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HomeMy WebLinkAbout1460 GerhardIn Re: William Gerhard, 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 07 -001 Order No. 1460 3/12/08 3/14/08 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). Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." An Answer was not filed and a hearing was deemed waived. All of the averments in the Investigative Complaint are admitted and are set forth as the following Findings. The record is complete. 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. Gerhard, #07 -001 Page 2 I. ALLEGATIONS: That William Gerhard, a public official /public employee in his capacity as a Member of the School Board of Directors of the Weatherly School District, violated the following provisions of the State Ethics Act (Act 93 of 1998) when he used the authority of his office for the private pecuniary gain for himself and /or business with which he and /or a member of his immediate family is associated by participating in board actions to award a contract to the Vogel Bus Company at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel; when he failed to disclose on a Statement of Financial Interests filed for the 2003 calendar year income from Country Coach, office directorship with K.C. Trailer Sales and financial interest in K.C. Trailer Sales and Country Coach; when he failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office directorship or employment with K.C. Trailer Sales and his financial interest in Country Coach and K.C. Trailer Sales; and when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales; when he failed to disclose Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit as a direct /indirect source of income, his office, directorship or employment in Orefield Transit, and his financial interests in Orefield Transit. § 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). § 1105. Statement of financial interests (b) Required information. - -The statement shall include the following information for the prior calendar year with regard to the person required to file the statement: (5) The name and address of any direct or indirect source of income totaling in the aggregate $1,300 or more. However, this provision shall not be construed to require the divulgence of confidential information protected by statute or existing professional codes of ethics or common law privileges. (8) Any office, directorship or employment of any nature whatsoever in any business entity. (9) Any financial interest in any legal entity engaged in business for profit. 65 Pa.C.S. §§ 1105(b)(5), (8), (9). § 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 Gerhard, #07 -001 Page 3 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. II. FINDINGS: 1. The Investigative Division of the State Ethics Commission received a signed, sworn complaint alleging that William Gerhard violated provisions of the State Ethics Act (Act 93 of 1998). 2. Upon review of the complaint the Investigative Division initiated a preliminary inquiry on January 4, 2007. 3. The preliminary inquiry was completed within sixty days. 4. On February 27, 2007, a letter was forwarded to William Gerhard, by the Investigative Division of the State Ethics Commission informing him that a complaint against him was received by the Investigative Division and that a full investigation was being commenced. a. Said letter was forwarded by certified mail, no. 7006 2150 0000 8776 4711. b. The domestic return receipt bore the signature of William Gerhard, with a delivery date of March 8, 2007. 5. On May 29, 2007, the Investigative Division of the State Ethics Commission filed an application for a ninety day extension of time to complete the Investigation. 6. The Commission issued an order on June 11, 2007, granting the ninety day extension. 7 On September 14, 2007, the Investigative Division of the State Ethics Commission filed an application for a second ninety day extension of time to complete the Investigation. 8. The Commission issued an order on October 23, 2007, granting the ninety day extension. 9. On January 7, 2008, an amended Notice of Investigation was forwarded to William Gerhard by the Investigative Division of the State Ethics Commission informing him that the allegations contained in the February 27, 2007, Notice of Investigation were being amended. a. Said letter was forwarded by certified mail, no. 7006 2150 0002 5372 6529. b. The domestic return receipt bore the signature of William Gerhard, with a delivery date of January 9, 2008. Gerhard, #07 -001 Page 4 10. Periodic notice letters were forwarded to William Gerhard in accordance with the provisions of the Ethics Law advising him of the general status of the investigation. 11. The Investigative Complaint was mailed to the Respondent on January 18, 2008. 12. William Gerhard has served as a member of the School Board of Directors of the Weatherly Area School District since approximately December 1999. 13. Gerhard has also has been appointed to the Board's Transportation Committee. a. Gerhard served on the Transportation Committee during calendar years 2001 and 2004. b. The Board's Transportation Committee typically consists of 3 to 4 members. c. The primary functions for the Transportation Committee are to oversee the creation of RFP's (Requests for Proposals), to evaluate bus companies, select bus companies to be used, and make recommendations to the Board as to which companies should be awarded bus contracts. d. In 2005 the committee was changed to the Transportation /Property Committee. 14. Gerhard served on the Transportation Committee, in part, because of his knowledge and experience in the transportation industry. a. Gerhard, through his company, provided busing services to the Hazleton Area School District. b. Country Coach Inc., a business with which Gerhard was associated, provided busing services to the Weatherly Area School District. c. Gerhard also operated charter buses in the geographical area of the School District. 15. William H. Gerhard is married to Donna M. Gerhard and they reside at 1436 Wetzel Run Drive, Weatherly, PA 18255. 16. Since calendar year 2000 Gerhard has been affiliated with two bus companies, Orefield Transit, Inc. and Country Coach, Inc., as an owner, officer or employee. a. William Gerhard has owned Orefield Transit, Inc. continuously since approximately October 1, 2000. 1. Gerhard purchased the business on or about October 2000. b. William Gerhard was President of Country Coach, Inc. from approximately September 5, 2000, until February 1, 2001. 1. Country Coach was incorporated in 2000 by Gerhard and his wife. 2. William Gerhard has been an employee of Country Coach, Inc. since September 5, 2000. 17. Articles of Incorporation on file with the Pennsylvania Department of State Corporation Bureau include corporate filings for Country Coach, Inc. and Orefield Transit, Inc. Gerhard, #07 -001 Page 5 18. Country Coach, Inc. was incorporated on or about September 5, 2000, with a business address of 1436 Wetzel Run Drive, Weatherly, PA 18255. a. 1436 Wetzel Run Drive, Weatherly, PA 18255 is the home address of William H. and Donna M. Gerhard. b. The Department of State assigned entity number 2960874 to Country Coach, Inc. c. Corporate Officers at that time were William H. Gerhard, Secretary and Donna M. Gerhard, President. 19. On October 1, 2000, a shareholders meeting was held for Country Coach Inc. a. Ownership was split evenly between William Gerhard and Donna Gerhard with each holding one share. b. Minutes reflect Donna Gerhard was President and Treasurer while William Gerhard was Vice - President and Secretary. 20. A special shareholders meeting for Country Coach, Inc. was held on February 1, 2001. a. The purpose for this special meeting was for William Gerhard to relinquish his positions as "Shareholder, Director and Secretary /Treasurer" of Country Coach. b. By approved resolution, Donna M. Gerhard assumed 100% ownership and all Director and Officer positions of the corporation. c. These changes were not filed with the Pennsylvania Department of State until approximately April 30, 2004 (See Finding #21). 21. Articles of Incorporation for Country Coach, Inc. were updated on or about April 30, 2004. a. Donna M. Gerhard was listed as President, Treasurer and Secretary. b. William H. Gerhard is not identified as having any Officer positions with Country Coach, Inc. at this time. c. Shareholder meeting minutes reflect this action occurred on February 1, 2001. (See Finding #20) d. The Articles of Incorporation on file with the Commonwealth did not reflect the change in Gerhard's position until April 30, 2004. 22. Articles of Incorporation on file with the Pennsylvania Department of State include corporate filings for Orefield Transit, Inc. a. Orefield Transit, Inc. was incorporated on or about Arpil 19, 1984. b. PO Box 578, RD #1, Orefield, PA 18069 was the address for Orefield Transit, Inc. reported to the Department of State. c. George Gezzer is listed as the President, Vice - President and Gerhard, #07 -001 Page 6 Secretary /Treasurer of Orefield Transit, Inc. 23. William H. Gerhard purchased Orefield Transit, Inc. and its bus inventory from George Gezzer on or about October 1, 2000. a. The Orefield Transit, Inc., inventory purchased by Gerhard included tour buses but no school buses. b. Gerhard did not submit new or updated articles of incorporation to the Pennsylvania Department of State after the acquisition. 24. Minutes from the shareholder meeting of October 1, 2000, for Orefield Transit, Inc. reflect the following: a. George Gezzer announced that he has sold his stock in the corporation to William H. Gerhard and Donna M. Gerhard. Followed by the election of William H. Gerhard, President and Donna M. Gerhard Secretary /Treasurer. b. No changes have been made to the Corporate Officers of Orefield Transit, Inc. since October 1, 2000. 25. Gerhard has operated Orefield Transit Inc. solely as a leasing agent for Country Coach Inc. a. Buses used by Country Coach Inc. were leased from Orefield Transit Inc. b. Orefield Transit Inc. does not lease buses to other companies. 26. Gerhard's other business interests include KC Trailer Sales, 1436 Wetzel Run Drive, Weatherly, PA 18255. a. KC Trailer Sales was a home based business operated by Gerhard and his wife Donna Gerhard. b. KC Trailer Sales was in the business of selling vehicle, equipment, utility and horse trailers. 27. On or about March 17, 1995, Gerhard filed a fictitious name registry for KC Trailer Sales with the Pennsylvania Department of State, Corporation Bureau. a. No documentation was filed with the Department of State terminating the fictitious name registry. b. William Gerhard asserts that KC Trailer Sales has not operated as a business entity since at least 2000. 28. William Gerhard handles the day to day operations of Country Coach Inc. including making business decisions. a. Donna Gerhard is listed as company President on paper to qualify the business as being minority owned and operated. b. William Gerhard makes decisions as to which buses to purchase and district bus contracts to bid on. c. William Gerhard is compensated as an employee of Country Coach Inc. for these services. Gerhard, #07 -001 Page 7 d. Wages received by William Gerhard were used collectively by William and Donna Gerhard. e. William Gerhard signs business checks on behalf of Country Coach Inc. effectuating business transactions. 29. William Gerhard continues to own Orefield Transit Inc. a. Orefield Transit Inc. owns the buses which were used by Country Coach Inc. b. Country Coach Inc. leases buses from Orefield Transit Inc. c. Country Coach Inc. also rented buses on an as needed basis from Vogel Bus Company in 2007. 30. On or about September 2001 William Gerhard submitted an Advice of Counsel request to the State Ethics Commission Legal Division. a. Gerhard was owner of Orefield Transit, Inc. and an employee of Country Coach, Inc. at the time of the request. b. Gerhard simultaneously was a sitting member of the Weatherly Area School District Board of School Directors. c. This Advice of Counsel request sought an opinion regarding Gerhard's ownership of Country Coach Inc. and Orefield Transit Inc. and his service as a school board member and Country Coach bidding on school district contracts. 31. On September 17, 2001, State Ethics Commission Advice of Counsel number 01- 592 was issued to William H. Gerhard, 1436 Wetzel Run Drive, Weatherly, PA 18255. a. The issue which was the basis for Gerhard's request was "Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq., presents any prohibition or restrictions upon a school director with regard to continuing to serve on the school board where: (1) the school director is employed by a charter bus company owned by his spouse; and (2) the charter bus company may bid on and receive contract(s) to do a special education bus run or field trips for the school district." [Advice of Counsel, 01 -592 at 1.] b. Advice of Counsel number 01 -592 was based on the following factual scenario submitted by Gerhard: As a School Director for the Weatherly Area School District, you seek an advisory from the State Ethics Commission based upon the following submitted facts. You state that your wife owns "Country Coach, Inc.," a charter bus company. You are employed by Country Coach, Inc. to operate the company and the busses. The Weatherly School Board is requesting bids from private contractors for a special education bus run. You ask whether you may remain on the School Board if Country Gerhard, #07 -001 Page 8 Coach, Inc. bids upon and receives the contract for the run. Additionally, Country Coach, Inc. may submit quotes for Weatherly Area School District field trip contracts. You state that generally, the School Board does not take action with regard to field trips. Rather, individual teachers who are in charge of the field trips obtain three quotes and award the contract to the one submitting the lowest quote. Given these facts, you ask whether you may remain on the School Board if Country Coach, Inc. submits quotes for field trip contract(s) and performs the field trip runs under contract(s) with the School District. [Advice of Counsel, 01 -592 at 1.] c. The Legal Division of the State Ethics Commission determined that sections 1103 (a), (f), and (j), 65 Pa.C.S. §1103 (a), (f), (j), were pertinent to the Advice request. 1. Included in the Advice of Counsel was restricted activities under sections 1103 (a), (f), (j) and definitions under section 1102 for "conflict" or "conflict of interest," "authority of office or employment," "immediate family," "business," "business with which he is associated," "financial interest" and "contract." 32. State Ethics Commission Advice of Counsel Number 01 -592 issued to William H. Gerhard on September 17, 2001, included the following excerpted discussion and conclusion: a. Excerpted Discussion: You ask whether you may remain on the Board of the Weatherly Area School District if: (1) Country Coach, Inc. bids upon and receives the School District contract for the special education bus run; or (2) Country Coach, Inc. submits quotes for field trip contract(s) and performs field trip runs under contract(s) with the School District, given that generally, the School Board does not take action with regard to field trips, but rather, individual teachers in charge of the field trips obtain three quotes and award the contract to the one submitting the lowest quote. You are advised that Section 1103(a) of the Ethics Act would not prohibit you from remaining on the Board of the Weatherly Area School District if Country Coach, Inc. submits quotes or bids to the School District to obtain contract(s) to perform the special education run or field trips. However, such matters would present conflicts of interest for you in your capacity as a School Director. For example, pursuant to Section 1103(a), you would have a conflict of interest as to using the authority of your public position as a School Director or confidential information received by being in such position to solicit or promote business activity between Country Coach, Inc. and the Weatherly Area School District. To the extent that you would, in your public capacity, have involvement as to reviewing or Gerhard, #07 -001 Page 9 [Advice of Counsel, 01 -592 at 5 -6.] b. selecting such bids or proposals, a conflict of interest would exist. See Fletcher, Opinion 89 -018 (School director employed by contractor which transported school district students was prohibited from voting on transportation contracts or serving on the transportation committee). Additionally, you would have a conflict of interest in approving /signing payments to Country Coach, Inc. As for Section 1103(f) of the Ethics Act, you are advised that for each contract valued at $500 or more between Country Coach, Inc. and the Weatherly Area School District, the requirements of Section 1103(f) of the Ethics Act set forth above would have to be strictly observed. Parenthetically, although the contracting in question would not be prohibited under the Ethics Act provided the restrictions and requirements of the Ethics Act would be observed, a problem could exist as to such contracting under the Public School Code of 1949. In the instant situation, the Public School Code of 1949, as amended, provides as follows: §3 -324. Not to be employed by or do business with district; exceptions. No school director shall, during the term for which he was elected or appointed, as a private person engage in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act.... 24 P.S. §3 -324. Since the proposed contracting may be prohibited by the above quoted provision, it is suggested that you seek legal advice in that regard. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Conclusion: As a School Director for the Weatherly Area School District, you are a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Your wife is a member of your immediate family. Country Coach, Inc. is a business with which you as an employee and your wife as owner are associated. Gerhard, #07 -001 Page 10 Section 1103(a) of the Ethics Act would not prohibit you from having outside employment /business activities subject to the restrictions, conditions, and qualifications as noted above. You may not use the authority of your public position as School Director, or confidential information received by being in your public position, for the advancement of your or your wife's private pecuniary benefit or that of Country Coach, Inc. Although Section 1103(a) of the Ethics Act would not prohibit you from remaining on the Board of the Weatherly Area School District if Country Coach, Inc. submits quotes or bids to the School District to obtain contract(s) to perform a special education run or field trips, such matters would present conflicts of interest for you in your capacity as a School Director. In each instance of a conflict of interest, you would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j). For each contract valued at $500 or more between Country Coach, Inc. and the Weatherly Area School District, the requirements of Section 1103(f) of the Ethics Act set forth above would have to be strictly observed. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. It is suggested that legal advice be obtained with regard to the possible applicability of the Public School Code of 1949. [Advice of Counsel, 01 -592 at 6.] 33. Country Coach has contracted with the Weatherly School District to provide bus service. a. Country Coach was awarded a contract for the 2004 -2005 school year by the Weatherly School District board. 34. The Weatherly Area School District bid student transportation contracts for a three (3) school year period. a. Contracts were awarded in 2003 and again in 2004 covering school years 2003 -04 through 2005 -06 and 2004 -05 through 2006 -07 respectively. b. Gerhard served on the Transportation Committee during the 2004 bid process. 35. The Weatherly Area School District awards bus contracts based on specific routes as opposed to a single contractor for the entire district. a. Since 2003 bus contractors providing services to the district included but may not have been limited to Country Coach Inc., Vogel Bus Company, Evancho Transportation Company, Inc. and the Hemlock Bus Company. 36. District bus contracts were awarded through an RFP process (request for proposal). a. RFP's were developed by the district's transportation committee in concert with district administrators to adequately satisfy district transportation needs. Gerhard, #07 -001 Page 11 b. Contracts were awarded based on bus route during public board meetings. c. The district's transportation committee would forward its recommendations to the entire board for consideration. d. Gerhard participated in transportation committee reviews and recommendations. 37. On June 14, 2004, the Weatherly Area School Board took action approving transportation contracts with Vogel Bus Company, Evancho Transportation and Country Coach Inc. for the 2004 -05 school year and beyond. a. William Gerhard abstained from Board action taken on this motion. b. William Gerhard was a member of the District Transportation Committee in 2004. 38. Minutes from the June 14, 2004, meeting of the school board include the following official action taken on these contracts: a. On a motion by J. Ursta and seconded by G. Makuch, approved the transportation contracts with the following vendors for the 2004 -2005 school year and beyond for student transportation: Vogel Bus Company Evancho Transportation Country Coach, Inc. Bus Routes 1,6,8,9,10 Bus Routes Marian /McAdoo & Hazleton Parochial Bus Routes 3,5,7,11 Athletic /Activity, Special Needs After the motion was made, Atty. Miscavige asked that the motion be amended to include approval pending the contractors signing a contract with WASD. The motion was so amended. J. Palmer expressed that this motion troubles him. He understood that legally WASD was correct but the appearance of this motion looks unethical and doesn't look good. K. Minnick noted WASD is in compliance. The motion passed on a roll call vote ". Voting yes: J. Ursta, B Barbush, T. Kew, G. Makuch, K. Minnick. Voting no: J. Palmer and F. Migneco. Abstaining: W. Gerhard. 5 yes, 2 no 1 abstained, 1 absent. 39. During the September 13, 2004, Weatherly School board meeting, Country Coach Inc. was found to have breached its contract with the Weatherly Area School District for student transportation services. a. After a lengthy discussion, the Board voted 6 -1 -0 with 2 members absent to terminate its contract with Country Coach, Inc. b. Respondent William Gerhard was absent from this meeting. c. Country Coach's bus routes were transferred to Evancho Bus Company by board vote on September 28, 2004. 1. William Gerhard was absent from this meeting. 40. Since September 28, 2004, Vogel Bus Company, Evancho Transportation Company and Hemlock Bus Company have been the District's primary busing companies; each having designated routes. a. Country Coach, Inc. provides limited transportation services for athletic and Gerhard, #07 -001 Page 12 other special events on an as needed emergency basis. 1. Gerhard has played no role in this process. 41. During school years 2004 -05 and 2005 -06, Vogel Bus Company had two separate busing contracts for student transportation services with the Weatherly Area School District running simultaneously. a. District busing contracts are referenced by date and purveyor. b. An April 14, 2003, contract with Vogel Bus Company was for the transportation of district students to the Carbon County Area Vocational Technical School for the 2003 -04 through 2005 -06 school years. c. A June 25, 2004, contract with Vogel Bus Company was for five specified bus routes for the 2004 -05 through 2006 -07 school years. 42. On April 14, 2003, the Weatherly Area School Board entered into a three (3) year contract with Ken Vogel, d /b /a Vogel Bus Company, to provide student transportation for District Students to the Carbon County Area Vocational Technical School. a. This contract covered school years 2003 -04 through 2005 -06. b. Stated compensation per day, by school year was as follows: 2003 -04 School year $130.00 per day 2004 -05 School year $135.00 per day 2005 -06 School year $139.00 per day c. William Gerhard was absent from this meeting. 43. On August 1, 2005, an addendum to the April 14, 2003, bus contract was entered into changing the daily compensation for the 2005 -06 school year from $139.00 per day to $172.38 per day. 44. On June 25, 2004, the Weatherly Area School Board entered into a three (3) year contract with Ken Vogel, d /b /a Vogel Bus Company, to transport students on designated bus routes 1, 6, 8, 9, and 10. a. This contract covered school years 2004 -05 through 2006 -07. b. Stated compensation per day, by school year was as follows: 1. 2004 -05 School year: $533.49 per day for routes 1 ,6, 8, and 9 and $121.83 per day for route 10. 2. 2005 -06 School year: $552.63 per day for routes 1, 6, 8, and 9 and $126.09 per day for route 10. 3. 2006 -07 School year: $569.21 per day for routes 1, 6, 8, and 9 and $129.87 per day for route 10. c. This contract also included a fuel cost addition should the price of diesel fuel exceed $1.75 per gallon excluding taxes. d. The contract also included a clause giving the district the right to add or delete bus routes and the right to negotiate revised prices based on the Gerhard, #07 -001 Page 13 number of routes added or deleted. e. William Gerhard abstained from the vote on this contract. 45. On November 8, 2004, an addendum to the district contract with Vogel was entered into increasing compensation for Vogel Bus Company for additional runs. a. William Gerhard was absent from this meeting. 46. On August 1, 2005, another addendum to this contract was made changing the amounts paid for special early dismissal short and long runs and daily rates for routes 6, 8, 9 and 10 for the 2005 -06 school year and consolidated routes eliminating former bus route #1, changes were as follows: a. 2005 -06 School year short run: $49.25 b. 2005 -06 School year other than short run: $98.50 c. 2005 -06 School year routes 6, 8, and 9: $442.02 per day; Route 10: $152.31 per day. d. The board approved the addendum during an August 1, 2005, special meeting. 1. William Gerhard was present for this special meeting and participated in the discussion and vote to approve the addendum. 2. William Gerhard was not a member of the District Transportation Committee in 2005. 47. The August 1, 2005, contract addendum reduced the number of bus routes Vogel had by one on this contract from five to four. a. Bus route number one (1) was deleted reducing the daily amount due Vogel by approximately $138.16. b. The decision to reduce the number of buses was the result of board discussions regarding the number of buses on the road and their cost to the District. c. This addendum did not affect terms of Vogel Bus company's April 13 [sic], 2003, contract (Votech Contract). 48. Kenneth Vogel, displeased with the August 1, 2005, contract addendum, raised the reduction issue with the Board resulting in a year long dispute between Vogel and the school district. a. This dispute was resolved as a result of another contract addendum entered into on June 12, 2006.* 49. Minutes from Weatherly Area School District Board of School Directors Meetings held on the following days included recorded discussions and /or Transportation Committee reports on the contract dispute with Vogel Bus Company between August 2005 and June 12, 2006. a. Meeting Date Gerhard Attendance August 8, 2005 Absent Gerhard, #07 -001 Page 14 September 12, 2005 Present October 11, 2005 Present November 14, 2005 Present June 12, 2006 Present b. Minutes do not include any recorded abstentions by Gerhard during the meetings he was present at, listed above. c. No decisions were made by the board during these meetings concerning the dispute with Vogel.* 50. The Weatherly Area Board of School Directors took action at their June 12, 2006, meeting to approve rescinding the Vogel Bus Company addendum dated August 1, 2005, and approve a new transportation contract addendum.* a. William Gerhard was present at this meeting, participating in the discussion and subsequent official action taken on the addendum. b. William Gerhard was one of five affirmative votes on the addendum which passed by a 5 -4 margin. c. This contract addendum incorporated the Votech bus route, Bus #2 extending the April 14, 2003, contract by one school year. 51. Minutes from the Weatherly Area School District's June 12, 2006, meeting include the following recorded discussion and official action taken approving a new contract addendum with Vogel Bus Company. a. "Approved the rescinding of the Vogel Bus Company addendum dated August 1, 2005, and approved the transportation contract addendum for Vogel Bus Company. There was Board discussion regarding the acceptability of the rates, the rescinding of the previous addendum, the wording of the addendum, and interest on the unpaid portion. Motion to approve the rescinding of one addendum and approve the new addendum by G. Grega and seconded by J. Toft. The motion passed on roll call vote: Voting yes J. Dougherty, C. Gerhart, W. Gerhard, G. Grega, J. Toft. Voting no B. Barbush, T. Kew, G. Makuch, J. Ursta. 5 yes, 4 no, 0 absent." b. Following this motion, the Board took action to approve transportation contract addendums with the Hemlock Bus Company and the Evancho Transportation Company Inc. 1. William Gerhard voted in favor of these addendums which were approved by a 8 -1 margin. 2. Board member J. Ursta voted against these addendums. 52. On June 12, 2006, an addendum was entered into on the Vogel Bus Company contracts dated April 14, 2003, and June 25, 2004, for Votech and general bus transportation services. a. The April 14, 2003, contract was for the transportation of District students to the Carbon County Area Vocational Technical School for the 2003 -04 through 2005 -06 school years while the June 25, 2004, contract was for general transportation services for the 2004 -05 through 2006 -07 school years. Contract Dates Original April 14, 2003 and June 23, 2004 Addendum August 1, 2005 Addendum June 12, 2006 Cost per day Set out in contract for each bus route 1,6,8,9- $552.63 6,8,9- $442.02 2- $190.02 10- $126.09 10- $152.31 6- $153.82 2- $139.00 2- $172.38 8- $144.78 9- $190.02 10- $226.21 # of Buses 6 5 5 Total (per day) $817.72 $766.71 $904.85 Yearly (x180) $147,189.60 $138,007.80 $162,873.00 Gerhard, #07 -001 Page 15 b. The basis for this addendum was to "clarify the compensation for the routes for the years 2005 -2006 and establish compensation for the routes for 2006- 2007 school year... to extend the contract for transportation to the Carbon County Area Vocational Technical School, now Carbon County Career and Training Institute through June 30, 2007." c. Agreed upon compensation was as follows: 1. 2005 -06 School year Bus #2: $190.02 (Votech Route) Bus #6: $153.82 Bus #8: $144.78 Bus #9: $190.02 Bus #10: $226.21 Total $904.85 (Per day) Yearly $162,873.00 Other than short run $98.50 Agreed interest on deferred payments $1,243.26 2. 2006 -07 School year Bus #2: $195.72 (Votech Route) Bus #6: $158.44 Bus #8: $149.12 Bus #9: $195.72 Bus #10: $233.00 Total 932.00 Yearly $167,760.00 Other than short run $98.50 53. The addendum resulted in an increase in the amount of money that the District would pay Vogel for his services. A Comparison of the daily rates per bus for the 2005 -2006 and 2006 -2007 school years, as set forth in each contract is as follows: 2005 -2006 Contract Dates Original April 14, 2003 June 23, 2004 Addendum August 1, 2005 Addendum June 12, 2006 Cost per day set out in contract for each bus route. 1,6,8,9- $569.21 6,8,9 -N /A ** 2- $195.72 10- $129.87 10 -N /A ** 6- $158.44 2 -N /A* 2 -N /A ** 8- $149.12 9- $195.72 10- $233.00 # of Buses 5 N/A 5 Total (per day) $699.08 $0.00 $932.00 Yearly (x180) $125,834.40 $0.00 $167,760.00 Gerhard, #07 -001 Page 16 2006 -2007 *The April 14, 2003, contract expired in June 2006, and therefore did not have an amount established for the 2006 -2007 school year. * *The August 1, 2005, addendum did not change any of the daily amounts for the 2006 -2007 school year. 54. During the same time the Board was debating a contract addendum with Vogel Bus Company, Gerhard was privately negotiating the sale of five buses to Vogel. a. Vogel eventually decided to purchase only one bus from Gerhard. b. Vogel purchased four (4) other buses from another source in July 2006. 55. In or about the spring of 2006 Vogel became aware of a 1996 International School bus offered for sale by Gerhard. a. Vogel contacted Gerhard inquiring about purchasing five (5) buses from Gerhard. 1. During their negotiations Vogel had learned of a school bus auction being held by 422 Sales near Butler, PA. 2. Vogel opted to purchase four (4) buses at auction from 422 Sales and only one from Gerhard. b. These discussions between Vogel and Gerhard were occurring during the same point in time Vogel's contract addendum was being considered by the Gerhard, #07 -001 Page 17 district. 1. Gerhard participated in some of those discussions. c. Vogel ultimately acquired one bus from Gerhard less than one month after his contract was increased by the school board. 56. Gerhard sold Vogel Bus Company a 1996 International School Bus VIN #1 HVBBAAP2TH374629 for $5,000.00 from Orefield Transit, Inc. on July 6, 2006. a. This bus was paid for by Vogel Bus Company check number 3833 as detailed below. b. William Gerhard represented Orefield Transit Inc. in this transaction. c. Kenneth J. Vogel acted on behalf of Vogel Bus Company in this transaction. 57. William Gerhard, d /b /a Orefield Transit, Inc. acquired this bus from Rohrer Enterprises, Inc. on August 25, 2005. a. This bus was used by County Coach, Inc. from August 25, 2005, until the time of the sale. 58. On July 6, 2006, Kenneth J. Vogel, d /b /a Vogel Bus Company, 137 Quakake Road, Weatherly, PA 18255 issued business check number 3833 in the amount of $5,000.00 to William Gerhard. a. Nothing is written in the memo portion of the check. b. The reverse side of the check is endorsed by William Gerhard and processed by Commerce Bank on July 7, 2006. 59. Vogel Bus Company financial records include a corresponding check stub for check number 3833. a. Check number 3833 is identified as being issued to Bill Gerhard on July 6, 2006, in the amount of $5,000.00 for a school bus. b. Vogel did not attempt to get the title changed to his name until August 17, 2006. 60. On August 17, 2006, Leonard's Auto Tag Service, 996 North Shermans Court, Hazleton, PA 18201, notarized the title and submitted it to PennDot to complete the sale of the 1996 International Bus from Gerhard to Vogel. a. The actual title transfer was not recorded by PennDot until May 7, 2007. b. Leonard's had to resubmit the title paperwork to PennDot three times creating the delay. c. Vogel Bus Company took possession of the bus on or around July 2006. d. Vogel Bus Company used temporary license plates on the bus until it received the permanent title from PennDot. 61. Leonard's Auto Tag Service maintains photocopies of all title transfer paperwork it processes. Gerhard, #07 -001 Page 18 a. Its files include a bill of sale, PennDot form MV -4ST dated August 17, 2006, between Orefield Transit Inc. (seller) and Vogel Bus Co. (buyer). b. The vehicle being transferred was a 1996 International VIN# 1 HVBBAAP2TH374629. c. The purchase price is listed as $5,000.00. d. William Gerhard signed as seller and Kenneth Vogel signed as the buyer. e. Proof of insurance was provided by Vogel and temporary plate number SC09149 was issued. f. Included with the transfer documents was a PennDot MV -3 Motor Vehicle Verification of Fair Market Value by the Issuing Agent also dated August 17, 2006. This form indicates that the 1996 International identified as a "SBUS" had 132,861 miles on the odometer and was being sold as is" for $5,000.00. This document also was signed by William Gerhard, seller and Kenneth Vogel, purchaser. h. Additional documents included correspondence dated July 31, 2006, on Kenneth Vogel Bus Company stationery indicating that Kenneth Vogel is the sole owner of Vogel Bus Company and authorized to sign any forms relating to its school bus operation. Correspondence dated July 31, 2006, from the Weatherly Area School District confirming that Vogel Bus Company had a signed contract with the District through the 2006 -07 school year and a copy of the bus's title while owned by Orefield Transit Inc. [sic]. This was notarized by David F. Smith on August 17, 2006. 62. William Gerhard did not disclose to the Board or public at the time of the June 12, 2006, vote that he had private business dealings with Kenneth Vogel, d /b /a Vogel Bus Company involving the purchase and sale of buses during the same time frame the District was considering a contract addendum with Vogel Bus Company. 63. Records of both the Weatherly Area School District and Vogel Bus Company include the 1996 International Bus as being part of the fleet for the 2006 -2007 school year. a. The bus is identified as being used for district bus route #2. b. Vogel Bus Company had a different bus for this route for the 2005 -2006 school year. c. Vogel supplied an inventory list of buses to be used to the Weatherly Area School District around August 2006, in preparation for the 2006 -2007 school year. g. 64. Around the fall of 2006, Gerhard purchased two school buses from Vogel at a cost of approximately $1,500.00 each. a. Discussions between Vogel and Gerhard on this transaction started around the same time the two discussed Vogel purchasing five buses from Gerhard. Gerhard, #07 -001 Page 19 b. Gerhard was interested in two of Vogel's buses based on different year requirements each had to comply with for school district contracts they had. c. Gerhard purchased a 1989 and a 1990 International bus from Vogel. 65. Gerhard disclosed his sale of a bus to Vogel during a Board Caucus Meeting held on September 5, 2006, after questions were raised regarding the ownership of bus number 2 in the Vogel Bus Company fleet. a. Hand written notes taken by Board Secretary Martha Kew - Goodale include the following notation under financial report item 7c: "agreement for 5 but bought only 1}Hazleton August Inspection ". b. This is in reference to the bus being used for District route number two. c. This disclosure came after Gerhard participated in a 5 -4 vote to approve a contract addendum with the District for Vogel Bus Company on June 12, 2006. (See Finding #56 -58) 66. Gerhard participated in transportation committee meetings, board discussions and official actions taken on transportation contracts and addendums awarded to Vogel Bus Company since 2004 which resulted in increased payments to Vogel by the Weatherly School District. a. The June 12, 2006, addendum provided a one time interest payment of $1,243.26 and contract increases for the 2005 -06 and 2006 -07 school years. b. The agreed upon increase for the 2006 -07 school year was from $162,873.00 to $167,760.00 or $4,887.00. 67. Gerhard participated in a board action increasing compensation to Vogel Bus Company during the same time period he was negotiating a private contract for the sale of at least one bus. a. The negotiations resulted in the sale of one bus by Gerhard to Vogel which was finalized less than one month (July 6, 2006) after the board vote of June 12, 2006, increasing Vogel's contract. b. The $4,887.00 increase combined with the $1,243.26 deferred payment for 2005 -06 totaled $6,130.26. This amount was $1,130.26 more than the $5,000.00 Vogel paid to Gerhard for the 1996 International bus used as part of the contract. THE FOLLOWING FINDINGS RELATE TO ALLEGATIONS THAT WILLIAM GERHARD FAILED TO LIST ALL SOURCES OF INCOME AND BUSINESS INTERESTS ON STATEMENTS OF FINANCIAL INTERESTS FORMS FILED. 68. William Gerhard in his official capacity as a member of the Weatherly Area School District Board of School Directors was annually required to file a Statement of Financial Interests form by May 1 containing information for the prior calendar year. 69. Statement of Financial Interests forms on file with the Weatherly Area School District include the following filings for Gerhard: Calendar Year: 2006 Gerhard, #07 -001 Page 20 Filed: 03/05/07 on SEC Form 1/07 Position: School Board Candidate Creditors: None Direct /indirect income: Hazleton Area School District; Country Coach Inc. Office, Directorship or Employment in any business: Country Coach Inc., Office Manager Business interest transferred to immediate family member: Country Coach Inc. Interest: President, Relationship: wife, Date transferred: 2000 estimate All other financial interests: None Calendar year: 2005 Filed: February 28, 2006, on SEC Form 01 \06 Position: School Board Member Occupation: Bus Driver Creditors: HSECU, 6% Direct or indirect sources of income: Hazelton Area School District, Country Coach Office, Directorship or employment in any business All other financial interests: Country Coach, Incorporated, Office Manager /Bus Driver Business interests transferred to immediate family member: Country Coach, Incorporated, transfer Donna M. Gerhard, 100% approximately 2003 All other Financial Interests: None Calendar year: 2004 Filed: January 24, 2005, on SEC from 01/05 Position: School Board Member Occupation: Teacher Creditor: None Direct or indirect sources of income: Hazelton School District All other financial interests: None Calendar year: 2004 Filed: October 9, 2006, on SEC form 01/06 File type: Amended filing Position: Board Member Occupation: Bus Driver Creditors: None Direct or indirect sources of income: Hazelton Area School District , Country Coach, Incorporated Office, directorship or employment in any business: Country Coach, Incorporated — Secretary Calendar year: 2003 Filed: March 1, 2004, on SEC Form 01/04 Position: School Board Member Occupation: Teacher Creditors: None Direct or indirect sources of income: Hazelton School District All other financial interests: None Calendar Year: 2002 Filed: 03/10/02 on SEC Form 1/03 Position: School Board Candidate Creditors: None Direct /indirect income: Hazleton Area School District; Country Coach Inc. All other financial interests: None. Gerhard, #07 -001 Page 21 70. Gerhard did not list his financial interest in KC Trailer Sales on Statements of Financial Interests forms filed for calendar years 2002 through 2006. a. Records on file with the Pennsylvania Department of State include a current fictitious name registry for KC Trailer Sales with William H. Gerhard and Donna M. Gerhard owners. b. KC Trailer Sales has not been an active business since at least 2000. 71. William Gerhard has not received income in excess of $1,300.00 annually from KC Trailer Sales since at least calendar year 2001. 72. Gerhard failed to list Country Coach, Inc. as a source of income in excess of $1,300.00 on his Statement of Financial Interests form for calendar year 2003. a. Gerhard received income from Country Coach, Inc. in the amount of approximately $15,158.00 during the 2003 calendar year. 73. Gerhard failed to list his financial interest in Country Coach Inc. on Statements of Financial Interests filed for calendar years 2003 and 2004. a. Gerhard disclosed Country Coach, Inc. as a source of income on his calendar year 2002 Statement of Financial Interest. b. Gerhard was listed as both an annual officer of Country Coach on official Department of State Articles of Incorporation until April of 2004. 74. Gerhard filed an amended Statement of Financial Interests for calendar year 2004 on October 9, 2006 disclosing Country Coach as a source of income in excess of $1,300.00 during the 2004 calendar year. 75. Gerhard did not list his financial interest in Orefield Transit, Inc. on Statements of Financial Interests filed for calendar years 2002 through 2006. a. William Gerhard is the President of Orefield Transit Inc. 76. Gerhard did not list Orefield Transit, Inc. as a source of income in excess of $1,300.00 annually on Statements of Financial Interests filed for calendar years 2002 through 2006. 77. State and Federal Income tax forms completed by H &R Block for the Gerhards include gross income received by William Gerhard from Orefield Transit Inc. since calendar year 2003: a. Calendar Year Gross Income 2006 $2,302.00 2005 $1,488.00 2004 $1,865.00 2003 $11,351.00 (includes Donna Gerhard's 50 %) 2002 $4,760.00 (includes Donna Gerhard's 50 %) b. Wages received by William Gerhard and Donna Gerhard from Orefield Transit, Inc. were not recorded individually on their 2002 or 2003 tax return. 1. William Gerhard received approximately $5,675.50; one half of the $11,351.00 paid to the Gerhards from Orefield Transit, Inc. during 2003. Gerhard, #07 -001 Page 22 2. William Gerhard received approximately $2,380.00; one -half of the $4,760.00 paid to the Gerhards from Orefield Transit, Inc. during 2002. 78. William Gerhard did not list his office, directorship or employment in Orefield Transit, Inc. on Statements of Financial Interests forms filed for calendar years 2002 through 2006. a. William Gerhard has served as the President of Orefield Transit, Inc. during this time frame. 79. William Gerhard realized a private pecuniary gain of $5,000.00 as the result of the sale of a 1996 International School bus to Kenneth Vogel (24) days after casting an affirmative vote to award a contract addendum to Vogel Bus Company which passed by a 5 -4 margin. *[Cf., Fact Findings 48 a, 49 c, and 50.] III. DISCUSSION: As a Member of the School Board ( "Board ") of the Weatherly Area School District ( "School District ") since approximately December 1999, Respondent William Gerhard, hereinafter also referred to as "Respondent," "Respondent Gerhard," or "Gerhard," has been 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 Gerhard violated Sections 1103(a), 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he used the authority of his office for the private pecuniary gain of himself and /or a business with which he and /or a member of his immediate family is associated by participating in Board actions to award a contract to the Vogel Bus Company at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel; when he failed to disclose on a Statement of Financial Interests filed for the 2003 calendar year income from Country Coach, his office or directorship with K.C. Trailer Sales and financial interest in K.C. Trailer Sales and Country Coach; when he failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in Country Coach and K.C. Trailer Sales; and when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales; and when he failed to disclose on Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit as a direct /indirect source of income, his office, directorship or employment in Orefield Transit, and his financial interests in Orefield Transit. 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: 65 Pa.C.S. § 1103(a). § 1103. Restricted activities (a) Conflict of interest - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. Gerhard, #07 -001 Page 23 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. Section 1105(b)(5) of the Ethics Act requires the filer to disclose on the Statement of Financial Interests the name and address of any direct or indirect source of income totaling in the aggregate $1,300 or more. Section 1105(b)(8) of the Ethics Act requires the filer to disclose on the Statement of Financial Interests any office, directorship or employment in any business entity. Section 1105(b)(9) of the Ethics Act requires the filer to disclose on the Statement of Financial Interests any financial interest in any legal entity engaged in business for profit. The term "financial interest" is defined in the Ethics Act as "[a]ny financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness." 65 Pa.C.S. § 1102. We shall now summarize the material facts pertaining to this case. Given Respondent's failure to file an Answer to the Investigative Complaint, the facts as averred by the Investigative Complaint are deemed admitted by Respondent. 65 Pa.C.S. § 1108(e); 51 Pa. Code § 21.5(k) and (k)(1). Respondent Gerhard has served as a Member of the Board of the School District since approximately December 1999. Gerhard served on the Board's Transportation Committee during 2001 and 2004. The Transportation Committee oversees the creation of RFP's (Requests for Proposals), evaluates bus companies, selects bus companies to be used, and makes recommendations to the Board as to which companies should be awarded bus contracts. Since 2000 Gerhard has been affiliated with two bus companies, Orefield Transit, Inc. and Country Coach, Inc., as an owner, officer or employee. Gerhard purchased Orefield Transit, Inc. on or about October 1, 2000. Gerhard has owned Orefield Transit, Inc. continuously from that time to the present. Minutes from the Gerhard, #07 -001 Page 24 corporation's shareholder meeting of October 1, 2000, reflect that Gerhard was elected President and Gerhard's wife, Donna M. Gerhard, was elected Secretary /Treasurer. No changes have been made to the corporate officers of Orefield Transit, Inc. since October 1, 2000. Gerhard and his wife incorporated Country Coach, Inc. in 2000. On February 1, 2001, Gerhard's wife assumed 100% ownership and all Director and Officer positions of the corporation. Per the Fact Findings, deemed admitted by Respondent, Gerhard's wife is listed as company President on paper to qualify the business as being minority owned and operated. Gerhard handles the day -to -day operations of Country Coach Inc., including making business decisions. Gerhard is compensated as an employee of Country Coach, Inc. Gerhard has been an employee of Country Coach, Inc. since September 5, 2000. Gerhard's other business interests include KC Trailer Sales, a home based business operated by Gerhard and his wife. On or about March 17, 1995, Gerhard filed a fictitious name registry for KC Trailer Sales with the Pennsylvania Department of State, Corporation Bureau. No documentation was filed with the Department of State terminating the fictitious name registry. KC Trailer Sales has not been an active business since at least 2000. Since September 28, 2004, Vogel Bus Company, Evancho Transportation Company, and Hemlock Bus Company have been the School District's primary busing companies, with each having designated routes. Country Coach, Inc. provides limited transportation services for athletic and other special events on an as needed emergency basis. Gerhard has played no role in this process. During school years 2004 -05 and 2005 -06, Vogel Bus Company had the following two separate busing contracts with the School District: (1) An April 14, 2003, contract (hereinafter, the April 14, 2003, contract ") for the transportation of students to the Carbon County Area Vocational Technical School for the 2003 -04 through 2005 -06 school years; and (2) A June 25, 2004, contract (hereinafter, the June 25, 2004, contract ") for five specified bus routes for the 2004 -05 through 2006 -07 school years. The April 14, 2003, contract provided for compensation to Vogel Bus Company in the following amounts per day, by school year: (1) 2003 -04 School year $130.00 per day (2) 2004 -05 School year $135.00 per day (3) 2005 -06 School year $139.00 per day Gerhard was absent from the Board meeting at which the April 14, 2003, contract was entered into by the School District. On August 1, 2005, an addendum to the April 14, 2003, bus contract was entered into, changing the daily compensation for the 2005 -06 school year from $139.00 per day to $172.38 per day. The June 25, 2004, contract provided for compensation to Vogel Bus Company in the following amounts per day, by school year: Gerhard, #07 -001 Page 25 (1) 2004 -05 School year: $533.49 per day for routes 1, 6, 8, and 9 and $121.83 per day for route 10; (2) 2005 -06 School year: $552.63 per day for routes 1, 6, 8, and 9 and $126.09 per day for route 10; and 2006 -07 School year: $569.21 per day for routes 1, 6, 8, and 9 and $129.87 per day for route 10. The June 25, 2004, contract included a clause giving the School District the right to add or delete bus routes and the right to negotiate revised prices based upon the number of routes added or deleted. Gerhard abstained from the vote on this contract. (3) On November 8, 2004, an addendum to the June 25, 2004, contract was entered into, increasing compensation for Vogel Bus Company for additional runs. Gerhard was absent from this meeting. On August 1, 2005, another addendum to the June 25, 2004, contract was approved by the Board. This addendum changed the amounts paid for special early dismissal short and long runs and daily rates for routes 6, 8, 9 and 10 for the 2005 -06 school year, and consolidated routes eliminating former bus route #1. The changes were as follows: (1) 2005 -06 School year short run: $49.25 (2) 2005 -06 School year other than short run: $98.50 (3) 2005 -06 School year routes 6, 8, and 9: $442.02 per day; Route 10: $152.31 per day. The Board's aforesaid decision to reduce the number of buses was the result of Board discussions regarding the number of buses on the road and their cost to the School District. Gerhard participated in the discussion and vote of the Board to approve this addendum. The August 1, 2005, contract addendum resulted in a dispute between Vogel Bus Company and the School District. Gerhard attended Board meetings on September 12, 2005, October 11, 2005, November 14, 2005, and June 12, 2006, at which the Board received Transportation Committee reports and /or engaged in discussions regarding the contract dispute with Vogel Bus Company. Minutes of the aforesaid meetings do not include any recorded abstentions by Gerhard. The Board took action at its June 12, 2006, meeting to approve rescinding the Vogel Bus Company contract addendum dated August 1, 2005, and to approve a new transportation contract addendum. Gerhard was present at this meeting, and he participated in the discussion and subsequent official action taken on the addendum. Gerhard was one of five affirmative votes on the addendum, which passed by a 5 -4 margin. The June 12, 2006, addendum incorporated the Votech bus route, extending the April 14, 2003, contract by one school year. The addendum resulted in an increase in the amount of money that the District would pay Vogel Bus Company for services, providing a one -time interest payment of $1,243.26 and contract increases for the 2005 -06 and 2006- 07 school years as set forth in Fact Finding 53. During the same time the Board was debating a contract addendum with Vogel Bus Company, Gerhard was privately negotiating the sale of up to five buses to Kenneth Vogel d /b /a Vogel Bus Company. At or about this same time, Gerhard was also discussing with Vogel Gerhard's interest in purchasing some school buses from Vogel. Gerhard, #07 -001 Page 26 On June 12, 2006, when Gerhard participated in Board action approving the aforesaid addendum and increasing compensation to Vogel Bus Company, he was negotiating a private contract for the sale of at least one bus to Vogel Bus Company. On July 6, 2006, less than one month after the Board vote of June 12, 2006, increasing Vogel's contract /compensation, Gerhard sold to Vogel Bus Company a 1996 International School Bus VIN #1HVBBAAP2TH374629 from Orefield Transit, Inc. for $5,000.00. Vogel Bus Company check number 3833 was issued to Gerhard on July 6, 2006. The check is in the amount of $5,000.00 and is identified as being issued to Gerhard for a school bus. Gerhard represented Orefield Transit Inc. in this transaction. Kenneth Vogel acted on behalf of Vogel Bus Company in this transaction. The documents relating to this transaction include a PennDot MV -3 Motor Vehicle Verification of Fair Market Value, which indicates that the 1996 International identified as a "SBUS" had 132,861 miles on the odometer and was being sold as is" for $5,000.00. This document was signed by Gerhard as the seller and Kenneth Vogel as the purchaser. At the time of the Board's June 12, 2006, vote on the contract addendum with Vogel Bus Company, Gerhard did not disclose to the Board or to the public that he had private business dealings with Kenneth Vogel, d /b /a Vogel Bus Company, involving the purchase and sale of buses. Gerhard disclosed his sale of a bus to Vogel during a Board Caucus Meeting held on September 5, 2006, after questions were raised regarding the ownership of bus number 2 in the Vogel Bus Company fleet. Records of both the School District and Vogel Bus Company include the 1996 International Bus as being part of the fleet for the 2006 -2007 school year. Around the fall of 2006, Gerhard purchased two school buses (a 1989 and a 1990 International bus) from Vogel at a cost of approximately $1,500.00 each. Fact Finding 79 of the Investigative Complaint - -to which Gerhard did not respond- - avers that Gerhard realized a private pecuniary gain of $5,000.00 as the result of the sale of a 1996 International School bus to Kenneth Vogel twenty -four (24) days after casting an affirmative vote to award a contract addendum to Vogel Bus Company, which passed by a 5 -4 margin. We shall now review the Fact Findings pertaining to Gerhard's Statements of Financial Interests. As a Member of the Board, Gerhard was required to file annual Statements of Financial Interests by May 1 containing information for the prior calendar year. Gerhard did not list his office, directorship or employment or his financial interest in KC Trailer Sales on his Statements of Financial Interests filed for calendar years 2002 through 2006. Gerhard failed to list Country Coach, Inc. as a source of income in excess of $1,300.00 on his Statement of Financial Interests form for calendar year 2003. Gerhard received income from Country Coach, Inc. in the amount of approximately $15,158.00 during the 2003 calendar year. Gerhard did not list a financial interest in Country Coach Inc. on Statements of Financial Interests filed for calendar years 2003 and 2004. However, per Fact Findings 20 and 20 a -c, Gerhard did not have a financial interest in Country Coach, Inc. after February 1, 2001. The fact that Gerhard's wife had assumed 100% ownership of the corporation was not of record with the Pennsylvania Department of State until approximately April 30, 2004. Gerhard, #07 -001 Page 27 Gerhard did not list his financial interest in Orefield Transit, Inc. on Statements of Financial Interests filed for calendar years 2002 through 2006. Gerhard did not list his office, directorship or employment in Orefield Transit, Inc. on Statement of Financial Interests forms filed for calendar years 2002 through 2006. Gerhard served as President of Orefield Transit Inc. during that entire time. Gerhard did not list Orefield Transit, Inc. as a source of income in excess of $1,300.00 annually on his Statements of Financial Interests filed for calendar years 2002 through 2006. However, State and Federal Income tax forms completed by H &R Block for the Gerhards indicate that Gerhard received gross income in excess of $1,300.00 annually from Orefield Transit Inc. for calendar years 2002 through 2006. Finally, we note that on September 17, 2001, State Ethics Commission Advice of Counsel number 01 -592 was issued to Gerhard in response to a request for an advisory. (See, Fact Findings 31 -32.) Having highlighted the Fact Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. Gerhard's failure to file an Answer to the Investigative Complaint has resulted in the deemed admission of the factual averments of the Investigative Complaint. 65 Pa.C.S. § 1108(e); 51 Pa. Code §§ 21.5(k) and (k)(1); cf., Russell v. Donnelly, 827 A.2d 535 (Pa. Cmwlth. 2003). As we apply the facts to the allegations, due process requires that we not depart from the allegations. Pennsy v. Department of State, 594 A.2d 845 (Pa. Cmwlth. 1991). A violation of the Ethics Act must be based upon clear and convincing proof. 65 Pa.C.S. § 1108(g). Clear and convincing proof is "so `clear, direct, weighty, and convincing as to enable the trier of fact to come to a clear conviction, without hesitance, of the truth of the precise facts in issue." In Re: Charles E.D.M., 550 Pa. 595, 601, 708 A.2d 88, 91 (Pa. 1998) (Citation omitted). It is alleged that Gerhard violated Section 1103(a) of the Ethics Act when he used the authority of his office for the private pecuniary gain of himself and /or a business with which he and /or a member of his immediate family is associated by participating in Board actions to award a contract to the Vogel Bus Company at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel. The Fact Findings as deemed admitted by Respondent necessitate the conclusion that Respondent has violated Section 1103(a) of the Ethics Act as alleged. Factually, during the same time the Board was debating a contract addendum with Vogel Bus Company, Gerhard was privately negotiating the sale of up to five buses to Kenneth Vogel d /b /a Vogel Bus Company. At or about this same time, Gerhard was also discussing with Vogel Gerhard's interest in purchasing some school buses from Vogel. On June 12, 2006, when Gerhard used the authority of his public office by participating in Board action approving the aforesaid addendum to the Vogel contract and increasing compensation to Vogel Bus Company, Gerhard was actively engaged in negotiating a private contract to sell at least one school bus to Vogel Bus Company, and he had a reasonable expectation that he would receive such a contract. On July 6, 2006 - -less than one month after the Board vote of June 12, 2006, increasing Vogel's contract -- Gerhard's negotiations with Vogel culminated in the sale to Vogel Bus Company of a 1996 International School Bus VIN #1 HVBBAAP2TH374629 from Orefield Transit, Inc. for $5,000.00. Orefield Transit, Inc. is a business with which Gerhard and his wife are associated. Fact Finding 79 of the Investigative Complaint - -to which Gerhard did not respond- - avers that Gerhard realized a private pecuniary gain of $5,000.00 as the result of the sale of a 1996 International school bus to Kenneth Vogel twenty -four (24) days after casting an affirmative vote to award a contract addendum to Vogel Bus Company, which passed by a Gerhard, #07 -001 Page 28 5 -4 margin. Gerhard's failure to file an Answer to the Investigative Complaint has resulted in the deemed admission of the factual averments of Fact Finding 79. 65 Pa.C.S. § 1108(e); 51 Pa. Code §§ 21.5(k) and (k)(1); cf., Russell v. Donnelly, supra. Thus, based upon the Fact Findings before us, Gerhard realized a pecuniary gain of $5,000.00 as the result of the sale of the 1996 International School bus to Kenneth Vogel on July 6, 2006, just twenty -four (24) days after casting an affirmative vote to award a contract addendum to Vogel Bus Company. The finding of a violation of Section 1103(a) of the Ethics Act under these circumstances is supported by case law and Commission precedent. This Commission has long held that a reasonable and legitimate anticipation of the development of a financial /business relationship may support a finding of a conflict of interest. See, e.q., Pavlovic, Opinion 02 -005; Confidential Opinion, 00 -006; Garner, Opinion 93 -004; Amato, Opinion 89 -002 (citing Sowers, Opinion 80 -050); Caldwell, Order 1172; Snyder, Order 979 -2, affirmed, Snyder v. State Ethics Commission, 686 A.2d 843 (Pa. Cmwlth. 1996), alloc. denied, 1997 Pa. LEXIS 2719 (Pa. Dec. 22, 1997). In Snyder v. State Ethics Commission, supra, Commonwealth Court affirmed Snyder, Order 979 -2, in which this Commission determined that a township supervisor who had participated and voted on development issues when he had actual or anticipated contracts to perform work in the developments had violated Section 3(a) (now Section 1103(a)) of the Ethics Law. Commonwealth Court, in affirming this Commission's Order, stated that Snyder "should not have considered and voted on issues involving his personal business dealings." Snyder, 686 A.2d at 849. In Kistler, Order 1441, we determined that "personal business dealings" encompass the persons or entities with which one does business or actively seeks to do business. We held that a member of an intermediate unit board of directors unintentionally violated Section 1103(a) of the Ethics Act when he voted in favor of authorizing an architect to pursue the construction of a classroom facility for the intermediate unit while he was actively engaged in seeking a contract with that same architect or the architect's company to build a transportation facility for the intermediate unit and had a reasonable expectation that he would receive such a contract. In the instant matter, Gerhard had a conflict of interest as to the June 12, 2006, addendum to the Vogel contract because of his ongoing business negotiations with Vogel. The $5,000.00 pecuniary gain received by Gerhard from the sale of the 1996 International school bus to Kenneth Vogel was a private pecuniary gain received in violation of Section 1103(a) of the Ethics Act. We therefore hold that Respondent Gerhard violated Section 1103(a) of the Ethics Act when he used the authority of his office for the private pecuniary gain of himself and /or Orefield Transit, Inc., a business with which he and /or a member of his immediate family is associated, by participating in Board actions to approve a June 12, 2006, addendum to a School District contract with Vogel Bus Company, thereby increasing compensation to Vogel Bus Company, at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel. We shall now address the allegations pertaining to Gerhard's Statements of Financial Interests. It is alleged that Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2003 calendar year income from Country Coach, his office or directorship with K.C. Trailer Sales and financial interest in K.C. Trailer Sales and Country Coach; when he failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office, directorship or employment with K.C. Trailer Sales and his Gerhard, #07 -001 Page 29 financial interest in Country Coach and K.C. Trailer Sales; when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales; and when he failed to disclose on Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit as a direct /indirect source of income, his office, directorship or employment in Orefield Transit, and his financial interests in Orefield Transit. There is no question that as a Member of the Board, Gerhard was a public official required to file annual Statements of Financial Interests by May 1 containing information for the prior calendar year. Cf., Quinn, Opinion 07 -014; Confidential Opinion, 05 -004; Means, Opinion 04 -007. Factually, Gerhard did not list his office, directorship or employment or his financial interest in KC Trailer Sales on his Statements of Financial Interests filed for calendar years 2002 through 2006. Gerhard failed to list Country Coach, Inc. as a source of income in excess of $1,300.00 on his Statement of Financial Interests form for calendar year 2003, even though Gerhard received income from Country Coach, Inc. in the amount of approximately $15,158.00 during the 2003 calendar year. Gerhard did not list a financial interest in Country Coach Inc. on Statements of Financial Interests filed for calendar years 2003 and 2004. However, per Fact Findings 20 and 20 a -c, Gerhard did not have a financial interest in Country Coach, Inc. after February 1, 2001, such that he would not have been required to disclose a financial interest in Country Coach, Inc. on his Statements of Financial Interests for calendar years 2003 and 2004. Gerhard did not list his financial interest in Orefield Transit, Inc. on Statements of Financial Interests filed for calendar years 2002 through 2006. Gerhard did not list his office, directorship or employment in Orefield Transit, Inc. on Statement of Financial Interests forms filed for calendar years 2002 through 2006. Gerhard served as President of Orefield Transit Inc. during that entire time. Gerhard did not list Orefield Transit, Inc. as a source of income in excess of $1,300.00 annually on his Statements of Financial Interests filed for calendar years 2002 through 2006. However, State and Federal Income tax forms completed by H &R Block for the Gerhards indicate that Gerhard received gross income in excess of $1,300.00 annually from Orefield Transit Inc. for calendar years 2002 through 2006. Based upon the facts before us, we hold as follows: Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose, on a Statement of Financial Interests filed for the 2003 calendar year, Country Coach, Inc. as a direct or indirect source of income, his office or directorship with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. Gerhard, #07 -001 Page 30 Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose on Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit, Inc. as a direct or indirect source of income, his office, directorship or employment in Orefield Transit, Inc., and his financial interest in Orefield Transit, Inc. The parties were given an opportunity to file, concurrently, their respective Position Statements. Respondent did not file a Position Statement. The Investigative Division filed a Position Statement contending that Respondent Gerhard should be required to pay restitution in the amount of $5,000.00, representing the private pecuniary gain he received in violation of Section 1103(a) of the Ethics Act. Based upon the facts before us, we conclude that restitution is warranted. Although we could order Gerhard to pay restitution in the full amount of $5,000.00, in the exercise of our discretion and based upon the totality of the facts and unique circumstances in this case, we shall order restitution in the lesser amount of $500.00. We further determine that Respondent Gerhard shall be directed to file amended Statements of Financial Interests for calendar years 2002, 2003, 2004, 2005 and 2006, providing full financial disclosure as required by the Ethics Act, to the extent he has not already done so. Accordingly, Respondent Gerhard is directed to make payment of restitution in the amount of $500.00, payable to the Commonwealth of Pennsylvania and forwarded to this Commission within thirty (30) days of the issuance of this adjudication and Order. To the extent he has not already done so, Respondent Gerhard is further directed to file with the School District, within thirty (30) days of the issuance of this adjudication and Order, amended Statements of Financial Interests for calendar years 2002, 2003, 2004, 2005 and 2006, providing full financial disclosure as required by the Ethics Act, and to provide to this Commission copies of all of the aforesaid filings for compliance verification purposes. Noncompliance will result in the institution of an order enforcement action. IV. CONCLUSIONS OF LAW: 1. As a Member of the School Board ( "Board ") of the Weatherly Area School District ( "School District ") since approximately December 1999, Respondent William Gerhard ( "Gerhard ") has been 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. Gerhard violated Section 1103(a) of the Ethics Act when he used the authority of his office for the private pecuniary gain of himself and /or Orefield Transit, Inc., a business with which he and /or a member of his immediate family is associated, by participating in Board actions to approve a June 12, 2006, addendum to a School District contract with Vogel Bus Company, thereby increasing compensation to Vogel Bus Company, at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel. 3. Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose, on a Statement of Financial Interests filed for the 2003 calendar year, Country Coach, Inc. as a direct or indirect source of income, his office or directorship with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 4. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he Gerhard, #07 -001 Page 31 failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 5. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 6. Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose on Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit, Inc. as a direct or indirect source of income, his office, directorship or employment in Orefield Transit, Inc., and his financial interest in Orefield Transit, Inc. 7 Restitution is warranted. In Re: William Gerhard, Respondent ORDER NO. 1460 File Docket: 07 -001 Date Decided: 3/12/08 Date Mailed: 3/14/08 1 Respondent William Gerhard ( "Gerhard "), a public official in his capacity as a Member of the School Board ( "Board ") of the Weatherly Area School District ( "School District ") since approximately December 1999, violated Section 1103(a) of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a), when he used the authority of his office for the private pecuniary gain of himself and /or Orefield Transit, Inc., a business with which he and /or a member of his immediate family is associated, by participating in Board actions to approve a June 12, 2006, addendum to a School District contract with Vogel Bus Company, thereby increasing compensation to Vogel Bus Company, at a time when he was negotiating with Vogel Bus Company to sell and /or lease buses to Vogel. 2. Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose, on a Statement of Financial Interests filed for the 2003 calendar year, Country Coach, Inc. as a direct or indirect source of income, his office or directorship with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 3. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2004 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 4. Gerhard violated Sections 1105(b)(8) and 1105(b)(9) of the Ethics Act when he failed to disclose on a Statement of Financial Interests filed for the 2005 calendar year his office, directorship or employment with K.C. Trailer Sales and his financial interest in K.C. Trailer Sales. 5. Gerhard violated Sections 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act when he failed to disclose on Statements of Financial Interests filed for the 2002, 2003, 2004, 2005, and 2006 calendar years Orefield Transit, Inc. as a direct or indirect source of income, his office, directorship or employment in Orefield Transit, Inc., and his financial interest in Orefield Transit, Inc. 6. Gerhard is directed to make payment of restitution in the amount of $500.00, payable to the Commonwealth of Pennsylvania and forwarded to this Commission within thirty (30) days of the issuance of this Order. 7 To the extent he has not already done so, Gerhard is further directed to file with the School District, within thirty (30) days of the issuance of this Order, amended Statements of Financial Interests for calendar years 2002, 2003, 2004, 2005 and 2006, providing full financial disclosure as required by the Ethics Act, and to provide to this Commission copies of all of the aforesaid filings for compliance verification purposes. Gerhard, #07 -001 Page 33 8. Non - compliance with paragraph 6 or 7 of this Order will result in the institution of an order enforcement action. BY THE COMMISSION, Louis W. Fryman, Chair Commissioner Donald M. McCurdy and Commissioner Paul M. Henry dissent.