102.
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from using the authority of public office /employment or confidential information
received by holding such a public position for the private pecuniary benefit of the public
official /public employee himself, any member of his immediate family, or a business with
which he or a member of his immediate family is associated.
The use of authority of office is not limited merely to voting, but extends to any use
of authority of office including, but not limited to, discussing, conferring with others, and
lobbying for a particular result. Juliante, Order 809.
In each instance of a voting conflict, Section 1103(j) of the Ethics Act requires the
public official /public employee to abstain and to publicly disclose the abstention and
reasons for same, both orally and by filing a written memorandum to that effect with the
Confidential Advice, 08 -509
January 25, 2008
Page 4
person recording the minutes. In the event that the required abstention results in the
inability of the governmental body to take action because a majority is unattainable due to
the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the
disclosure requirements noted above are followed. See, Pavlovic, Opinion 02 -005.
In applying the above provisions of the Ethics Act to your inquiry, it is noted that
Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public
officials /public employees from having outside business activities or employment; however,
the public official /public employee may not use the authority of his public position - -or
confidential information obtained by being in that position - -for the advancement of his own
private pecuniary benefit or that of a business with which he is associated. Pancoe,
Opinion 89 -011.
If a business with which the public official /public employee is associated or a private
customer /client would have a matter pending before the governmental body, the public
official /public employee would generally have a conflict of interest as to such matter.
Kannebecker, Opinion 92 -010; Miller, Opinion 89 -024. A reasonable and legitimate
expectation that a business relationship will form may also support a finding of a conflict of
interest. Amato, Opinion 89 -002.
In the instant matter, the Firm is a business with which Individual E is associated in
his capacity as a C. Pursuant to Section 1103(a) of the Ethics Act, Individual E, as a
Member and A of the Board, would generally have a conflict of interest in matters before
the Board that would financially impact himself, the Firm, or the Firm's client(s). See,
Kannebecker, supra; Miller, supra. In each instance of a conflict of interest, Individual E
would be required to abstain fully from participation and to satisfy the disclosure
requirements of Section 1103(j) of the Ethics Act.
Having established the above general principles, your specific inquiry shall be
addressed.
You are advised that pursuant to Section 1103(a) of the Ethics Act, Individual E
would have a conflict of interest in matters before the Board pertaining to applications for
funding submitted by or on behalf of client(s) of the Firm and would be required to abstain
fully from matters pertaining to those applications or to applications of competitors for the
same round of funding. In each instance of a conflict of interest, Individual E would also
be required to fully satisfy the disclosure requirements of Section 1103(j) of the Ethics Act.
The propriety of the proposed conduct has only been addressed under the Ethics
Act; the applicability of any other statute, code, ordinance, regulation or other code of
conduct other than the Ethics Act has not been considered in that they do not involve an
interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the
I .
Conclusion: As a Member and A of the Board of Directors ( "Board ") of
Governmental Body B (hereinafter the Authority "), Individual E is 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 [type of business] of [name of business] (hereinafter referred to as the
Firm ") is a business with which Individual E is associated as a C. Pursuant to Section
1103(a) of the Ethics Act, Individual E, as a Member and A of the Board, would generally
have a conflict of interest in matters before the Board that would financially impact himself,
the Firm, or the Firm's client(s). Individual E would have a conflict of interest under
Section 1103(a) of the Ethics Act in matters before the Board pertaining to applications for
funding submitted by or on behalf of client(s) of the Firm and would be required to abstain
fully from matters pertaining to those applications or to applications of competitors for the
same round of funding. In each instance of a conflict of interest, Individual E would also
be required to fully satisfy the disclosure requirements of Section 1103(j) of the Ethics Act.
Confidential Advice, 08 -509
January 25, 2008
Page 5
Act.
The propriety of the proposed conduct has only been addressed under the Ethics
Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement
proceeding initiated by the Commission, and evidence of good faith conduct in any other
civil or criminal proceeding, provided the requester has disclosed truthfully all the material
facts and committed the acts complained of in reliance on the Advice given.
This letter is a public record and will be made available as such.
Finally, if you disagree with this Advice or if you have any reason to
challenge same, you may appeal the Advice to the full Commission. A
personal appearance before the Commission will be scheduled and a
formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually received at
the Commission within thirty (30) days of the date of this Advice pursuant
to 51 Pa. Code § 13.2(h)_ The appeal may be received at the Commission
by hand delivery, United States mail, delivery service, or by FAX
transmission (717 - 787 - 0806). Failure to file such an appeal at the
Commission within thirty (30) days may result in the dismissal of the
appeal.
Sincerely,
Robin M. Hittie
Chief Counsel