Loading...
HomeMy WebLinkAbout08-553 BiemillerJohn W. Biemiller, Vice President EDC Finance Corporation 100 South Queen Street P.O. Box 1558 Lancaster, PA 17608 -1558 Dear Mr. Biemiller: ADVICE OF COUNSEL May 16, 2008 08 -553 This responds to your letters dated March 13, 2008, and April 7, 2008, and your faxed transmission received May 9, 2008, by which you requested advice from the Pennsylvania State Ethics Commission. Issue: Whether Michael W. Davis, Esq. ( "Mr. Davis "), in his capacity as a Member of the Board of Directors of EDC Finance Corporation, located in Lancaster County, Pennsylvania, would be considered a "public employee" or "public official" subject to the requirements for filing Statements of Financial Interests pursuant to the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Facts: As Vice President of the EDC Finance Corporation ("EDC Finance "), located in Lancaster County, Pennsylvania, you have been authorized by Mr. Davis, a Member of the Board of Directors of EDC Finance, to request an advisory from the Pennsylvania State Ethics Commission on his behalf. You seek a determination as to whether Mr. Davis, in his capacity as a Member of the EDC Finance Board of Directors, would be required to file Statements of Financial Interests pursuant to the Ethics Act. You have submitted facts that may be fairly summarized as follows. EDC Finance is a private, non - profit 501(c)(4) entity that was incor orated in 1986 by the Economic Development Company of Lancaster County ("EDC' which is itself a private, non-profit 501 c 6 entity. You state that EDC founded EDC Finance to administer the p Pennsylvania Development lvania Industrial Develo ment Authorit and "PCLF" fundin g programs in Lancaster County. EDC Finance also administers the First Industries Fund, Small Business First, and BuildingPA programs in Lancaster County. You state that EDC Finance is both an Industrial Development Corporation CIDC ") and an Area Loan Organization ( "ALO ") as designated by the Pennsylvania Department of Community and Economic Development. You state that EDC Finance is not funded by Lancaster County or any other municipal subdivision. However, EDC Finance contracts for staff services from EDC, which receives membership dues from Lancaster County and several municipalities and also receives a Pennsylvania Local Economic Development Assistance grant. Biemiller, 08 -553 May 16, 2008 Page 2 The EDC Board of Directors elected the first EDC Finance Board of Directors. You state that in 2007, the EDC Finance Bylaws were restructured to establish EDC Finance as a fully separate entity from EDC. You have submitted a copy of the EDC Finance Bylaws, amended and restated December 8, 2006, effective January 1, 2007, and revised February 27, 2008. You state that the EDC Finance Membership ( "the Membership ") currently includes 28 individuals who represent four categories of organizations from across all of Lancaster County: community organizations; government organizations; financial entities; and businesses. You further state that the Membership is self- appointing and is primarily charged with electing the EDC Finance Board of Directors at an annual meeting, which Directors must be Members of EDC Finance. The Membership is also charged with maintaining the diversity of the Membership and the Members of the Board of Directors; avoiding conflicts of interest; and maintaining the integrity of EDC Finance. You state that although the EDC Finance Bylaws authorize the Board of Directors to create different classes of Members, there is currently only one Membership group, with all Members having the same responsibilities and powers. You have submitted a copy of a list of the Board of Directors and the Membership of EDC Finance as of March 1, 2008, which document is incorporated herein by reference. It is administratively noted that the EDC Finance Bylaws provide, in pertinent part, as follows: Article II em eerrs 2.01 Members. The members of EDC Finance shall include the persons and entities that support EDC Finance through the payment of dues and /or by other means as determined by the Board. The Members shall number at least 25 at all times (excluding any employees or staff of EDC Finance that may also be members). The membership must include (without limitation) representatives from each of the following groups (the "Membership Groups "): A. Government organizations responsible for economic development in Lancaster County, Pennsylvania (or other areas of Pennsylvania served by the corporation) (the "Service Area "); B. Financial institutions that provide commercial long term fixed asset financing in the Service Area; C. Community organizations dedicated to economic development in the Service Area, such as (without limitation) chambers of commerce, foundations, trade associations, private colleges and universities, or small business development centers; and D. Businesses in the Service Area. No person or entity may own or control more than 10 percent of the EDC Finance's voting membership.... Biemiller, 08 -553 May 16, 2008 Page 3 The Board may by resolution from time -to -time change membership policies. Article III Board of Directors 3.01 Number and Qualification. The EDC Finance Board of Directors (the "Board ") shall consist of not less than seven directors nor more than sixteen directors as designated by the Board from time to time. The Board shall be chosen from the Membership, include a diverse group of Directors from across Lancaster County, Pennsylvania, and may include representatives from other parts of the corporation's Service Area. The Board shall include, but not be limited to, representatives of at least three of the four Membership Groups (as described in Section 2.01 above), and no one Membership Group shall control the Board.... 3.02 Term of Office. Directors shall be chosen by the members entitled to vote thereon.... 3.03 Interim Vacancies. If a seat on the Board of Directors becomes vacant during a Director's term, a replacement Director shall be elected by the EDC Finance Board for the unexpired term of such Director. Any Director filling an interim vacancy must stand for election at the next Annual or Special meeting of the Members, whichever comes first. 3.06 Powers. Except as provided in these Bylaws, actions, decisions, privileges and rights not inconsistent with the Articles of Incorporation of the corporation shall be vested in the Board of Directors.... Unless otherwise prohibited by these Bylaws or applicable law, the Board of Directors have [sicl the power to approve or deny membership in EDC Finance. 3.08 Compensation of Directors. Directors, as such, shall not receive any salary for their services. By resolution of the Board, expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board. Nothing herein shall be construed to preclude any Director from serving EDC Finance in any other capacity and receiving compensation therefore. EDC Finance Bylaws, at 2 -6. Biemiller, 08 -553 May 16, 2008 Page 4 You state that while EDC Finance has several Members and Board Members that have ties to government funding, EDC Finance does not have access to such government funding, and none of the aforementioned Members or Board Members control EDC Finance. You express your view that EDC Finance is not a governmental body or authority. You state that Members of the EDC Finance Board of Directors are not elected or appointed by any public body. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. The initial question to be addressed in responding to your inquiry is whether Mr. Davis, in his capacity as a Member of the EDC Finance Board of Directors, would be considered a "public employee" or "public official" as those terms are defined by the Ethics Act. In order to be a "public employee" subject to the Ethics Act, an individual must stand in an employer - employee relationship with the Commonwealth or a political subdivision of the Commonwealth. Eiben, Opinion 04 -002; Ver Ellen, Opinion 03 -005. Based upon the submitted facts, ED Finance is not a political subdivision because it was formed by EDC, not by any county, city, borough, incorporated town, township, school district, vocational school, or county institution district. Additionally, Mr. Davis, as a Member of the EDC Finance Board of Directors, is not an employee of EDC Finance. Therefore, in his capacity as a Member of the EDC Finance Board of Directors, Mr. Davis would not be considered a "public employee" as that term is defined in the Ethics Act. The remaining question is whether Mr. Davis, in his capacity as a Member of the EDC Finance Board of Directors, would be considered a public official subject to the requirements for filing Statements of Financial Interests pursuant to the Ethics Act. The Ethics Act defines the term "public official" as follows: § 1102. Definitions "Public official." Any person elected by the public or elected or appointed by a governmental body or an appointed official in the executive, legislative or judicial branch of this Commonwealth or any political subdivision thereof, provided that it shall not include members of advisory boards that have no authority to expend public funds other than reimbursement for personal expense or to otherwise exercise the power of the State or any political subdivision thereof. 65 Pa.C.S. § 1102. The Regulations of the State Ethics Commission similarly define the term "public official" and set forth additional criteria for applying the definition. 51 Pa. Code § 11.1. Biemiller, 08 -553 May 16, 2008 Page 5 The following terms are relevant to your inquiry and are defined in the Ethics Act as follows: § 1102. Definitions "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any agency performing a governmental function. "Political subdivision." Any county, city, borough, incorporated town, township, school district, vocational school, county institution district, and any authority, entity or body organized by the aforementioned. 65 Pa. C. S. § 1102. In applying the Ethics Act's definition of the term "public official," the first portion of the definition provides that a public official is a "person' (defined to include, inter alia, an individual, corporation or firm) which is: (1) elected by the public; (2) elected or appointed by a governmental body; or (3) an appointed official in the executive, legislative or judicial branch of the Commonwealth of Pennsylvania or a political subdivision of the Commonwealth. Muscalus, Opinion 02 -007. When the first portion of the definition is met, status as a public official subject to the Ethics Act is established, unless the exclusion for members of purely advisory boards is applicable. Eiben, Opinion 04 -002. As a Member of the EDC Finance Board of Directors, Mr. Davis clearly does not fall within either the first or third category above. As a Member of the EDC Finance Board of Directors Mr. Davis was not elected by the public. Additionally, as a Member of the EDC Finance Board of Directors, Mr. Davis is not an appointed official in the executive, legislative, or judicial branch of the Commonwealth or a political subdivision of the Commonwealth. The remaining category in the definition of "public official" is the category for a person who is elected or appointed by a "governmental body." A "governmental body" includes an "agency" performing a governmental function. Although it has been determined that an ALO performs a governmental function (Area Loan Organizations Under Capital Loan Fund Act, Opinion 95 -006), the Commission has not conclusively determined whether a non - profit entity that has not been formed by a governmental entity such as a political subdivision may be considered an "agency" within the meaning of the Ethics Act's definition of the term "governmental body. See, Area Loan Organizations Under Capital Loan Fund Act, Opinion 95 -006, supra; M�arrier /Anderson, Opinion 98 -008 at 5 -6. It is parenthetically noted that the legislative debate that immediately preceded the inclusion of the key phraseology in the definition of the term "governmental body" suggests that the term "agency" was not intended to apply to a private corporation performing a governmental function solely through contractual arrangement(s). Legislative Journal of House 1989 Session, No. 43 at 1037 (Comments of Representatives Blaum and Heckler, moments before the approval of the amendment by a vote of 199 -1 in the House). For purposes of responding to your present inquiry, you are advised that to the extent Mr. Davis was elected by the Membership to serve on the EDC Finance Board of Directors, he was not elected by a "governmental body," and therefore he would not be considered a "public official" subject to the requirements for filing Statements of Biemiller, 08 -553 May 16, 2008 Page 6 Financial Interests pursuant to the Ethics Act. If Mr. Davis was not elected by the Membership but rather was elected by the EDC Finance Board of Directors to fill an interim vacancy, then he would not be considered a "public official" subject to the requirements for filing Statements of Financial Interests pursuant to the Ethics Act unless the EDC Finance Board of Directors would be an "agency performing a governmental function" within the meaning of the definition of the term "governmental body" as set forth in the Ethics Act. To the extent additional advice is desired in that regard, you may proceed to request a supplemental advisory as to individual(s) for whom you establish standing. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Conclusion: Based upon the submitted facts that: (1) EDC Finance Corporation ("EDC Finance ") is a private, non - profit 501(c)(4) entity that was incorporated in 1986 by the Economic Development Company of Lancaster County ("EDC "), which is itself a private, non - profit 501(c)(6) entity; (2) EDC Finance is both an Industrial Development Corporation ( "IDC ") and an Area Loan Organization ("ALO ") as designated by the Pennsylvania Department of Community and Economic Development; (3) EDC Finance administers various loan funding programs in Lancaster County; (4) EDC Finance is not funded by Lancaster County or any other municipal subdivision; (5) the EDC Finance Membership is self- appointing and includes the persons and entities that support EDC Finance through the payment of dues and /or by other means as determined by the EDC Finance Board of Directors; (6) the EDC Finance Membership elects the EDC Finance Board of Directors at an annual meeting, which Directors must be Members of EDC Finance; and (7) the EDC Finance Board of Directors may fill vacancies on the Board on an interim basis, you are advised as follows. To the extent Michael W. Davis, Esq., (Mr. Davis) was elected by the Membership of EDC Finance to serve on the EDC Finance Board of Directors, he was not elected by a "governmental body," and therefore he would not be considered a "public official" subject to the requirements for filing Statements of Financial Interests pursuant to the Ethics Act. If Mr. Davis was not elected by the Membership but rather was elected by the EDC Finance Board of Directors to fill an interim vacancy, then he would not be considered a "public official" subject to the requirements for filing Statements of Financial Interests pursuant to the Ethics Act unless the EDC Finance Board of Directors would be an "agency performing a governmental function" within the meaning of the definition of the term "governmental body" as set forth in the Ethics Act. To the extent additional advice is desired in that regard, you may proceed to request a supplemental advisory as to individual(s) for whom you establish standing. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11) of the Ethics Act, 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. Biemiller, 08 -553 May 16, 2008 Page 7 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