HomeMy WebLinkAbout09-558 ConfidentialADVICE OF COUNSEL
May 29, 2009
09 -558
This responds to your letter dated April 24, 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 impose any prohibitions or restrictions upon the former A
with regard to serving on a B of a [type of business].
Facts: As the former A, you request a confidential advisory from the
Pennsylvania State Ethics Commission. You have submitted extensive facts that may
be fairly summarized as follows.
You resigned from your public position as the A effective [date].
You state that while you served as the A, Company 1 secured various grants,
loans, and bond financing from the Commonwealth of Pennsylvania ( "Commonwealth ")
in connection with the construction of a [type of facility] located in [geographic location].
You have submitted a copy of a list of financial assistance secured by Company 1 from
the Commonwealth in connection with the aforesaid project, which document is
incorporated herein by reference.
In addition, you have submitted copies of correspondence from other
Commonwealth officials, specifically, the C and the D, pertaining to offers of financial
assistance from the Commonwealth for the aforesaid project, which documents are also
incorporated herein by reference. It is noted that the correspondence from the C offers
assistance in securing Es through Commonwealth Department F, although there is no
indication in the submitted facts of whether any such Es were sought or secured during
your tenure as A.
You state that the membership units of Company 1 are held by an entity which in
turn is held by another entity, Company 2. Company 2 is owned in part by Company 3.
You state that as part of a corporate reorganization, the management of
Company 3 established a standalone business entity, Company 4, on [date]. You state
that Company 4 is a [type of business] that will have a business purpose wholly distinct
from that of Company 1. You further state that all of the [type of assets] that are
Confidential Advice, 09 -558
May 29, 2009
Page 2
currently owned by Company 3 will be transferred to Company 4. The current holders
of Company 3 will receive equivalent interests in Company 4. Company 4, Company 2,
and Company 1 will have the same officers. You additionally state that Company 4 will
not have any direct or indirect financial interest in Company 1 or its indirect parent,
Company 2.
Company 3 holds 100% of the membership interests in Company 5, which will
contractually provide services to Company 1 in relation to the start up and operation of
the aforesaid facility.
You have submitted copies of charts detailing the organizational relationships
among the aforesaid companies, both before and after the aforesaid corporate
reorganization, which documents are incorporated herein by reference.
You state that you are presently considering an opportunity to serve on a B of
Company 4. As a member of the B, you would make non - binding recommendations
and provide strategic advice and industry insights to Company 4's Board of Directors
and management with regard to [certain business activities].
You state that your aforesaid prospective appointment to the B of Company 4, if
accepted by you, would occur within one year of your departure from Commonwealth
service.
Based upon the above submitted facts, you ask whether the Ethics Act would
permit you to serve as a member of the B of Company 4.
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.
In the former capacity as the A, you would be considered a public official /public
employee and an "executive -level State employee" subject to the Ethics Act and the
Regulations of the State Ethics Commission. See, 65 Pa.C.S. § 1102; 51 Pa. Code §
11.1.
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
Confidential Advice, 09 -558
May 29, 2009
Page 3
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three - member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
65 Pa.C.S. §§ 1103(a), (j).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
65 Pa.C.S. §1102.
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from using the authority of public office /employment or confidential
information received by holding such a public position for the private pecuniary benefit
of the public official /public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated.
The use of authority of office is not limited merely to voting, but extends to any
use of authority of office including, but not limited to, discussing, conferring with others,
and lobbying for a particular result. Juliante, Order 809.
In each instance of a voting conflict, Section 1103(j) of the Ethics Act requires the
public official /public employee to abstain and to publicly disclose the abstention and
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May 29, 2009
Page 4
reasons for same, both orally and by filing a written memorandum to that effect with the
person recording the minutes.
Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person
shall offer or give to a public official /public employee anything of monetary value and no
public official /public employee shall solicit or accept anything of monetary value based
upon the understanding that the vote, official action, or judgment of the public
official /public employee would be influenced thereby. Reference is made to these
provisions of the law not to imply that there has been or will be any transgression
thereof but merely to provide a complete response to the question presented.
Upon termination of service as the A, you became a former public official /public
employee and a former executive -level State employee subject to the restrictions of
Section 1103(g) and Section 1103(i) of the Ethics Act.
Section 1103(i) of the Ethics Act restricts former executive -level State employees
as follows:
§ 1103. Restricted activities
(i) Former executive -level employee. - -No former
executive -level State employee may for a period of two
years from the time that he terminates employment with this
Commonwealth be employed by, receive compensation
from, assist or act in a representative capacity for a business
or corporation that he actively participated in recruiting to this
Commonwealth or that he actively participated in inducing to
open a new plant, facility or branch in this Commonwealth or
that he actively participated in inducing to expand an existent
plant or facility within this Commonwealth, provided that the
above prohibition shall be invoked only when the recruitment
or inducement is accomplished by a grant or loan of money
or a promise of a grant or loan of money from the
Commonwealth to the business or corporation recruited or
induced to expand.
65 Pa.C.S. § 1103(i).
Section 1103(i) restricts the ability of a former executive -level State employee to
accept employment or otherwise engage in business relationships following termination
of State service, under certain narrow conditions. The restrictions of Section 1103(i)
apply even where the business relationship is indirect, such as where the business in
question is a client of a new employer, rather than the new employer itself. See,
Confidential Opinion, 94 -011. However, Section 1103(i) would not restrict you from
being employed by, receiving compensation from, assisting, or acting in a
representative capacity for a business or corporation subject to the conditions that you
would not have actively participated in recruiting such business or corporation to
Pennsylvania, and that you would not have actively participated in inducing such
business or corporation to open or expand a plant, facility, or branch in Pennsylvania,
through a grant or loan of money or a promise of a grant or loan of money from the
Commonwealth of Pennsylvania to such business or corporation.
Unlike Section 1103(i), Section 1103(g) does not prohibit a former public
official /public employee from accepting a position of employment. However, it does
restrict the former public official /public employee with regard to "representing" a
"person" before the governmental body with which he has been associated ":
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May 29, 2009
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§ 1103. Restricted activities
(g) Former official or employee. - -No former public
official or public employee shall represent a person, with
promised or actual compensation, on any matter before the
governmental body with which he has been associated for
one year after he leaves that body.
65 Pa.C.S. § 1103(g) (Emphasis added).
The terms "represent," "person," and "governmental body with which a public
official or public employee is or has been associated" are specifically defined in the
Ethics Act as follows:
§ 1102. Definitions
"Represent." To act on behalf of any other person in
any activity which includes, but is not limited to, the
following: personal appearances, negotiations, lobbying and
submitting bid or contract proposals which are signed by or
contain the name of a former public official or public
employee.
"Person." A business, governmental body,
individual, corporation, union, association, firm, partnership,
committee, club or other organization or group of persons.
"Governmental body with which a public official
or public employee is or has been associated." The
governmental body within State government or a political
subdivision by which the public official or employee is or has
been employed or to which the public official or employee is
or has been appointed or elected and subdivisions and
offices within that governmental body.
65 Pa.C.S. § 1102.
The term "Person" is very broadly defined. It includes, inter alia, corporations and
other businesses. It also includes the former public employee himself, Confidential
Opinion, 93 -005, as well as a new governmental employer. Ledebur, Opinion 95 -007.
The term "representation" is also broadly defined to prohibit acting on behalf of
any person in any activity. Examples of prohibited representation include: (1) personal
appearances before the former governmental body or bodies; (2) attempts to influence;
(3) submission of bid or contract proposals which are signed by or contain the name of
the former public official /public employee; (4) participating in any matters before the
former governmental body as to acting on behalf of a person; and (5) lobbying.
Popovich, Opinion 89 -005.
Listing one's name as the person who will provide technical assistance on a
proposal, document, or bid, if submitted to or reviewed by the former governmental
body, constitutes an attempt to influence the former governmental body. Section
1103(g) also generally prohibits the inclusion of the name of a former public
official /public employee on invoices submitted by his new employer to the former
governmental body, even if the invoices pertain to a contract that existed prior to
termination of service with such governmental body. Shay, Opinion 91 -012. However,
if such a pre- existing contract does not involve the unit where the former public
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May 29, 2009
Page 6
employee worked, the name of the former public employee may appear on routine
invoices if required by the regulations of the agency to which the billing is being
submitted. Abrams/Webster, Opinion 95 -011.
A former public official /public employee may assist in the preparation of any
documents presented to his former governmental body. However, the former ublic
official /public employee may not be identified on documents submitted to the former
governmental body. The former public official /public employee may also counsel any
person regarding that person's appearance before his former governmental body. Once
again, however, the activity in this respect should not be revealed to the former
governmental body. The Ethics Act would not prohibit or preclude making general
informational inquiries to the former governmental body to secure information which is
available to the general public, but this must not be done in an effort to indirectly
influence the former governmental body or to otherwise make known to that body the
representation of, or work for the new employer.
Section 1103(g) only restricts the former public official /public employee with
regard to representation before his former governmental body. The former public
official /public employee is not restricted as to representation before other agencies or
entities. However, the "governmental body with which a public official /public employee
is or has been associated" is not limited to the particular subdivision of the agency or
other governmental body where the public official /public employee had influence or
control but extends to the entire body. See, Legislative Journal of House, 1989
Session, No. 15 at 290, 291; Sirolli, Opinion 90 -006; Sharp, Opinion 90- 009 -R.
The governmental bodies with which you are deemed to have been associated
upon termination of service as the A, hereinafter collectively referred to as your "former
governmental body," would be: the G, Office H in its entirety, Commonwealth
Department F in its entirety, and all commissions, committees, councils, and boards on
which you served in your official capacity. Therefore, for the first year following
termination of your service as the A, Section 1103(g) of the Ethics Act would apply and
restrict "representation" of "persons" before your "former governmental body" as
delineated above.
Turning to your specific inquiry, you are advised as follows.
Section 1103(i) of the Ethics Act would not prohibit you from accepting an
appointment to the B of Company 4 subject to the conditions that you would not have
actively participated in recruiting Company 4 or Company 3 to Pennsylvania, and that
you would not have actively participated in inducing Company 4 or Company 3 to open
or expand a plant, facility, or branch in Pennsylvania, through a grant or loan of money
or a promise of a grant or loan of money from the Commonwealth of Pennsylvania to
Company 4 or Company 3.
Section 1103(g) of the Ethics Act would not prohibit you from accepting an
appointment to the B of Company 4. However, for the first year following termination of
service as the A, Section 1103(g) of the Ethics Act would prohibit you from performing
any activities that would involve prohibited representation before your former
governmental body as set forth above.
With regard to Section 1103(a) of the Ethics Act, 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 Company 4 if, factually, you:
(1) did not use the authority of your public position in any matter pertaining to any of the
aforesaid companies or their principals at a time when you had an actual or reasonable
expectation that you would enter into such a business arrangement or would otherwise
Confidential Advice, 09 -558
May 29, 2009
Page 7
receive a private pecuniary benefit; and (2) did not otherwise use the authority of your
public position or confidential information received as a result of being in your public
position in furtherance of securing such a business arrangement or other private
pecuniary benefit. Cf., Desmond, Opinion 08 -004.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act. Specifically not addressed herein is the applicability of the I.
Conclusion: In the former capacity as the A, you would be considered a public
official /public employee and an "executive -level State employee" subject to the Public
Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Upon
termination of service as the A, you became a former public official /public employee and
a former executive -level State employee subject to the restrictions of Section 1103(g)
and Section 1103(i) of the Ethics Act. The restrictions of Section 1103(g) and Section
1103(i) of the Ethics Act as outlined above must be followed.
Based upon the submitted facts that: (1) while you served as the A, Company 1
secured various grants, loans, and bond financing from the Commonwealth of
Pennsylvania ( "Commonwealth ") in connection with the construction of a [type of facility]
located in [geographic location]; (2) the membership units of Company 1 are held by an
entity which in turn is held by another entity, Company 2; (3) Company 2 is owned in
part by Company 3; (4) as part of a corporate reorganization, management of Company
3 established a standalone business entity, Company 4, on [date]; (5) the current
holders of Company 3 will receive equivalent interests in Company 4 (6) Company 4,
Company 2, and Company 1 will have the same officers; (7) Company 4 will not have
any direct or indirect financial interest in Company 1 or its indirect parent, Company 2;
and (8) Company 3 holds 100% of the membership interests in Company 5, which will
contractually provide services to Company 1 in relation to the start up and operation of
the aforesaid facility, you are advised as follows.
Section 1103(i) of the Ethics Act would not prohibit you from accepting an
appointment to the B of Company 4 subject to the conditions that you would not have
actively participated in recruiting Company 4 or Company 3 to Pennsylvania, and that
you would not have actively participated in inducing Company 4 or Company 3 to open
or expand a plant, facility, or branch in Pennsylvania, through a grant or loan of money
or a promise of a grant or loan of money from the Commonwealth of Pennsylvania to
Company 4 or Company 3.
With regard to Section 1103(g) of the Ethics Act, the governmental bodies with
which you are deemed to have been associated upon termination of service as the A,
hereinafter collectively referred to as your "former governmental body," would be: the G,
Office H in its entirety, Commonwealth Department F in its entirety, and all
commissions, committees, councils, and boards on which you served in your official
capacity. Therefore, for the first year following termination of your service as the A,
Section 1103(g) of the Ethics Act would apply and restrict "representation" of "persons"
before your "former governmental body" as delineated above. Section 1103(g) of the
Ethics Act would not prohibit you from accepting an appointment to the B of Company 4.
However, for the first year following termination of service as the A, Section 1103(g) of
the Ethics Act would prohibit you from performing any activities that would involve
prohibited representation before your former governmental body as set forth above.
With regard to Section 1103(a) of the Ethics Act, 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 Company 4 if, factually, you:
(1) did not use the authority of your public position in any matter pertaining to any of the
aforesaid companies or their principals at a time when you had an actual or reasonable
Confidential Advice, 09 -558
May 29, 2009
Page 8
expectation that you would enter into such a business arrangement or would otherwise
receive a private pecuniary benefit; and (2) did not otherwise use the authority of your
public position or confidential information received as a result of being in your public
position in furtherance of securing such a business arrangement or other private
pecuniary benefit.
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,
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