HomeMy WebLinkAbout09-525 ConfidentialADVICE OF COUNSEL
March 20, 2009
09 -525
This responds to your letter dated January 28, 2009, by which you requested a
confidential advisory from the Pennsylvania State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65
Pa. .S. § 1101 et seq., would present any prohibitions or restrictions upon an A and B
of a [type of political subdivision] C, who in a private capacity is a [type of profession]
licensed to [engage in professional activities] in [name of state] but not in [name of
state], with regard to working as an employee of or independent contractor to the [type
of firm] that serves as D for the [type of political subdivision].
Facts: As an A and B of C for [name of political subdivision] (hereinafter referred
to as the Political Subdivision "), you request a confidential advisory from the
Pennsylvania State Ethics Commission. You have submitted extensive facts that may
be fairly summarized as follows.
You have served as an A of the Political Subdivision C for [number] years. Since
the fall of [year], the [name of firm] (hereinafter referred to as the Firm "), located in E,
Pennsylvania, has served as the appointed D for the Political Subdivision. You state
that the Firm is paid on an hourly rate basis for work performed and is not paid an F.
You are a [type of profession] licensed to [engage in professional activities] in
State 1. You currently are taking steps to obtain licensure in State 2.
As a means of gaining experience in your field, you have approached several
[type of firms] regarding potential working relationships. You state that you have
discussed with the Gs of the Firm the possibility of working with the Firm as an H on a
part -time basis. You state that neither you nor the Firm anticipated the aforesaid
proposed working relationship when you voted in year], and most recently a few
months ago, to engage the Firm as D for the Political Subdivision.
You state that it is anticipated that you would initially work as an independent
contractor to the Firm, and that depending upon circumstances, you and the Firm might
later contemplate changing your status to that of an employee. You state that the
proposed relationship would involve work limited to matters unrelated to the Firm's work
for the Political Subdivision. You further state that anything you might do in connection
Confidential Advice, 09 -525
March 20, 2009
Page 2
with the Political Subdivision would be in your capacity as an A and I of C and would be
without compensation from the Political Subdivision or the Firm.
You state that from the perspective of your service on the Political Subdivision C,
assignments of work to the Firm would not in any way be conditioned upon the amount
of work that you might receive from the Firm under the contemplated working
relationship. You further state that you would abstain from any votes of C with respect
to matters relating to the engagement and compensation of the Firm.
Based upon the above submitted facts, you ask whether you or the Firm would
violate the Ethics Act if you would work part -time for the Firm as either an independent
contractor to the Firm or as an employee of the Firm.
You have proffered your own analysis of the legal issues that you have raised.
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.
It is further initially noted that, pursuant to the same aforesaid Sections of the
Ethics Act, an advisory may be given only as to prospective (future) conduct, and only
to the person whose prospective conduct is in question, his authorized representative,
or, when applicable, his appointing body or employer. To the extent that you have
inquired as to the conduct of the Firm, you are considered a third party without legal
standing. Therefore, this advisory must necessarily be limited to addressing only your
prospective conduct.
As an A and B of C for the Political Subdivision, you are a public official subject
to the provisions of the Ethics Act.
Sections 1103(a) and 1103(j) of the Ethics Act provide:
§ 1103. Restricted activities
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
(j) Voting conflict. - -Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or
by any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
Confidential Advice, 09 -525
March 20, 2009
Page 3
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three - member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
65 Pa.C.S. §§ 1103(a), (j).
The following terms related to Section 1103(a) are defined in the Ethics Act as
follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business." Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self - employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated." Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or
has a financial interest.
"Financial interest." Any 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.
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from using the authority of public office /employment or confidential
information received by holding such a public position for the private pecuniary benefit
Confidential Advice, 09 -525
March 20, 2009
Page 4
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.
In each instance of a conflict of interest, the public official /public employee would
be required to abstain fully from participation. The abstention requirement would not be
limited merely to voting, but would extend to any use of authority of office, including, but
not limited to, discussing, conferring with others, and lobbying for a particular result.
Juliante, Order 809.
Subject to certain statutory exceptions, in each instance of a voting conflict,
Section 1103(j) of the Ethics Act requires the public official /public employee to abstain
and to publicly disclose the abstention and reasons for same, both orally and by filing a
written memorandum to that effect with the person recording the minutes.
Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows:
§ 1103. Restricted activities
(f) Contract. - -No public official or public employee or
his spouse or child or any business in which the person or
his spouse or child is associated shall enter into any contract
valued at $500 or more with the governmental body with
which the public official or public employee is associated or
any subcontract valued at $500 or more with any person
who has been awarded a contract with the governmental
body with which the public official or public employee is
associated, unless the contract has been awarded through
an open and public process, including prior public notice and
subsequent public disclosure of all proposals considered and
contracts awarded. In such a case, the public official or
public employee shall not have any supervisory or overall
responsibility for the implementation or administration of the
contract. Any contract or subcontract made in violation of
this subsection shall be voidable by a court of competent
jurisdiction if the suit is commenced within 90 days of the
making of the contract or subcontract.
65 Pa.C.S. § 1103(f).
The term "contract" is defined in the Ethics Act as follows:
§ 1102. Definitions
"Contract." An agreement or arrangement for the
acquisition, use or disposal by the Commonwealth or a
political subdivision of consulting or other services or of
supplies, materials, equipment, land or other personal or real
property. The term shall not mean an agreement or
arrangement between the State or political subdivision as
one party and a public official or public employee as the
other party, concerning his expense, reimbursement, salary,
wage, retirement or other benefit, tenure or other matters in
consideration of his current public employment with the
Commonwealth or a political subdivision.
65 Pa.C.S. § 1102.
Confidential Advice, 09 -525
March 20, 2009
Page 5
Section 1103(f) does not operate to make contracting with the governmental
body permissible where it is otherwise prohibited. Rather, where a public official /public
employee, his spouse or child, or a business with which he, his spouse or child is
associated, is otherwise appropriately contracting with the governmental body, or
subcontracting with any person who has been awarded a contract with the
governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an
"open and public process" be observed as to the contract with the governmental body.
Section 1103(f) of the Ethics Act also provides that the public official /public employee
may not have any supervisory or overall responsibility as to the implementation or
administration of the contract with the governmental body.
In applying the above provisions of the Ethics Act to the instant matter, it is noted
that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit
public officials /public employees from having outside business activities or employment;
however, the public official /public employee may not use the authority of his public
position - -or confidential information obtained by being in that position- -for the
advancement of his own private pecuniary benefit or that of a business with which he is
associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited
under Section 1103(a) would include: (1) the pursuit of a private business opportunity in
the course of public action, Metrick, Order 1037; (2) the use of governmental facilities,
such as governmental telephones, postage, staff, equipment, research materials, or
other property, or the use of governmental personnel, to conduct private business
activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official
capacity as to matters involving the business with which the public official /public
employee is associated in his private capacity or private client(s). Miller, Opinion 89-
024 Kannebecker, Opinion 92 -010. A reasonable and legitimate expectation that a
business relationship will form may also support a finding of a conflict of interest. Amato,
Opinion 89 -002. In each instance of a conflict of interest, the public official /public
employee would be required to abstain from participation, and in the instance of a voting
conflict, to abstain and fully satisfy the disclosure requirements of Section 1103(j) of the
Ethics Act.
Any business as to which you are a director, officer, owner, or employee or in
which you have a financial interest would be considered a business with which you are
associated. A sole proprietorship or self - employed individual is included within the
definition of the term "business" as set forth in the Ethics Act. 65 Pa.C.S. § 1102; In Re:
Nomination Petition of Paulmier, 594 Pa. 433, 937 A.2d 364 (2007).
Subject to the statutory exceptions to the definition of "conflict" or "conflict of
interest" as set forth in the Ethics Act, 65 Pa.C.S. § 1102, pursuant to Section 1103(a)
of the Ethics Act, in your capacity as an A and B of C for the Political Subdivision, you
would have a conflict of interest in matters that would financially impact you, any
business es with which you are associated, or the customer(s) /client(s) of any
business es with which you are associated. See, Kannebecker, supra; Miller, supra.
In response to your specific inquiry, you are advised as follows.
An advisory cannot provide a ruling as to past conduct. You are generally
advised that the elements of a violation of Section 1103(a) of the Ethics Act would not
be established as a result of your prospectively entering into a business arrangement
with the Firm, as either an independent contractor or an employee, subject to the
conditions that, while serving as an A of C for the Political Subdivision: (1) you did not
use the authority of your public position in any matter pertaining to the Firm at a time
when you had an actual or reasonable expectation that you would enter into a business
arrangement with the Firm or would otherwise receive a private pecuniary benefit
relating to the Firm; and (2) you did not use confidential information received as a result
of being in your public position in furtherance of securing a business arrangement or
other private pecuniary benefit relating to the Firm. See, Desmond, Opinion 08 -004.
Confidential Advice, 09 -525
March 20, 2009
Page 6
To the extent that you would perform work as an independent contractor to the
Firm, such business relationship with the Firm generally would form the basis for you to
have a conflict of interest in your public capacity in matters involving the Firm. See,
Kannebecker, supra; Miller, supra. To the extent that you would be an employee of the
Firm, the Firm would be a business with which you are associated, and in your public
capacity as an A and B of C for the Political Subdivision, you generally would have a
conflict of interest in matters that would financially impact you, the Firm, or the Firm's
client(s).
In each instance of a conflict of interest, you would be required to abstain fully
from participation. The abstention requirement would extend beyond voting to include
any use of authority of office. In each instance of a voting conflict, you would be
required to abstain fully and to publicly disclose the abstention and reasons for same,
both orally and by filing a written memorandum to that effect with the person recording
the minutes.
With regard to Section 1103(f), it is noted that the definition of the term "contract"
under Section 1102 of the Ethics Act includes " [a]n agreement or arrangement for the
acquisition, use or disposal by the Commonwealth or a political subdivision of consulting
or other services...." An agreement or arrangement between the Political Subdivision
and the Firm for the Firm to provide services as the Political Subdivision's D would
constitute a "contract" as that term is defined by the Ethics Act.
To the extent that the Firm would be a business with which ou are associated,
for example, as your employer, the requirements of Section 1103) of the Ethics Act
would have to be observed whenever applicable.
To the extent that you would be an independent contractor to the Firm, Section
1103(f) of the Ethics Act would not be applicable subject to the conditions that your work
for the Firm would be completely unrelated to the Firm's work for the Political
Subdivision and would not fall within the scope of a subcontract as to the Firm's contract
with the Political Subdivision.
The ropriety of the proposed conduct has only been addressed under the Ethics
Act. Specifically not addressed herein is the applicability of the J or the K.
Conclusion: As an A and B of C for [name of political subdivision] (hereinafter
referred to as the Political Subdivision "), 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. Based upon the submitted facts that: (1) since the fall of Jyear], the [name
of firm] (hereinafter referred to as the Firm "), located in E, Pennsylvania, has served as
the appointed D for the Political Subdivision; (2) you are a [type of profession] licensed
to [engage in professional activities] in State 1; (3) you currently are taking steps to
obtain licensure in State 2; (4) you have discussed with the Gs of the Firm the possibility
of working with the Firm as an H on a part -time basis; (5) neither you nor the Firm
anticipated the aforesaid proposed working relationship when you voted in [year], and
most recently a few months ago, to engage the Firm as D for the Political Subdivision;
(6) it is anticipated that you would initially work as an independent contractor to the
Firm, and depending upon circumstances, you and the Firm might later contemplate
changing your status to that of an employee; (7) the proposed relationship would involve
work limited to matters unrelated to the Firm's work for the Political Subdivision; (8)
anything you might do in connection with the Political Subdivision would be in your
capacity as an A and I of C and would be without compensation from the Political
Subdivision or the Firm; (9) from the perspective of your service on the Political
Subdivision C, assignments of work to the Firm would not in any way be conditioned
upon the amount of work that you might receive from the Firm under the contemplated
working relationship; and (10) you would abstain from any votes of C with respect to
Confidential Advice, 09 -525
March 20, 2009
Page 7
matters relating to the engagement and compensation of the Firm, you are advised as
follows.
An advisory cannot provide a ruling as to past conduct. You are generally
advised that the elements of a violation of Section 1103(a) of the Ethics Act would not
be established as a result of your prospectively entering into a business arrangement
with the Firm, as either an independent contractor or an employee, subject to the
conditions that, while serving as an A of C for the Political Subdivision: (1) you did not
use the authority of your public position in any matter pertaining to the Firm at a time
when you had an actual or reasonable expectation that you would enter into a business
arrangement with the Firm or would otherwise receive a private pecuniary benefit
relating to the Firm; and (2) you did not use confidential information received as a result
of being in your public position in furtherance of securing a business arrangement or
other private pecuniary benefit relating to the Firm. To the extent that you would perform
work as an independent contractor to the Firm, such business relationship with the Firm
generally would form the basis for you to have a conflict of interest in your public
capacity in matters involving the Firm. To the extent that you would be an employee of
the Firm, the Firm would be a business with which you are associated, and in your
public capacity as an A and B of C for the Political Subdivision, you generally would
have a conflict of interest in matters that would financially impact you, the Firm, or the
Firm's client(s). In each instance of a conflict of interest, you would be required to
abstain fully from participation. The abstention requirement would extend beyond voting
to include any use of authority of office. In each instance of a voting conflict, you would
be required to abstain fully and to publicly disclose the abstention and reasons for
same, both orally and by filing a written memorandum to that effect with the person
recording the minutes. An agreement or arrangement between the Political Subdivision
and the Firm for the Firm to provide services as the Political Subdivision's D would
constitute a "contract" as that term is defined by the Ethics Act. To the extent that the
Firm would be a business with which you are associated, the requirements of Section
1103(f) of the Ethics Act would have to be observed whenever applicable. To the extent
that you would be an independent contractor to the Firm, Section 1103(f) of the Ethics
Act would not be applicable subject to the conditions that your work for the Firm would
be completely unrelated to the Firm's work for the Political Subdivision and would not
fall within the scope of a subcontract as to the Firm's contract with the Political
Subdivision.
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.
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,
Confidential Advice, 09 -525
March 20, 2009
Page 8
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