HomeMy WebLinkAbout1536 BOBIAKIn Re: Stephen Bobiak,
Respondent
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Louis W. Fryman, Chair
John J. Bolger, Vice Chair
Donald M. McCurdy
Raquel K. Bergen
Nicholas A. Colafella
Mark Volk
08 -058
Order No. 1536
9/22/09
10/6/09
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission conducted
an investigation regarding possible violation(s) 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 allegations. Upon completion of its investigation, the
Investigative Division issued and served upon Respondent a Findings Report identified as
an "Investigative Complaint." An Answer was filed and a hearing was requested by the
Investigative Division. A Stipulation of Findings and a Consent Agreement waiving an
evidentiary hearing were subsequently submitted by the parties to the Commission for
consideration. The Stipulated Findings are set forth as the Findings in this Order. The
Consent Agreement has been approved.
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.
Bobiak, 08 -058
Page 2
I. ALLEGATIONS:
That Stephen Bobiak, a public official /public employee in his capacity as a Member
of Frackville Borough Council, Schuylkill County, violated Sections 1103(a) and 1103(f) of
the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. §§ 1103(a) and 1103(f), when he used
the authority of his public position for the private pecuniary benefit of himself and /or a
business with which he is associated by authorizing and /or participating in decisions of the
Borough to name a business with which [he] is associated, Goal Line Financial, as the
Borough's broker /agent of record for insurance matters without a vote of Council and
without an open and public process; and when he authorized the placements of funds from
a Borough workers pension account and Borough account to a business with which he is
associated.
II. FINDINGS:
1. Stephen Bobiak has served on Frackville Borough Council, Schuylkill County since
January 3, 2006.
a. Frackville Borough Council consists of seven (7) members.
b. Bobiak served as Council President from January 3, 2006, until August 13,
2008.
2. Professionally, Bobiak owns and operates Goaline Financial Group, Inc., d /b /a Goal
Line Financial Group and NICA Management Corporation, both based in Frackville,
PA.
a. Goaline Financial Group, Inc. is an insurance and investment business.
1. Goal Line Financial Group is a fictitious name of Goaline Financial
Group, Inc.
b. NICA Management Corporation is a construction reference association in the
Frackville, PA area.
3. Articles of Incorporation on file with the Pennsylvania Department of State include
business filings for Goaline Financial Group, Inc., Goal Line Financial Group and
NICA Management Corporation.
a. Both business entities have a registered business address of 15 South
Lehigh Avenue, Frackville, PA 17921.
b. Articles of Incorporation were filed for NICA Management Corporation on
January 11, 1999.
1. Entity number 2855147 was assigned to NICA Management
Corporation by the Department of State.
2. Stephen Bobiak is the stated President while Cheryl Ann Bobiak is
the stated Secretary and Treasurer.
3. Cheryl Ann Bobiak is the wife of Stephen Bobiak.
c. Articles of Incorporation were filed for Goaline Financial Group, Inc. on
January 11, 1999.
1. Entity number 2855148 was assigned to Goaline Financial Group,
Bobiak, 08 -058
Page 3
Inc. by the Department of State.
2. Stephen Bobiak is the stated President while Cheryl Ann Bobiak is
the stated Secretary and Treasurer.
3. Cheryl Ann Bobiak is the wife of Stephen Bobiak.
d. A fictitious name registry for Goal Line Financial Group was filed on
February 26, 1999.
1. Entity number 2863473 was assigned to Goal Line Financial Group
by the Department of State.
2. Goaline Financial Group, Incorporated is the stated fictitious name
owner.
4. Frackville Borough provides benefits for its full -time employees including, but not
limited to, life insurance, paid holidays, disability coverage, health care coverage
and pension plans.
a. Employee benefits typically remain the same from one year to the next
unless changed through contract negotiations.
b. These benefits have been in place throughout Bobiak's tenure on Council.
c. Benefit plans differ somewhat depending on the type of position with the
Borough.
1. Police Officers and office staff have medical coverage through Capital
Blue Cross.
2. Office staff participate in a non - uniformed employee pension plan
through the Pennsylvania State Borough's Association.
3. Uniformed employees participate in a pension plan administered by
M &T Bank.
4. Road Department employees receive their benefits through
Carpenters East Industrial Council, Local 1059 a.k.a the Carpenters
Union.
d. The Borough makes contributions and receives payments from the
Commonwealth for uniformed and non - uniformed pension plans.
1. The pension plans are subject to periodic audit by the Department of
Auditor General.
5. In January 2006, Frackville Borough Council discussed and considered the job
description for the position of Public Works Director.
a. Frackville Borough did not employ a Public Works Director prior to 2006.
b. Prior to 2006, an employee was designated foreman of the Public Works
Department and was part of the union.
6. In January of 2006, Joseph Conapinski was employed by the Borough's Public
Works Department.
Bobiak, 08 -058
Page 4
a. The road crew consisted of Conapinski and two (2) other full -time road
workers.
b. As a Public Works Department employee, Conapinski was a member of the
Carpenters Union and received Borough paid benefits as such.
1. The Borough contributed $1.50 per hour worked by Conapinski to this
plan.
2. Conapinski made no contributions to the plan.
7 Between January 23, 2006, and May 9, 2006, Frackville Borough Council reviewed
and took action on the job description for the position of Public Works Director, to
advertise the position, appointed Joseph Conapinski interim and later permanent
Public Works Director and set the salary and benefits for the position as follows:
a. January 23, 2006: Job description discussed and motion to advertise the
position.
b. February 14, 2006: Motion to advertise the position, Joseph Conapinski
made interim Public Works Director.
c. March 14, 2006: Public Works Director Ordinance accepted with Joseph
Conapinski hired to the position.
d. May 9, 2006: Salary and benefits resolution adopted.
e. Stephen Bobiak participated in all Council actions to approve the position
and set compensation.
8. Minutes from Frackville Borough Council meetings held between January 23, 2006,
and May 9, 2006, as highlighted in the previous finding include the following
discussions and official actions taken on the position of Public Works Director:
a. January 23, 2006:
"Council President Bobiak read the job description of a public works director
to all of council. The solicitor said this position is not identified in the
borough so it must be advertised and approved by an ordinance. A motion
to advertise for the Public Work(s) Director was made by Mr. Roman,
seconded by Mr. O'Boyle. Mr. Hummel said he feels the contract should be
ratified before this position is established. The borough is working with a
very tight budget. Roll Call Vote went as follows: Hummel -no, Jankaitis -yes,
O'Boyle -yes, Petri -yes, Roman -yes, and Bobiak -yes. Motion carried by a 5 -1
vote."
b. February 14, 2006:
"A motion to advertise for the Public Works Director was made by Mr.
O'Boyle, seconded by Mr. Jankaitis. Roll Call vote went as follows: O'Boyle -
yes, Petri -yes, Dillman -no, Hummel -no, Jankaitis -yes and Bobiak -yes.
Motion carried by 4 -2 vote."
"A motion to appoint Mr. Joseph Conapinski as the Public Works Director
was made by Mr. O'Boyle, seconded by Mr. Jankaitis. Roll call vote went as
follows: Dillman -no, Hummel -no, Jankaitis -yes, O'Boyle -yes, Petri -yes and
Bobiak -yes. Motion carried by a 4 -2 vote."
Bobiak, 08 -058
Page 5
c. March 14, 2006:
"Minutes: A motion to accept the February 14, 2006 minutes including the
change on page 5, paragraph 7, to appoint Mr. Joseph Conapinski as the
interim public works director was made (by) Mr. Dillman, seconded by Mr.
O'Boyle. All in favor. Motion carried."
Present: Bobiak, Dillman, Hummel, Jankaitis, O'Boyle, Roman.
New Business: A motion to accept the Public Works Director Ordinance was
made by Mr. Roman, seconded by Mr. Jankaitis. Roll call vote went as
follows: Jankaitis -yes, O'Boyle -yes, Roman -yes, Dillman -no, Hummel -no and
Bobiak -yes. Motion carried by a 4 -2 vote."
"A motion to hire Joseph Conapinski as the Public Works Director was made
by Mr. Roman, seconded by Mr. Jankaitis. Roll call vote went as follows:
O'Boyle -yes, Roman -yes, Dillman -yes, Hummel -no, Jankaitis -yes, and
Bobiak -yes. Motion carried by a 5 -1 vote."
d. May 9, 2006:
"A motion to accept the resolution as read for the salary benefits for the
Public Works Director was made by Mr. Jankaitis, seconded by Mr. Petri.
Roll call vote went as follows: O'Boyle -yes, Petri -yes, Hummel -no, Jankaitis-
yes, and Bobiak -yes. Motion carried 5 -0."
9. The job description, ordinance and benefits resolution for the position of Public
Works Director were all prepared by Borough Solicitor Mark Semanchik following
Council action.
10. Bobiak in his official capacity as President of Frackville Borough Council
participated in all votes and official actions taken resulting in Joseph Conapinski
being appointed to the position of Public Works Director.
11. The Frackville Borough position of Public Works Director is a management level
position subject to the same benefits package provided to other non - uniformed
Borough employees not in the Carpenters Union, including participating in the PA
Municipal Retirement System.
a. Conapinski, as a Public Works Department employee, was a member of the
Carpenters Union prior to being appointed Public Works Director and had
pension funds invested through the Carpenters Union.
12. Joseph Conapinski's position as Public Works Director was established by
Ordinance Number 1 of 2006 adopted by Council on March 14, 2006.
a. Bobiak signed this Ordinance in his official capacity as Frackville Borough
Council President.
1. Bobiak had also voted to approve the ordinance creating the position.
b. The Ordinance was prepared by Borough Solicitor Semanchik.
13. Joseph Conapinski's salary and benefits package as Public Works Director was
established by Resolution 1 of 2006 adopted by Council on May 9, 2006.
a. Bobiak signed this Resolution in his official capacity as Frackville Borough
Council [President].
b. The Resolution was prepared by Borough Solicitor Semanchik.
Bobiak, 08 -058
Page 6
c. This Resolution was signed by Bobiak on March 14, 2006, along with the
Ordinance No. 1 creating the Public Works Director position.
14. Frackville Borough Resolution Number 1 of 2006 contained the following language
regarding Borough provided benefits for the Public Works Director.
a. Item 4: The Borough shall provide, at its full cost, the health and medical
insurance package as currently being provided to the Borough's Police
Department for the Director and his spouse.
b. Item 5: The Borough shall provide the Director with life insurance in the
minimum amount of $25,000.00.
c. Item 6: The Borough shall provide the Director with income protection
insurance through Companion Life Insurance Company with benefits
equivalent to $210.00 per week at the time of a debilitating non -work related
accident or sickness.
d. Item 7: As to retirement, the Director will be enrolled in the Borough's
pension plan administered by the PA Municipal Retirement System and
presently provided to the Borough's administrative staff.
15. Resolution 1 of 2006 did not include any language regarding the disposition of the
pension funds maintained in Conapinski's name with the Carpenter's Union.
a. Council did not discuss or take any official actions regarding the account.
16. As of May 30, 2006, Conapinski's pension account with the Carpenter's Union had
a closeout value of $17,170.07.
a. This account balance was the result of Borough contributions and
investment earnings during Conapinski's employment as a Borough
employee.
b. Conapinski did not contribute any of his own funds towards this account.
17. As a result of being promoted to the non -union position of Public Works Director,
Conapinski was no longer able to continue as a member of the Carpenters Union.
a. Conapinski was informed by the Carpenters Union that he was required to
remove pension contributions from the pension account within 90 days of
leaving the union.
b. On March 14, 2006, Conapinski transitioned from Interim Director to
Director.
18. Council was not advised by either Conapinski or the Union that Conapinski had a
90 day window in which to remove his pension funds from the Carpenters Union.
a. Conapinski did not receive any instructions from Council regarding the
disposition of the pension funds.
b. Conapinski believed that they were his funds to invest.
c. Council members presumed that the funds would be moved to the Borough
Association since Conapinski was not retiring from the Borough, he was
Bobiak, 08 -058
Page 7
merely changing positions from union to non - union.
19. Prior to April 5, 2006, Conapinski had a conversation regarding his pension account
with Bobiak at the Frackville Borough Office.
a. Bobiak was Borough Council President at the time.
b. Bobiak was at the Frackville Borough Office signing checks and /or
conducting other official Borough business.
c. Conapinski was aware that Bobiak handled investments as part of his
business.
d. Conapinski has known Bobiak most of his life.
e. Conapinski did not have any prior business dealings with Bobiak.
20. During the conversation, Bobiak informed Conapinski that he could get Conapinski
a better return on the investments.
a. Bobiak offered to invest Conapinski's pension payout from the Carpenters
Union.
b. Bobiak was licensed to sell EquiTrust products at the time through Goal Line
Financial Group.
c. Bobiak did not inform Conapinski initially where he intended to invest his
pension funds.
21. Conapinski did not advise Frackville Borough Council of his intention to invest his
pension payout with Bobiak.
a. Bobiak was Council President at the time and did not bring the matter before
Council for any consideration.
22. Conapinski authorized Bobiak to invest the pension funds from the Carpenters
Union.
a. Conapinski believed that the funds were his to re- invest since he was vested
in the Carpenters Union.
b. Bobiak did not inform Conapinski that the Carpenters Union pension could
have been rolled into the Pennsylvania Municipal Retirement System.
23. As a result of discussions with Conapinski, Bobiak arranged for two (2) investment
accounts to be opened for Joseph Conapinski, Sr. with EquiTrust.
a. Account numbers EQ0001033049F and EQ0001060097F were assigned by
EquiTrust to the Conapinski accounts.
b. Account number EQ0001033049F was opened on or before April 18, 2006.
c. Account number EQ0001060097F was opened on or before January 22,
2007.
d. Account number EQ0001033049F was funded initially by a $17,170.07
check issued from the Carpenters Industrial Council Pension Fund 1016
Bobiak, 08 -058
Page 8
Centre Street, Ashland, PA 17921 on May 30, 2006.
1. This check represented a payout of Conapinski's pension account
maintained by the Carpenters Union.
e. Account number EQ001060097F was funded initially by Frackville Borough
check number 4665 dated January 19, 2007, in the amount of $2,514.37.
1. This check represented the Borough's contribution towards
Conapinski's pension for 2006.
f. Bobiak compiled all of the paperwork required for the set up of both
accounts.
1. Conapinski signed documents as directed by Bobiak.
24. On April 5, 2006, Joseph Conapinski, Sr. signed a Market Power Bonus Index Plus
Annuity Application with EquiTrust.
a. This application was completed by Bobiak for Conapinski with the exception
of his signature.
b. This application was signed by Stephen Bobiak as producer on April 12,
2006.
c. Payments are identified as an anticipated "exchange /transfer /rollover of
$12,243.00."
d. This application was date stamped as received by EquiTrust on April 18,
2006.
e. The anticipated "exchange /transfer /rollover" expected was Conapinski's
payout from the Carpenters Union.
25. On April 12, 2006, EquiTrust Operations received a "Transfer /1035 Exchange
Form" signed by Joseph Conapinski, Sr. on April 5, 2006.
a. This form served as a request to transfer the entire value of his Carpenters
Industrial Council pension account to EquiTrust.
b. This form was completed by Bobiak with the exception of Conapinski's
signature.
c. This occurred approximately three (3) weeks prior to Council adopting the
salary and benefits resolution for the Public Works Director.
d. Conapinski was aware that the Public Works Director was going to be a non-
union position when he was made interim Director on February 14, 2006.
e. Conapinski relied on Bobiak to handle the transfer of funds from the
Carpenters Union to EquiTrust.
26. On April 17, 2006, EquiTrust Life Insurance Company, P.O. Box 14500, Des
Moines, IA 50306 sent correspondence to the Carpenters Industrial Council, 1016
Center Street, Ashland, PA 17921 requesting a transfer of assets for Joseph J.
Conapinski, Sr. to EquiTrust account #EQ000133049F.
Bobiak, 08 -058
Page 9
a. The Carpenters Union complied with this request by way of check number
589 dated May 30, 2006, in the amount of $17,170.07.
27. Frackville Borough Council never discussed or approved the transfer of
Conapinski's pension funds from the Carpenters Union to EquiTrust.
a. Bobiak was Council President at the time.
b. The topic never came before Council for consideration.
c. Council members presumed Conapinski's pension funds were going to be
invested with the State through the Pennsylvania Municipal Retirement
System.
28. Within two (2) months of account EQ000133049F being opened, Bobiak facilitated
withdrawals for Conapinski from the account.
a.
b.
c.
d.
e.
Conapinski made two (2) withdrawals totaling $7,408.97 including
surrender /penalty charges from EquiTrust account EQ000133049F between
July 25, 2006, and January 3, 2008.
These withdrawals were for personal use by Conapinski.
Conapinski did not contribute any of his own wages towards this account.
The account was comprised of Borough contributions and investment
earnings.
Conapinski arranged for these withdrawals through Bobiak.
29. EquiTrust Account records for account EQ0001033049F include an application for
partial withdrawal by Bobiak on behalf of Conapinski in the amount of $4,800.00 on
July 25, 2006.
a. A penalty in the amount of $1,233.65 was assessed to this withdrawal
bringing the total transaction amount to $6,033.65.
b. A second withdrawal totaling $1,375.32 was made by Conapinski from this
account on January 3, 2008.
1. Supporting documentation on this withdrawal is unavailable.
c. These funds were contributed entirely by Frackville Borough for Conapinski's
retirement plan as an employee of the Borough's Public Works Department.
30. The withdrawals by Conapinski from the pension account were facilitated by
Bobiak.
a. These funds were contributed entirely by Frackville Borough.
b. Conapinski did not obtain Borough approval to withdraw the funds.
c. Conapinski believed that the money was his as he was a vested employee.
31. On January 22, 2007, EquiTrust Financial Services received a Market Booster
Index Application signed by Joseph Conapinski, Sr. and Stephen Bobiak on
January 19, 2007.
Bobiak, 08 -058
Page 10
a. This application was to open a second investment account for Conapinski
with EquiTrust.
b. Bobiak completed this application with the exception of Conapinski's
signature.
c. Bobiak signed the application as agent.
d. EquiTrust assigned number EQ0001060097F to this account.
32. At the time account number EQ0001060097F was opened by Bobiak for
Conapinski, Conapinski was working under the terms and conditions of Resolution
1 of 2006 as Public Works Director.
a. Borough pension contributions on Conapinski's behalf as Public Works
Director were to be invested through the Pennsylvania Municipal Retirement
System administrated by the Borough's Association.
33. Conapinski's second account (EQ0001060097F) with EquiTrust was funded by
Frackville Borough General Fund check number 4665 dated January 19, 2007, in
the amount of $2,514.37.
a. This check was made payable to EquiTrust Life Insurance Company.
b. The front side of the check was signed by Stephen Bobiak and Brenda
Deeter in their official capacities as Frackville Borough Council President
and Secretary /Treasurer respectively.
c. This check was issued at the direction of Bobiak.
d. Bobiak instructed Deeter on how to complete the check and what information
to include on it.
e. A notation on the voucher portion of this check stated "EquiTrust Life Insur,
Joe Conapinski Pension 2006."
f. EquiTrust assigned number EQ0001060097F to this account.
34. Check number 4665 was issued to EquiTrust on January 19, 2007, without any
specific approval by Council.
a. This check was issued solely on Bobiak's authorization in his official
capacity as President of Frackville Borough Council.
b. Deeter prepared and signed the check under the impression Bobiak was
authorized to approve the expenditure.
c. Bobiak did not provide any invoices to generate the payment.
d. The payment amount was determined based on the number of hours worked
by Conapinski during 2006 multiplied by approximately $1.50 per hour
worked.
35. At the time Borough check number 4665 was issued, all Borough contributions
towards Conapinski's pension should have been made to the Pennsylvania
Municipal Retirement System account with the Borough Association consistent with
Bobiak, 08 -058
Page 11
terms of the Public Works Director benefit package (Resolution 1).
a. Deeter did not question Bobiak about this discrepancy believing that as
Council President, he was authorized to issue the check.
b. Council did not authorize [that] EquiTrust be substituted for the Borough
Association to be the recipient of Conapinski's pension funds.
c. Bobiak signed Resolution 1 on March 14, 2006, as Council President.
36. Another pension contribution payment in the amount of $3,484.50 was issued by
the Borough to EquiTrust for account EQ0001060097F by way of check number
5048 on December 31, 2007.
a. This check was made payable to EquiTrust Life.
b. The front side of the check was signed by Stephen Bobiak and Brenda
Deeter in their official capacities as Frackville Borough Council President
and Secretary /Treasurer respectively.
c. This check was issued at the direction of Bobiak.
d. This check was prepared by Secretary /Treasurer Deeter based on
information Bobiak provided to her.
e. This check was for the Borough's contribution towards Conapinski's pension
for 2007.
f.
This payment was posted to Conapinski's account on January 7, 2008.
37. Check Number 5048 was issued to EquiTrust on December 31, 2007, without any
approval by Council.
a. This check was issued solely based on Bobiak's authorization to do so in his
official capacity as President of Frackville Borough Council.
b. Deeter prepared and signed the check under the impression Bobiak was
permitted to make the expenditure.
c. Bobiak did not provide any invoices to generate the payment.
d. The payment amount was determined based on the number of hours worked
by Conapinski during 2007 multiplied by approximately $1.50 per hour
worked.
38. Frackville Borough Council did not take any specific action approving check
numbers 4665 or 5048 issued to EquiTrust.
a. Neither check appeared on a monthly bill list for Council approval.
b. Council did not authorize either payment as part of an executive session.
c. Bobiak made all the decisions to invest pension funds on behalf of
Conapinski with EquiTrust.
1. Bobiak never advised Council of his actions.
Bobiak, 08 -058
Page 12
39. The Commonwealth of PA, Department of the Auditor General annually sends form
AG -385, certification for Foreign Fire Insurance Tax Distribution and General
Municipal Pension State Aid form to Frackville Borough for completion.
a. Form AG -385 lists the names of all Borough employees participating in an
approved pension plan receiving state aid.
b. Form AG -385 is annually completed by Frackville Borough
Secretary /Treasurer Brenda Deeter on behalf of the Borough.
c. Joseph Conapinski was included on AG -385 forms for 2003 through 2006;
the years prior to transitioning into the position of Public Works Director.
1. Conapinski's pension funds were invested with the Carpenters Union
until May 2006.
40. Instructions that accompany form AG -385 specify the following eligibility criteria for
non - uniformed employees under Section 3(a).
a. Be an active, full -time non - uniformed employee of the municipality.
b. Be employed for any six (6) consecutive months.
c. Work not less than 35 hours per week.
d. Be a member of a pension plan and meet all its requirements.
41. In 2006 when Conapinski became Director of Public Works for Frackville Borough,
he met all of the criteria detailed in the previous finding.
a. Conapinski began employment with the Borough on or about September 11,
2000.
b. Conapinski worked on a full -time basis for the Borough in excess of thirty -
five hours per week.
c. Conapinski participated in the pension plan offered through the Carpenters
Union.
d. Frackville Borough qualified to receive state aid towards the funding of
Conapinski's pension since the plan was in effect for more than three (3)
years.
42. To receive state aid towards the funding of an employee's pension plan,
participating employees can not be enrolled in either an individual retirement
account (IRA) or a deferred compensation plan.
a. The investment accounts established by Bobiak for Conapinski with
EquiTrust were in Conapinski's name, in the form of an individual retirement
account.
b. Since these accounts were in Conapinski's name, instead of Frackville
Borough, they are categorized as IRA accounts, which are not eligible for
state aid.
43. At the time Conapinski became Public Works Director the only eligible plan offered
by the Borough was through the PSBA along with the other non - uniformed
Bobiak, 08 -058
Page 13
employees.
a. Conapinski did not have a lapse in service between being a Borough laborer
and becoming Public Works Director to allow him to convert his pension
funds with the Carpenters Union to his own personal use.
44. Frackville Borough expenses such as pension contributions and health care
premiums are included in the annual operating budget.
a. These expenditures are considered approved for payment when due as a
result of budget approval.
b. Line items for pension contributions do not include investment companies.
c. Secretary /Treasurer Brenda Deeter had the authority to issue those
payments with the signature of the Council President.
45. Frackville Borough Council is provided with a bill list as part of [its] monthly meeting
packet.
a. Meeting packets are provided to Council for review 1 -2 days prior to [its]
meeting.
b. The actual bill list includes the payee, amount and a brief description of the
nature of the expense.
c. Bill lists are voted on in their entirety by Council.
d. No record exists of Council ever approving any contributions to either
EquiTrust account on behalf of Conapinski.
46. Bobiak as the agent of record on EquiTrust accounts EQ0001033049F and
EQ0001060097F received commission payments based on account activity.
a. Bobiak would receive a commission payment each time additional funds
were deposited into either account.
47. EquiTrust commission records reflect Bobiak received three (3) commission
payments totaling $2,055.21 as a result of these accounts between June 2, 2006,
and January 11, 2008.
a. Commission payments were made as follows:
Account # Date Amount
EQ0001033049F 06/02/06 $1,545.31
EQ0001060097F 02/02/07 $ 213.72
EQ0001060097F 01/11/08 $ 296.18
$2,055.21
b. Each commission payment was the direct result of funds being deposited
into the respective accounts.
48. Commissions totaling $509.90 paid to Bobiak for account number EQ0001060097F
were as the result of Bobiak as Council President directing pension investments for
Joseph Conapinski be made.
a. Bobiak would not have received any commissions on these deposits had the
Bobiak, 08 -058
Page 14
funds been invested through the Pennsylvania Municipal Retirement System
as required by Ordinance 1 and Commonwealth requirements regarding
General Municipal Pension State Aid.
49. Frackville Borough Council was unaware that Conapinski's pension funds were
being invested by Bobiak with EquiTrust until approximately March 2008.
a. Council became aware of the investments as part of a routine audit of the
Borough's non - uniformed employee pension plan covering the period
January 1, 2004, through December 31, 2006.
1. The audit conducted by the Department of Auditor General Bureau of
Municipal Pension Audits commenced in or about March 2008.
b. No account records for Conapinski were on file with the Borough at the time
auditors began the review.
1. Bobiak had not provided annual account statements to Deeter for
Borough files.
50. In order to comply with auditor requests for account documents, Deeter contacted
EquiTrust directly for account statements for Conapinski on March 3, 2008.
a. No other Borough employees had accounts with EquiTrust.
b. On March 3, 2008, Brenda Deeter faxed a request signed by Joseph
Conapinski on Borough stationery requesting statements for account
numbers EQ0001033049F and EQ0001060097F needed as part of the State
Audit.
1. Once received, the Statements were provided to the auditors for use
in completing the audit.
51. Bobiak's failure to provide the Borough with account statements for Conapinski's
accounts with EquiTrust concealed the fact that he was the account agent.
a. Council did not become aware of Bobiak's involvement until the audit when
the Borough was required to respond.
52. On or about March 13, 2008, the Borough received a draft audit report from the
Auditor General, Bureau of Municipal Pension Audits.
a. The draft audit report included the following findings and recommendations
regarding Bobiak's investing of pension funds with EquiTrust and Bobiak's
depositing of investment funds with a company which employs him:
Finding No.1- Failure to deposit monies into the non - uniformed pension plan.
Condition: On March 14, 2006, a member of the non - uniformed union pension plan
transferred to the administrative staff non - uniformed pension plan. However, the
vested portion of money attributable to the member's transfer was not deposited to
the proper custodial account maintained with the Pennsylvania State Association of
Boroughs (PSAB).
Criteria: A resolution dated March 14, 2006 at section 7, states: As to retirement,
the Director will be enrolled in the Borough's pension plan administered by the PA
Municipal Retirement System and presently provided to the Borough's
administrative staff.
Bobiak, 08 -058
Page 15
Effect: The member's vested benefit, as of March 14, 2006, in the amount of
$17,170.00, along with contractual contributions due the member for the years 2006
and 2007 pursuant to the PSAB agreement dated March 1, 2005, has not been
deposited to PSAB.
Recommendation: We recommend that borough officials deposit the monies
attributable to the member's vested benefit to the non - uniformed pension plan
custodial account, plus applicable interest had the money been on deposit as of
March 14, 2006. Also, borough officials should deposit to the non - uniformed
pension plan custodial account any contributions due the member pursuant to the
non - uniformed pension plan agreement.
Management Response: Management agreed with the finding without exception.
Borough officials intend on depositing the monies attributable to the members
vested benefit to the non - uniformed pension plan custodial account, at its earliest
opportunity to do so.
Finding No. 2 Related Party Transaction:
Condition: Borough officials failed to disclose a related party transaction. On May
31, 2006, an account was opened with EquiTrust Life Insurance Company for the
deposit of certain non - uniformed pension plan funds. The broker /dealer
representative in this instance is the President of Council of Frackville Borough.
-A related party transaction occurs when borough officials deal with a business
which employs or is owned by a borough official or a member of a borough official's
immediate family. Such a transaction may provide a financial benefit to the related
party through a commission or a profit from a sale.
Criteria: All related party transaction(s) should be disclosed and recorded in the
minutes of borough council meetings. In addition, the individual involved should
abstain from all votes concerning his or her involvement in the related party
transaction.
Cause: Borough officials failed to establish adequate internal control procedures to
ensure that the related party transaction was adequately disclosed.
Effect: The failure to properly disclose a related party transaction will result in the
borough not being aware of potential conflict of interest involving a borough official.
Recommendation: Borough officials should take those actions necessary to
eliminate the appearance of a conflict of interest. Actions should include, but are
not limited to, a written notification to the borough of each related party transaction,
and the abstention of the borough official from decisions and voting rights which
pertain to the related party transaction. These actions should be documented in the
minutes of the borough council meetings. Furthermore, borough officials should
closely review all related party transactions to ensure that the cost of the services
rendered by the firm are competitive.
Management Response: Management agreed with the finding without exception.
Borough officials intend on eliminating the appearance of the conflict of interest at
its earliest opportunity to do so.
53. As a result of the draft audit report, Bobiak attempted to have the funds he invested
for Conapinski with EquiTrust be returned to the Borough.
54. On March 13, 2008, the Borough sent a five page fax which included
correspondence under the signatures of Bobiak and Conapinski to EquiTrust and
Bobiak, 08 -058
Page 16
audit findings and requesting that the accounts be "reversed" based on the audit
findings.
a. Contained in the fax was March 13, 2008, correspondence on Borough
stationery signed by Bobiak and Conapinski referencing the audit findings
and requesting that all funds be sent to PSAMRT 2941 N. Front Street,
Harrisburg, PA 17110.
1. Bobiak signed this request as agent.
2. The stationery also identifies Bobiak as Council President.
55. The final audit report dated March 6, 2008, was distributed by the Department of
Auditor General to Frackville Borough officials, Stephen Bobiak, Council President;
Brenda Deeter, Secretary; and Delmar Phillips, Mayor on July 23, 2008.
a. Following receipt of the audit report Bobiak was questioned by Council
regarding his receipt of any compensation as a result of investing the
pension money of Joseph Conapinski with EquiTrust.
b. Bobiak admitted receiving commissions from two accounts that he set up for
Conapinski during Council's July 30, 2008, meeting but did not specify the
amounts of commissions he received.
56. Minutes from the Frackville Borough Council Meeting held on July 30, 2008, include
the following regarding Bobiak's receipt of commissions from the Conapinski
accounts he established at EquiTrust and Council actions:
"Councilman O'Boyle said that the borough had a pension audit done in February
and March of 2008, for the street department, the administrative department and the
police department. Mr. O'Boyle said the street department pension funds used
were unauthorized. Approximately $25,000.00 where a councilman present had
taken pension money from a street department employee's account and had
invested the money for this employee. Councilman Bobiak said that the street
department employee came to him and asked him to invest his pension monies
and he did invest the money as his insurance agent. President Jankaitis asked
Councilman Bobiak if he received a commission and Councilman Bobiak answered
yes. Councilman Bobiak said that there are two accounts so he collected two
commissions. President Jankaitis said that this is under investigation by at least
one state agency. Councilman Bobiak said he will take responsibility of the
situation. Councilman O'Boyle said a lawsuit will be filed tomorrow morning to get
our money returned. President Jankaitis asked Councilman Bobiak to resign.
Councilman Hummel said this situation could hurt the borough's financial aid so Mr.
Hummel is also asking Councilman Bobiak to resign."
57. As a result of the audit report and Bobiak's admissions, that he invested funds on
behalf of Conapinski with EquiTrust and that he had received commissions as a
result, Council took action to recover the pension funds Bobiak invested with
EquiTrust on behalf of Conapinski.
a. Council authorized the Solicitor to file suit against Bobiak.
b. Minutes from Council's July 30, 2008, special meeting include the following
official action taken authorizing the Solicitor to file suit against Bobiak:
"A motion to have the services of the borough solicitor to assist with the
lawsuit against Mr. Bobiak in Schuylkill County Court for the $25,000.00 plus
Bobiak, 08 -058
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dollars for the pension funds was made by Mr. O'Boyle, seconded by Mr.
Hummel. All in favor 5 -0 -1. Councilman Bobiak abstained. Motion carried."
Present: Hummel, Jankaitis, O'Boyle, Zuber, Bobiak, Roman.
Absent: Jordan.
c. The current status of this litigation is pending.
d. EquiTrust was removed as a defendant as a result of account funds being
returned to the Borough.
e. The amount the Borough is seeking is the $8,408.97 withdrawn by
Conapinski.
58. Based on the request by the Borough, EquiTrust refunded the balances of both
accounts.
a. On October 1, 2008, EquiTrust issued corporate check number 128095 in
the amount of $9,761.10 to Frackville Borough as the full surrender value of
policy number EQ0001033049F.
b. At the time of the Borough's request to close out the account, policy number
EQ0001033049F had a value of $12,377.85.
1. The payout was reduced by surrender charges of $2,616.75 making
the net return $9,761.10.
c. Also issued on October 1, 2008, was EquiTrust corporate check number
128093 to Frackville Borough in the amount of $5,998.87 representing the
full surrender value of policy number EQ0001060097F.
1. This account had a value of $6,344.86 at the time the account was
closed.
2. This payout was reduced by surrender charges of $345.99.
59. The amounts refunded to Frackville Borough by EquiTrust totaled the deposits
made of $23,168.94 less the two withdrawals made by Conapinski ($7,408.97)
including related penalties from account number EQ0001033049F.
Deposits: $17,170.07
$ 3,484.50
$ 2,514.37
Total Deposits: $23,168.94
Withdrawals: $6,175.32
Penalties: $1,233.65
$7,408.97
Net Deposits: $15,759.97
Refunds: $ 9,761.10
$ 5,998.87
Total Refund: $15,759.97
a. The result of Bobiak's actions in authorizing the transfer of funds and
deposits to EquiTrust and withdrawals by Conapinski was a net loss in the
Bobiak, 08 -058
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value of the pension fund:
Total Deposits:
Total Refunds:
$23,168.94
$15,759.97
$ 7,408.97
60. As a result of the policies being cancelled at Frackville Borough's request,
EquiTrust deducted the commissions paid to Bobiak effective with his commission
statement dated December 19, 2008.
a. Bobiak was debited $2,055.21 from gross commissions earned of $3,714.47
as of his December 19, 2008, account statement.
61. Stephen Bobiak realized a private pecuniary benefit of $2,055.21 as a result of
establishing two (2) investment accounts for Joseph Conapinski with EquiTrust.
a. Bobiak's account was debited this amount by EquiTrust on December 19,
2008, as detailed in the previous finding.
THE FOLLOWING FINDINGS RELATE TO ALLEGATIONS THAT STEPHEN BOBIAK
USED HIS POSITION TO BE NAMED BROKER OF RECORD TO COLLECT
COMMISSIONS ON THE PLACEMENT OF THE BOROUGH'S HEALTH INSURANCE.
62. Frackville Borough provides its employees with medical, vision, prescription and
dental coverage through Capital Blue Cross.
a. Capital Blue Cross assigned account number [account number redacted] to
Frackville Borough.
b. Frackville Borough was invoiced on a monthly basis for the coverage.
c. The inception of the Borough's account with Capital Blue Cross predated
Bobiak's tenure on Council.
63. Prior to Bobiak taking office as a Frackville Borough Councilman, there was never
an agent of record on the account.
a. All account questions and inquiries were handled by Secretary /Treasurer
Deeter.
64. Capital Blue Cross offers commissions of six (6) percent of the monthly premium
paid to be split between the Preferred Agent /Broker and Agent of Record on group
accounts with members of between 1 and 99.
a. The percentage split is two (2) percent to the Preferred Agent /Broker and
four (4) percent to the Agent of Record.
b. The Frackville Borough account was designated a group account with
membership in the range of 1 to 99.
65. For an agent to sell Capital Blue Cross products [the agent has] to be licensed by
Capital Blue Cross and deal through a Preferred Agent /Broker.
a. Capital Blue Cross has contracts with five (5) companies that serve as
Preferred Agent /Brokers within Pennsylvania.
Bobiak, 08 -058
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b. Preferred Agent /Brokers include Hartman Employee Benefits, American
Insurance Administrators, Emerson Reid & Company, Caruso Benefit Group
and the Benecon Group.
66. At all times relevant to this investigation, Stephen Bobiak was authorized /licensed
through Capital Blue Cross and /or [its] subsidiary Capital Advantage Insurance
Company to sell their products.
a. Bobiak was licensed through Capital Blue Cross prior to serving on
Frackville Borough Council.
b. Bobiak has been licensed by Capital Blue Cross since at least October 2,
2003.
c. Bobiak marketed Capital Blue Cross products through Preferred
Agent /Broker Hartman Employee Benefits, 420 William Street, P.O. Box
1087, Williamsport, PA 17703.
67. Capital Blue Cross requires its licensees to complete an agent acknowledgment
agreement form.
a. Bobiak signed agent acknowledgment forms on October 2, 2003, and August
1, 2006.
b. Section 4 of the agreement details "limitations on your authority as a
standard agent."
c. Subsection 4.1.14 prohibits to pay, allow, or offer to pay or allow as an
inducement to any person or group, any rebate of premium or other form of
consideration."
68. Frackville Borough Council did not solicit for an individual or agency to serve as the
agent of record on the Borough's Capital Blue Cross policy.
a. All needed account services were handled by Secretary /Treasurer Brenda
Deeter as part of her compensated duties with the Borough.
b. Prior to 2006 no agent of record was designated for the Borough account.
69. Shortly after assuming his position on Frackville Borough Council in January 2006,
Bobiak obtained blank stationery containing the Borough's letterhead from Brenda
Deeter.
a. Bobiak did not hold any clerical or administrative positions with the Borough
which would have required him to need Borough stationery.
b. Deeter was employed full -time as the Borough Secretary /Treasurer and by
chain -of- command reported to Council.
c. No other Council members requested or had blank Borough stationery.
70. On or around March 2006, Bobiak had a conversation with Charles Backes
regarding Backes getting established as an independent insurance agent through
Goal Line Financial.
a. Backes was licensed by the Pennsylvania Department of Insurance as a
resident producer individual with lines of authority including accident and
Bobiak, 08 -058
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health, casualty and allied lines, life and fixed annuities and property and
allied lines.
b. Backes was authorized by Capital Blue Cross and Capital Advantage
Insurance Company to offer their products as of November 1, 2003.
c. Bobiak was to assist Backes in getting established and offered to rent
Backes office space at Goal Line Financial Group's office at 15 Leigh
Avenue, Frackville, PA.
71. Bobiak and Backes negotiated a monthly rental fee of $400.00 for office space
through Goal Line Financial Group.
a. Backes' rent covered use of a portion of Goal Line Financial Group's
Frackville, PA location to sell insurance as an independent contractor.
b. Backes began occupying the space early in 2006.
c. Backes did not have a signed lease for the office space.
72. In an effort to assist Backes with insurance sales, Bobiak, in his position as a
member of Council, named Backes the agent of record for the Frackville Borough
account with Capital Blue Cross.
a. Bobiak's action of appointing Backes agent of record occurred without the
knowledge or consent of Frackville Borough Council.
b. Backes was not needed to provide any services as agent of record as
Borough Secretary Deeter had been performing all administrative functions
in relation to the Borough's health plan with Capital Blue Cross.
c. Bobiak asserts that Backes agreed to rent space from him prior to Bobiak
appointing Backes as agent of record.
d. Prior to April 2006 the Borough had not named an agent of record for the
Capital Blue Cross insurance and had not needed the services of an agent
of record. When the Borough needed assistance with the Blue Cross
Insurance account, Deeter would contact Blue Cross directly or through the
liaison.
73. On or about April 15, 2006, Bobiak in his official capacity as Frackville Borough
Council President used official Borough stationery to notify Capital Blue Cross that
he had designated Charles Backes as the agent of record for the Borough's Capital
Blue Cross policy.
a. Capital Blue Cross required written notification to make any changes to the
agent of record.
b. No authorization for this change was brought before Council by Bobiak.
c. The letter also authorizes commission payments be made by Blue Cross to
Backes and Hartman Employee Benefits, Inc. regardless of the group's
decision to use or not use the Agent of Record's services."
d. This letter contains the signatures of Stephen H. Bobiak, Frackville Borough
Council President, and Brenda Deeter, Borough Secretary.
Bobiak, 08 -058
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74. The contents of Bobiak's April 15, 2006, letter to Capital Blue Cross naming Backes
agent of record were as follows:
"Please be advised that Charles L. Backes, under contract with Hartman
Employee Benefits, Inc., has been selected by Frackville Borough (Group), as
its Agent of Record effective April 15, 2006. Charles L Backes is authorized by
the Group to solicit proposals on behalf of the Group for group health care
benefits programs offered by Capital Blue Cross as Capital Advantage
Company.
• The Group acknowledges that Charles L. Backes is acting as agent for
Capital Blue Cross and Capital Advantage Insurance Company for the
limited purpose of presenting group health benefits coverage proposals and
soliciting applications for group contracts for health benefits coverage. If the
Group purchases dental and /or vision coverage offered through Capital Blue
Cross and Capital Advantage Insurance Company, the Group also
acknowledges that Charles L Backes is acting agent for Delta Dental of
Pennsylvania (for dental coverage) and National Union Fire Insurance
Company of Pittsburgh (for vision coverage).
• The Group also acknowledges that any contract for health benefits coverage
through Capital Blue Cross and Capital Advantage Insurance Company shall
be by and among the Group, Capital Blue Cross and Capital Advantage
Insurance Company. Likewise, any contract for dental or vision coverage
shall be by and between the Group and Delta Dental of Pennsylvania or by
and between the Group and National Union Fire Insurance Company of
Pittsburgh, respectively.
• The Group further acknowledges that, in consideration of the services of
Charles L. Backes as Agent of Record and Hartman Employees Benefits,
Inc. as the Preferred Agent, Capital Blue Cross and Capital Advantage
Insurance Company will pay commissions to Charles L. Backes and Hartman
Employee Benefits, Inc., calculated as a percentage of premiums on all
products offered by or through Capital Blue Cross and Capital Advantage
Insurance Company. The Group's decision to use or not to use the Agent of
Record's services will not affect the premium rates."
75. Deeter signed the appointment letter at Bobiak's direction.
a. The letter was not prepared by Deeter.
1. Bobiak had Borough Stationery in his possession.
b. Deeter did not have the authority to assign an agent without Council
approval.
c. Frackville Borough did not vote or otherwise authorize Backes to serve as
agent of record.
1. The decision was made solely by Bobiak at or about the time that
Backes agreed to lease office space from Bobiak.
76. Based on the commission schedule established by Capital Blue Cross, the agent of
record receives four (4) percent of the monthly premium paid.
a. As of March 14, 2006, the monthly premium for the Frackville Borough
Account was approximately $9,280.72.
b. Four (4) percent of the monthly premium of $9,280.72 is $371.23.
Bobiak, 08 -058
Page 22
c. The monthly commission is approximately $30.00 less than the amount of
the rent to be paid by Backes to Bobiak.
77. Capital Blue Cross pays commissions to the agent of record through the preferred
Agent /Broker.
a. Six (6) percent of the monthly premium paid is sent from Capital Blue Cross
to the Preferred Agent /Broker.
b. The Preferred Agent /Broker retains two (2) percent of that amount and
forwards the other four (4) percent to the agent of record.
c. Commissions are paid based solely on the receipt of premium payments by
Capital Blue Cross.
78. Capital Blue Cross invoiced Frackville Borough on a monthly basis for account
[account number redacted].
a.
b.
c.
d.
Premiums varied slightly from month to month based on policy changes.
Borough Council approved insurance premium payments as part of the
annual budget.
Payments were issued by Secretary /Treasurer Deeter without Council review
upon receipt of the invoices.
Several payments also were approved on monthly bill lists.
79. Capital Blue Cross monthly premium invoices to the Borough do not list or identify
the agent of record on the account.
a. Invoices do not include the name of the agent or any identifying codes for
one.
b. Monthly premium invoices also do not reflect any commissions paid on the
account.
c. Commissions are built into the monthly premium amount.
d. The addition of Backes and /or Bobiak as the agent of record for the Capital
Blue Cross policy did not change the cost of the policy for the Borough.
80. Business records of Capital Blue Cross detail thirty -six (36) monthly premiums
billed on the Frackville Borough account between January 15, 2006, and December
15, 2008.
81. On July 7, 2006, Backes signed a "preferred producer & standard producer
relationship agreement" with Hartman Employee Benefits.
a. Backes had been authorized by Capital Blue Cross and Capital Advantage
Insurance Company to offer their products since November 1, 2003. See,
Finding No. 70b.
b. Backes is identified as the standard producer while Hartman is the stated
preferred producer.
Bobiak, 08 -058
Page 23
c. This was followed by a standard agent acknowledgement form signed by
Backes on October 17, 2006.
d. This document enabled Backes to serve as an agent for Capital Blue Cross
and its wholly owned subsidiaries, Capital Advantage Insurance Company
and Keystone Health Plan Central.
e. Backes identifies Goal Line Financial 15 S. Lehigh Ave., Frackville, PA
17931 as his business address along with the same phone 570 - 874 -4646
and fax 570 - 874 -1185 numbers included for Goal Line Financial Group.
f. The form identifies Backes as an individual under the agency Goal Line
Financial Group.
Stephen H. Bobiak is identified as the designated licensee and principal
partner /corporate officer of Goal Line Financial Group.
h. In supporting documentation, Backes identifies Goal Line Financial Group as
his current employer with Stephen Bobiak President /CEO as the contact
person 570 - 874 -4646.
82. Charles Backes received commissions from Capital Blue Cross through Hartman
Employee Benefits as a result of being named the agent of record by Bobiak on the
Frackville Borough account between April 2006 and November 2007.
a. Backes also received commissions on other Capital Blue Cross accounts
during that same timeframe.
1. The majority of all commission payments were the result of the
Frackville Borough account.
b. Backes performed no services as agent of record for the Frackville Borough
account.
g.
1. Borough Secretary /Treasurer Deeter processed all employee needs
as part of her job responsibilities.
83. Between April 1, 2006, and November 30, 2007, Backes received total commission
payments from Capital Blue Cross through Hartman Employee Benefits totaling
$10,401.81.
a. Of the $10,401.81 paid, $8,068.27 or approximately 80% were commissions
based on the Frackville Borough account.
b. These payments were made directly to Backes from Hartman Employee
Benefits.
84. Commissions paid to Backes from Capital Blue Cross including those directly
related to the Frackville Borough Account totaled $8,068.27.
a. Of Backes's total commissions of $5,116.60 in 2006, $3,528.63 was for the
Frackville Borough policy.
85. Bobiak and Backes never had a written rental agreement for Backes' use of
Bobiak's office.
Bobiak, 08 -058
Page 24
a. Backes orally agreed to pay rent to Bobiak prior to Backes being
commissioned as agent of record.
b. Bobiak asserts that he had rented his office to various individuals prior to
Backes' use of the office.
c. Backes made rental payments in 2006 only after he began receiving
commissions.
d. Of Backes' total commissions in 2006 of $5,116.60, $2,349.79 or 46% was
paid to Bobiak as rent.
86. During 2006 Backes paid Bobiak $2,349.79 towards the rental of office space from
Bobiak at Goal Line Financial Group Offices, 15 South Lehigh Avenue, Frackville,
PA.
a. Backes issued Bobiak a 1099 Miscellaneous income form in 2006
documenting rental payments of $2,349.79.
b. Backes did not pay Bobiak rent consistently at the agreed upon monthly rate
of $400.00.
1. If Backes occupied the space from April through December 2006,
rental payments to Bobiak should have been $3,600.00 (9 mos @
$400.00 /m)
c. Bobiak accepted rent from Backes as he was able to make payments.
1. Bobiak collected rent on months when Backes had funds available.
d. Backes did not issue Bobiak a 1099 Miscellaneous income form for calendar
year 2007.
1. Bobiak asserts that no rent was received from Backes after 2006.
87. On September 21, 2007, Bobiak sent two pieces of correspondence on Frackville
Borough stationery to Capital Blue Cross Broker Relations, one removing Backes
as agent of record and the other adding Bobiak as agent of record.
a. Bobiak signed both letters identifying himself as the "authorized group
representative (and) Borough Council President."
b. No other Borough Officials' signatures appear on either letter.
c. Neither letter was authorized by Council.
d. The first letter removing Charles Backes as the agent of record for the plan
effective October 1, 2007, stated that the Borough rescinds its designation of
Charles Backes as agent of record.
1. The letter was signed by Bobiak as Council President and authorized
Borough representative.
e. The second letter placed Goal Line Financial Group, Bobiak's company, as
the agent of record, also effective October 1, 2007.
1. Bobiak did not disclose in the letter that he is the president of Goal
Bobiak, 08 -058
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Line Financial Group.
f. The letter did not include the signature of Brenda Deeter.
88. Bobiak did not seek or receive approval from Frackville Borough Council to replace
Charles Backes with Goal Line Financial Group as the agent of record on the
Capital Blue Cross account.
a. Council was unaware that Backes was the agent of record prior to the
change.
b. Bobiak made the change without notifying any other Council Member.
89. Bobiak's second letter of September 21, 2007, to Capital Blue Cross stated that
Frackville Borough Council authorized his company, Goal Line Financial as the new
agent of record.
a. The letter was on Frackville Borough letterhead.
b. In that letter Bobiak wrote "please be advised that Goal Line Financial
Group, under contract with Hartman Employee Benefits Inc. has been
selected by (the) Borough of Frackville as its Agent of Record, effective
October 1, 2007."
c. Bobiak signed the letter under the titles of "authorized Group
Representative" and "Borough Council President."
1. Bobiak was not authorized by Council to be its "authorized Group
Representative" on the account.
2. Bobiak was Council President at the time.
d. Council took no acting authorizing Goal Line Financial or Bobiak as agent of
record.
90. Bobiak's letter to Capital Blue Cross noted that commissions paid to Goal Line
Financial would be calculated as a percentage of all premiums on all products
offered by or through Blue Cross.
91. Bobiak's second letter of September 21, 2007, to Capital Blue Cross claiming that
Goal Line Financial had been selected by Frackville Borough as agent of record
was false.
a. Borough Council never took any action authorizing Bobiak to act as agent of
record for any Borough insurance matters.
1. Council members were unaware that Backes had been named and
later removed as agent of record.
b. Bobiak, using his position as Council President, named his company, Goal
Line Financial, agent of record for the Borough's health insurance plan with
Capital Blue Cross.
c. This letter stated that commission payments would be made [to] Goal Line
Financial.
92. Bobiak d /b /a Goal Line Financial Group began receiving commissions as the agent
Bobiak, 08 -058
Page 26
of record on the Frackville Borough account with Capital Blue Cross effective with
the Hartman Employee Benefits Commission Statement covering the period
12/01/07 through 12/31/07.
a. Bobiak d /b /a Goal Line Financial Group continued to receive commissions
on this account through the Statement covering the period 06/01/01 —
06/30/08.
b. These commissions were paid at the standard four (4) percent rate provided
to the agent of record.
c. Neither Bobiak nor his company, Goal Line Financial, performed any
services for the Borough account.
d. Secretary /Treasurer Brenda Deeter handled all account issues on behalf of
the Borough during this timeframe.
93. Commission records of Hartman Employee Benefits confirm commissions paid to
Bobiak d /b /a Goal Line Financial Group totaling $3,657.29* for the Frackville
Borough account between December 1, 2007, and June 30, 2008.
*[Cf., Fact Finding 105. Respondent receives the benefit of the lower amount.]
94. Bobiak's records detail all commission payments received from Hartman Employee
Benefits earned by Goal Line Financial Group as a result of Capital Blue Cross
sales.
a. Commission statements make specific reference to Frackville Borough
during those months when a commission payment is earned.
b. Commissions were paid based on 4% of the premium which is included on
the commission statements.
95. On August 6, 2008, Bobiak d /b /a Goal Line Financial Group notified Salley Smeltz,
Producers Relations Coordinator, Capital Blue Cross of his desire to be removed as
the "Broker of Record for the Frackville Borough, Group #[redacted] effective July
15, 2008."
a. July 15, 2008, was the earliest effective date that commissions had not
already been paid on the account.
b. Bobiak made this request approximately one week after Council took action
approving litigation against Bobiak for investing Conapinski's pension funds
with EquiTrust.
96. Bobiak's August 6, 2008, correspondence to Smeltz contained the following
request:
a. "Due to a conflict of interest with Frackville Borough Council, I am hereby
rescinding as Broker of Record for the Frackville Borough, Group #512795
effective July 15, 2008 and will no longer represent that account. Since I am
no longer representing that group, it will be the responsibility of Capital Blue
Cross to contact the group with any further communications."
b. Bobiak did not elaborate on the nature of the "conflict of interest with
Frackville Borough Council."
Bobiak, 08 -058
Page 27
97. Frackville Borough learned of the changes to the agent of record on August 8,
2008, after receiving notification from Sally Smeltz of Capital Blue Cross.
a. Smeltz forwarded correspondence to the Borough which included copies of
the various agents of record change letters for the account.
1. These letters included all four documents prepared by Bobiak in 2006
and 2007.
b. Smeltz forwarded a copy of the Goal Line Financial Group agent of record
termination letter to the Borough on August 7, 2008.
98. Prior to August 6, 2008, Frackville Borough Council was unaware of the following:
a. Bobiak naming Charles Backes agent of record on or about April 15, 2006.
b. Bobiak d /b /a Goal Line Financial Group being made agent of record on or
about October 1, 2007.
c. The agent of record receiving commissions in the amount of four (4) percent
of the monthly premiums paid.
99. At all times relevant to this investigation, Secretary /Treasurer Deeter handled all
account inquiries on behalf of the Borough and /or the plan's participants.
a. Deeter did this in her official capacity as Secretary /Treasurer without any
additional compensation.
b. Charles Backes and Stephen Bobiak d /b /a Goal Line Financial Group each
received commissions as agent of record on this account, as detailed in this
report, without providing any services.
100. During the time Charles Backes and Goal Line Financial Group were receiving
commissions from Capital Blue Cross for serving as the agent of record on the
account, five (5) payments were approved by Council.
a. Bobiak was present and voted to approve three of the five payments issued
by the Borough.
b. These payments were approved as follows:
Bill List Amount Official Action
11/14/06 $10,266.36 Voted, 6 -0 recorded vote, 1 absent
10/10/07 $ 7,406.98 Voted, 7 -0 recorded vote
02/13/08 $12,148.64 Voted, 6 -0 recorded vote, 1 absent
$29,821.98
c. Bobiak was absent from Council's July 11, 2006, and September 12, 2007,
meetings when the other two payments were approved.
101. The remaining payments issued to Capital Blue Cross were considered authorized
as part of the annual budget approval process.
a. The 2006 budget was approved by Council during [its] December 29, 2005,
meeting.
1. This approval occurred prior to Bobiak taking a seat on Council.
Bobiak, 08 -058
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b. The 2007 budget was approved on December 12, 2006, while the 2008
budget was approved by Council on December 31, 2007.
c. Bobiak participated in the approval of budgets for 2007 and 2008 in his
official capacity as Frackville Borough Council President.
102. Bobiak's receipt of commissions as a result of serving as agent of record on the
Borough's Capital Blue Cross account was discussed during Council's October 8,
2008, meeting.
a. Minutes from Council's October 8, 2008, meeting included a disclosure by
Bobiak that he received commissions as a result of being the agent on the
Borough's health insurance plan.
b. Minutes from that meeting include the following recorded comments:
"Mr. O'Boyle asked Mr. Bobiak if he and his agent [Charles Backes]
collected a brokerage fee from the Borough's health insurance and he said
yes and it cost the Borough nothing."
103. Bobiak did not obtain or seek any legal advice prior to naming Backes or his
company, Goal Line Financial, as the Borough's agent of record.
a. Bobiak did request that Borough Solicitor Mark Semanchik provide him with
some documentation that Bobiak "did nothing wrong" on or about January
14, 2009.
b. Bobiak made this request approximately one week after being interviewed by
an investigator from the State Ethics Commission on January 5, 2009.
c. Solicitor Semanchik declined to provide Bobiak with any such
documentation.
104. Bobiak used his position as President of Frackville Borough Council to invest
pension funds of Joseph Conapinski with EquiTrust resulting in commission
payments totaling $2,055.21.
a. EquiTrust debited Bobiak's account ($2,055.21) the commissions paid when
the accounts were closed and the remaining balance returned to the
Borough.
b. The account lost fees [of] $4,196.39 associated with withdrawals by
Conapinski and surrender charges.
1. Surrender charges totaled: $2,962.74
2. Withdrawal fees totaled: $1,233.65
105. Bobiak realized a private pecuniary gain of $3,657.28* as a result of commissions
received when he appointed himself d /b /a Goal Line Financial Group as the agent
of record without Council approval on the Borough's account with Capital Blue
Cross.
*[Cf., Fact Finding 93. Respondent receives the benefit of the lower amount.]
106. Bobiak realized a private pecuniary gain of $2,349.79 as the result of rents received
Bobiak, 08 -058
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from Charles Backes for office space within Goal Line Financial Group after
appointing Backes the agent of record, without Council approval, on the Borough's
account with Capital Blue Cross.
107. Bobiak realized a total private pecuniary gain of $6,007.07 as a result of his official
actions as President of Frackville Borough Council as detailed in this report.
a. Bobiak's private pecuniary benefit is based on $2,349.79 in rental payments
received from Backes and $3,657.28 in commissions received after naming
his company agent of record for the Borough's Blue Cross account.
b. Financial gain does not include any portion of the EquiTrust commissions
received which were later debited ($2,055.21) or account losses totaling
$4,196.39.
III. DISCUSSION:
As a Council Member for Frackville Borough ( "Borough ") since January 3, 2006,
Respondent Stephen Bobiak (hereinafter also referred to as "Respondent," "Respondent
Bobiak," and "Bobiak ") 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 Bobiak violated Sections 1103(a) and 1103(f) of the Ethics
Act when he used the authority of his public position for the private pecuniary benefit of
himself and /or a business with which he is associated by authorizing and /or participating in
decisions of the Borough to name a business with which he is associated, Goal Line
Financial, as the Borough's broker /agent of record for insurance matters without a vote of
Council and without an open and public process; and when he authorized the placements
of funds from a Borough workers pension account and Borough account to a business with
which he is associated.
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:
§ 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).
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
Bobiak, 08 -058
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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 1103(f) of the Ethics Act imposes certain restrictions as to contracting:
§ 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).
Section 1103(f) of the Ethics Act provides in part that no public official /public
employee or his spouse or child or business with which the public official /public employee
or his spouse or child is associated may enter into a contract with his governmental body
valued at five hundred dollars or more or any subcontract valued at five hundred dollars or
more with any person who has been awarded a contract with the governmental body with
which the public official /public employee is associated unless the contract is awarded
through an open and public process including prior public notice and subsequent public
disclosure of all proposals considered and contracts awarded.
As noted above, the parties have submitted a Consent Agreement and Stipulation of
Findings. The parties' Stipulated Findings are set forth above as the Findings of this
Commission. We shall now summarize the relevant facts as contained therein.
Background:
Respondent has served as a Borough Council Member since January 3, 2006.
Respondent served as Borough Council President from January 3, 2006, until August 13,
2008. Borough Council consists of seven Members.
In a private capacity, Respondent owns and operates Goaline Financial Group, Inc.,
d /b /a Goal Line Financial Group. Goaline Financial Group, Inc. is an insurance and
Bobiak, 08 -058
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investment business. Goal Line Financial Group is a fictitious name of Goaline Financial
Group, Inc.
Articles of Incorporation on file with the Pennsylvania Department of State list
Respondent as President and Respondent's wife, Cheryl Ann Bobiak, as Secretary and
Treasurer of Goaline Financial Group, Inc.
Respondent's Actions Involving a Borough Employee's Pension Account:
The Borough provides various pension plans for its full -time employees. The
Borough makes contributions and receives payments from the Commonwealth for
uniformed and non - uniformed pension plans. The pension plans are subject to periodic
audit by the Department of Auditor General.
In 2006 Borough Council created a new management level employment position
titled "Public Works Director." Between January 23, 2006, and May 9, 2006, Borough
Council took action on a job description for the position, advertised the position, appointed
Public Works Department employee Joseph Conapinski ( "Conapinski ") as interim and later
permanent Public Works Director, and set the salary and benefits for the position.
Respondent participated in all Borough Council actions to approve the position, appoint
Conapinski to the position, and set compensation including benefits for the position, as
detailed in Fact Findings 7 -8d, 10.
The salary and benefits package for the position of Public Works Director was
established by Resolution Number 1 of 2006, which was adopted by Borough Council on
May 9, 2006. Resolution Number 1 of 2006 provided that the Public Works Director was to
be enrolled in the Borough's pension plan administered by the Pennsylvania Municipal
Retirement System. Respondent signed Resolution Number 1 of 2006 in his official
capacity as Borough Council President.
As a Borough employee, Conapinski had been a member of a union referred to as
the Carpenters Union" prior to being appointed Public Works Director, and he had
pension funds invested through the Carpenters Union. As a result of his promotion to the
non -union position of Public Works Director, Conapinski was no longer able to continue as
a member of the Carpenters Union. Conapinski was informed by the Carpenters Union
that he was required to remove pension contributions from the pension account within 90
days of leaving the union. On March 14, 2006, Conapinski transitioned from Interim
Director to Director.
Borough Council was not advised that Conapinski had a 90 day window in which to
remove his pension funds from the Carpenters Union. Borough Council did not discuss or
take any official actions regarding the disposition of the pension funds maintained in
Conapinski's name with the Carpenters Union. Borough Council Members presumed that
Conapinski's pension funds were going to be invested through the Pennsylvania Municipal
Retirement System since Conapinski was not retiring from the Borough and was merely
changing positions from union to non - union. Conapinski believed that the pension funds
were his to invest.
Prior to April 5, 2006, Conapinski had a conversation with Respondent at the
Borough Office regarding Conapinski's pension account. Respondent was Borough
Council President at the time. During the conversation, Respondent informed Conapinski
that he could get Conapinski a better return on the investments. Respondent offered to
invest Conapinski's pension payout from the Carpenters Union. At that time, Respondent
was licensed to sell EquiTrust products through Goal Line Financial Group. Respondent
did not inform Conapinski that the Carpenters Union pension could have been rolled into
the Pennsylvania Municipal Retirement System. Respondent did not bring the matter of
the disposition of Conapinski's Carpenters Union pension funds before Borough Council
Bobiak, 08 -058
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for any consideration.
Conapinski authorized Respondent to invest the pension funds from the Carpenters
Union. Respondent arranged for two investment accounts to be opened for Conapinski
with EquiTrust. Account numbers EQ0001033049F and EQ0001060097F were assigned
by EquiTrust to the Conapinski accounts. Account number EQ0001033049F was opened
on or before April 18, 2006. Account number EQ0001060097F was opened on or before
January 22, 2007. Respondent compiled all of the paperwork required for the set up of
both accounts. Such documents included an annuity application and request to transfer
the value of Conapinski's union pension account to Equi Trust prepared by Respondent in
April 2006, prior to Borough Council adopting the salary and benefits resolution for the
Public Works Director. Conapinski signed documents as directed by Respondent.
Account number EQ0001033049F was funded initially by a $17,170.07 check
issued from the Carpenters Industrial Council Pension Fund on May 30, 2006. This check
represented a payout of Conapinski's pension account maintained by the Carpenters
Union. The full amount of the payout consisted of Borough contributions and investment
earnings. Conapinski had not contributed any of his own funds towards the account.
Borough Council never discussed or approved the transfer of Conapinski's pension
funds from the Carpenters Union to EquiTrust. Respondent was Council President at the
time. The topic never came before Borough Council for consideration.
In 2006 and 2008 Respondent facilitated two withdrawals for Conapinski from Equi
Trust account EQ000133049F. The withdrawals totaled $7,408.97 including
surrender /penalty charges. Borough Council did not approve the withdrawal of the funds.
Conapinski's second account (account number EQ0001060097F) with EquiTrust
was initially funded by Borough General Fund check number 4665 dated January 19,
2007, in the amount of $2,514.37. This check represented the Borough's contribution
towards Conapinski's pension for 2006. Another pension contribution payment in the
amount of $3,484.50 was issued by the Borough to EquiTrust for account EQ0001060097F
by way of check number 5048 on December 31, 2007. This check was for the Borough's
contribution towards Conapinski's pension for 2007. The front sides of both checks were
signed by Respondent and Brenda Deeter ( "Deeter ") in their official capacities as Borough
Council President and Secretary /Treasurer respectively. Both checks were issued without
any approval by Borough Council. Both checks were issued solely on Respondent's
authorization in his official capacity as President of Borough Council. Deeter prepared and
signed the checks under the impression that Respondent was authorized to make the
expenditures.
No record exists of Borough Council ever approving any contributions to either
EquiTrust account on behalf of Conapinski. Respondent made all the decisions to invest
pension funds on behalf of Conapinski with EquiTrust. Respondent never advised
Borough Council of his actions.
As the Agent of Record on EquiTrust accounts EQ0001033049F and
EQ0001060097F, Respondent received commission payments based on account activity.
Between June 2, 2006, and January 11, 2008, Respondent received three commission
payments totaling $2,055.21 as a result of these accounts. Respondent would not have
received any commissions on these deposits had the funds been invested through the
Pennsylvania Municipal Retirement System as required.
Borough Council was unaware that Conapinski's pension funds were being invested
by Respondent with EquiTrust until approximately March 2008. Borough Council became
aware of the investments as part of a routine audit conducted by the Department of Auditor
General Bureau of Municipal Pension Audits. No account records for Conapinski were on
Bobiak, 08 -058
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file with the Borough at the time the auditors began the review. Respondent's failure to
provide the Borough with account statements for Conapinski's accounts with EquiTrust had
concealed the fact that Respondent was the account agent.
On or about March 13, 2008, the Borough received a draft audit report from the
Auditor General, Bureau of Municipal Pension Audits. The draft audit report included
findings and recommendations regarding Respondent's activities as detailed at Fact
Finding 52 a. As a result of the draft audit report, Respondent attempted to have the funds
he invested for Conapinski with EquiTrust returned to the Borough.
On March 13, 2008, the Borough sent a fax to Equi Trust that included
correspondence under the signatures of Respondent and Conapinski and audit findings
and requested that the accounts be "reversed" based on the audit findings. Respondent
signed this request as agent. The stationery also identifies Respondent as Borough
Council President.
Based on the request by the Borough, EquiTrust refunded the balances of both
accounts. The amounts refunded to the Borough by EquiTrust totaled $15,759.97 and
consisted of the deposits totaling $23,168.94 less the withdrawals made by Conapinski
from account number EQ0001033049F and related penalties. Respondent's actions in
authorizing the transfer of funds and deposits to EquiTrust and withdrawals by Conapinski
resulted in a net loss of $7,408.97 in the value of the pension fund.
Borough Council filed a lawsuit against Respondent. That litigation is pending.
The parties have stipulated that Respondent used his position as President of
Borough Council to invest pension funds of Conapinski with EquiTrust resulting in a private
pecuniary benefit to Respondent consisting of commission payments totaling $2,055.21.
As a result of the Conapinski accounts being closed, EquiTrust deducted $2,055.21 from
other commissions earned by Respondent, thereby recovering the full amount of the
commissions that had been paid to Respondent on the Conapinski accounts.
Respondent's Actions Involving the Borough's Health Insurance Plan:
The Borough provides its employees with medical, vision, prescription and dental
coverage through Capital Blue Cross. The inception of the Borough's account with Capital
Blue Cross predated Respondent's tenure on Borough Council.
Capital Blue Cross offers commissions of six percent of the monthly premium paid to
be split between the Preferred Agent /Broker and Agent of Record on group accounts with
members of between 1 and 99. The percentage split is two percent to the Preferred
Agent /Broker and four percent to the Agent of Record. The Borough account was
designated as a group account with membership in the range of 1 to 99.
Prior to Respondent taking office as a Borough Council Member, there was never
an Agent of Record designated on the Borough's Capital Blue Cross account. All needed
account services were handled by Deeter as part of her duties with the Borough.
On or around March 2006 (shortly after taking office as a Borough Council Member
in January 2006) Respondent had a conversation with an individual named Charles
Backes ( "Backes ") regarding Backes getting established as an independent insurance
agent through Goal Line Financial. Respondent offered to rent Backes office space at
Goal Line Financial Group's office. Respondent and Backes negotiated a monthly rental
fee of $400.00 for office space through Goal Line Financial Group. Backes began
occupying the space early in 2006.
In an effort to assist Backes with insurance sales, Respondent, in his position as a
Bobiak, 08 -058
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Member and President of Borough Council, named Backes the Agent of Record for the
Borough account with Capital Blue Cross. Respondent's action of appointing Backes
Agent of Record occurred without the knowledge or consent of Borough Council.
Capital Blue Cross required written notification to make any changes to the Agent of
Record. On or about April 15, 2006, Respondent, in his official capacity as Borough
Council President, used official Borough stationery to notify Capital Blue Cross that he had
designated Backes as the Agent of Record for the Borough's Capital Blue Cross policy,
with the Preferred Agent /Broker being Hartman Employee Benefits, Inc. No authorization
for this change was brought before Borough Council by Respondent.
The contents of Respondent's April 15, 2006, letter to Capital Blue Cross naming
Backes Agent of Record are set forth at Fact Finding 74. The letter authorizes commission
payments to be made by Capital Blue Cross to Backes and Hartman Employee Benefits,
Inc. regardless of the group's decision to use or not use the Agent of Record's services."
Fact Finding 73 c. This letter contains the signatures of Respondent as Borough Council
President and Deeter as Borough Secretary. Deeter signed the letter at Respondent's
direction. Deeter did not have the authority to assign an agent without Borough Council
approval.
Borough Council did not vote or otherwise authorize Backes to serve as Agent of
Record. That decision was made solely by Respondent at or about the time Backes
agreed to lease office space from Respondent.
Based on the commission schedule established by Capital Blue Cross, the monthly
commission to be paid to Backes as Agent of Record for the Borough account was
approximately $30.00 less than the amount of the monthly rent to be paid by Backes to
Respondent.
In 2006 Backes signed /produced various documents relating to his service as Agent
of Record on the Borough's account, which documents identified Goal Line Financial
Group as his employer and Respondent as the designated licensee and principal
partner /corporate officer of Goal Line Financial Group.
The addition of an Agent of Record for the Borough's Capital Blue Cross policy did
not change the cost of the policy for the Borough.
As Agent of Record on the Borough account with Capital Blue Cross, Backes
received commissions on the account between April 2006 and November 2007. Backes
performed no services as Agent of Record for the Borough account. Deeter processed all
employee needs as part of her job responsibilities.
In 2006 the commissions paid to Backes for the Borough's Capital Blue Cross
account totaled $3,528.63. During 2006 Backes paid Respondent a total of $2,349.79 for
office space rental. Respondent asserts that no rent was received from Backes after 2006.
The parties have stipulated that Respondent realized a private pecuniary gain of
$2,349.79 as the result of rents received from Backes for office space within Goal Line
Financial Group after appointing Backes the Agent of Record on the Borough's account
with Capital Blue Cross without Borough Council approval.
On September 21, 2007, Respondent sent two pieces of correspondence on
Borough stationery to Capital Blue Cross Broker Relations, one removing Backes as Agent
of Record and the other adding Goal Line Financial Group as Agent of Record, with both
actions effective October 1, 2007. The letter(s) did not identify Respondent as the
President of Goal Line Financial Group. Respondent signed both letters identifying
himself as the "authorized group representative (and) Borough Council President." No
Bobiak, 08 -058
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other Borough officials' signatures appear on either letter. Neither letter was authorized by
Borough Council. Council was not aware that Backes had been the Agent of Record, or
that Respondent had changed the Agent of Record to be Goal Line Financial Group.
Between December 1, 2007, and June 30, 2008, Respondent d /b /a Goal Line
Financial Group received commissions totaling $3,657.28 as the Agent of Record on the
Borough account with Capital Blue Cross. Neither Respondent nor Goal Line Financial
Group performed any services for the Borough account. Deeter handled all account
issues on behalf of the Borough during this timeframe.
The parties have stipulated that Respondent realized a private pecuniary gain of
$3,657.28 as a result of commissions received when he appointed himself d /b /a Goal Line
Financial Group as the Agent of Record on the Borough's account with Capital Blue Cross
without Borough Council approval.
On August 6, 2008, Respondent d /b /a Goal Line Financial Group notified Capital
Blue Cross of his desire to be removed as the "Broker of Record" for the Borough account
effective July 15, 2008. July 15, 2008, was the earliest effective date that commissions
had not already been paid on the account. Respondent made this request approximately
one week after Borough Council took action approving litigation against Respondent for
investing Conapinski's pension funds with EquiTrust. Respondent's August 6, 2008,
correspondence referenced a conflict of interest with Borough Council.
Prior to August 6, 2008, Borough Council was not aware: (1) that on or about April
15, 2006, Respondent had named Backes Agent of Record on the Borough account; (2)
that on or about October 1, 2007, Respondent d /b /a Goal Line Financial Group had been
made Agent of Record on the Borough account; and (3) that the Agent of Record on the
Borough account received commissions in the amount of four percent of the monthly
premiums paid.
During the time Backes and Goal Line Financial Group were receiving commissions
from Capital Blue Cross for serving as the Agent of Record on the Borough account, five
payments for the account were approved by Borough Council. On November 14, 2006,
October 10, 2007, and February 13, 2008, Respondent voted to approve three such
payments totaling $29,821.98. Respondent was absent from the Borough Council
meetings at which the other two payments were approved.
The remaining payments issued to Capital Blue Cross were considered authorized
as part of the annual budget approval process. The 2006 budget was approved prior to
Respondent taking a seat on Borough Council. The 2007 budget was approved on
December 12, 2006, and the 2008 budget was approved on December 31, 2007.
Respondent participated in the approval of the budgets for 2007 and 2008 in his official
capacity as Borough Council President.
Calculation of the Total Private Pecuniary Gain:
The parties have stipulated that Respondent realized a total private pecuniary gain
of $6,007.07 as a result of his official actions as President of Borough Council as detailed
above. This amount includes $2,349.79 in rental payments received from Backes and
$3,657.28 in commissions received after naming Respondent's company Agent of Record
for the Borough's Capital Blue Cross account. This amount does not include any portion of
the EquiTrust commissions totaling $2,055.21 that Respondent initially received but that
were subsequently recovered by Equi Trust, or Equi Trust account losses.
Having highlighted the Stipulated Findings and issues before us, we shall now apply
the Ethics Act to determine the proper disposition of this case.
Bobiak, 08 -058
Page 36
The parties' Consent Agreement sets forth a proposed resolution of the allegations
as follows:
3. The Investigative Division will recommend the following
in relation to the above allegations:
a. That a violation of Section 1103(a) of the Public
Official and Employee Ethics Act, 65 Pa.C.S.
§1103(a), occurred when Bobiak authorized
and /or participated in decisions of the Borough
to name a business with which he is associated,
Goal Line Financial, as the Borough's
broker /agent of record for insurance matters.
b. That no violation of Section 1103(f) of the Public
Official and Employee Ethics Act, 65 Pa.C.S.
§1103(f), occurred when Goal Line Financial, a
business with this [sic] Bobiak is association
[sic], entered into a contract with the Borough in
excess of $500.00 without an open and public
process, as there was no contract between Goal
Line Financial and the Borough.
c. That a violation of Section 1103(a) of the Public
Official and Employee Ethics Act, 65 Pa.C.S.
§1103(f) [sic], occurred when Bobiak authorized
the placements of funds from a Borough
workers' pension account and Borough account
to a business with which he is associated.
4. Bobiak agrees to make payment in the amount of
$4,500.00 in settlement of this matter payable to the
Commonwealth of Pennsylvania and forwarded to the
Pennsylvania State Ethics Commission within thirty (30)
days of the issuance of the final adjudication in this
matter.
5. The Investigative Division will recommend that the
State Ethics Commission take no further action in this
matter; and make no specific recommendations to any
law enforcement or other authority to take action in this
matter. Such, however, does not prohibit the
Commission from initiating appropriate enforcement
actions in the event of Respondent's failure to comply
with this agreement or the Commission's order or
cooperating with any other authority who may so
choose to review this matter further.
Consent Agreement, at 2.
In considering the first recommended violation set forth in the Consent Agreement, it
is clear that a violation of Section 1103(a) of the Ethics Act occurred when Respondent, as
a Member and President of Borough Council, authorized and /or participated in decisions to
name Goal Line Financial Group as the Borough's broker /Agent of Record for the
Borough's account with Capital Blue Cross.
The parties appear to include within this recommended violation Respondent's
Bobiak, 08 -058
Page 37
actions as to naming Backes Agent of Record on the account. In 2006 Backes
signed /produced various documents relating to his service as Agent of Record on the
Borough's account, which documents identified Goal Line Financial Group as his employer
and Respondent as the designated licensee and principal partner /corporate officer of Goal
Line Financial Group.
The parties have stipulated that Respondent realized a private pecuniary gain of
$2,349.79 as the result of rents received from Backes for office space within Goal Line
Financial Group after appointing Backes the Agent of Record on the Borough's account
with Capital Blue Cross without Borough Council approval.
Respondent further used the authority of his public office on September 21, 2007,
when he issued two letters on Borough stationery to Capital Blue Cross Broker Relations,
removing Backes as Agent of Record and adding Goal Line Financial Group as Agent of
Record, with both actions effective October 1, 2007. Respondent signed both letters
identifying himself as the "authorized group representative (and) Borough Council
President." No other Borough officials' signatures appear on either letter. Neither letter
was authorized by Borough Council. Respondent made the decision to make these
changes to the Borough's account with Capital Blue Cross without Borough Council
approval.
Between December 1, 2007, and June 30, 2008, Respondent d /b /a Goal Line
Financial Group received a private pecuniary benefit consisting of commissions totaling
$3,657.28 as the Agent of Record on the Borough account with Capital Blue Cross.
During the time that Backes and Goal Line Financial Group were receiving
commissions from Capital Blue Cross for serving as the Agent of Record on the Borough
account, payments for the account were approved by Borough Council. Respondent voted
to approve three of five such payments. The remaining payments issued to Capital Blue
Cross were considered authorized as part of the annual budget approval process.
Respondent participated in the approval of the budgets for 2007 and 2008 in his official
capacity as Borough Council President.
We hold that a violation of Section 1103(a) of the Ethics Act occurred when
Respondent, as a Member and President of Borough Council, authorized and /or
participated in decisions to name a business with which he is associated, Goal Line
Financial Group, as the Borough's broker /Agent of Record for insurance matters as to the
Borough's account with Capital Blue Cross.
Based upon the Stipulated Findings, we agree with the parties and we hold that no
violation of Section 1103(f) of the Ethics Act occurred as to the allegation that Goal Line
Financial Group, a business with which Respondent is associated, entered into a contract
with the Borough in excess of $500.00 without an open and public process, as there was
no contract between Goal Line Financial Group and the Borough.
We accept the recommendation of the parties and hold that a violation of Section
1103(a) of the Ethics Act occurred when Respondent authorized the placements of funds
from a Borough workers' pension account and Borough account to a business with which
he is associated. This recommendation pertains to Respondent's uses of the authority of
his public position with respect to moving Conapinski's pension funds from the Carpenters
Union fund to Conapinski's first Equi Trust account, and providing additional Borough
funds as pension contributions into Conapinski's second Equi Trust account. All such
actions were taken per Respondent's direction /authorization and without Borough Council
approval.
The parties have stipulated that Respondent used his position as President of
Borough Council to invest pension funds of Conapinski with EquiTrust resulting in a private
Bobiak, 08 -058
Page 38
pecuniary benefit to Respondent consisting of commission payments totaling $2,055.21.
As a result of the Conapinski accounts being closed, EquiTrust deducted $2,055.21 from
other commissions earned by Respondent, thereby recovering the full amount of the
commissions that had been paid to Respondent on the Conapinski accounts.
As part of the Consent Agreement, Respondent has agreed to make payment in the
amount of $4,500.00 payable to the Commonwealth of Pennsylvania and forwarded to this
Commission within thirty (30) days of the issuance of the final adjudication in this matter.
We determine that the Consent Agreement submitted by the parties sets forth a
proper disposition for this case, based upon our review as reflected in the above analysis
and the totality of the facts and circumstances.
Accordingly, per the Consent Agreement of the parties, Respondent is directed to
make payment in the amount of $4,500.00 payable to the Commonwealth of Pennsylvania
and forwarded to this Commission by no later than the thirtieth (30 day after the mailing
date of this adjudication and Order.
Compliance with the foregoing will result in the closing of this case with no further
action by this Commission. Noncompliance will result in the institution of an order
enforcement action.
IV. CONCLUSIONS OF LAW:
1. As a Council Member for Frackville Borough ( "Borough ") since January 3, 2006,
Respondent Stephen Bobiak ( "Bobiak ") 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. Bobiak violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when he,
as a Member and President of Borough Council, authorized and /or participated in
decisions to name a business with which he is associated, Goal Line Financial
Group, as the Borough's broker /Agent of Record for insurance matters as to the
Borough's account with Capital Blue Cross.
3. No violation of Section 1103(f) of the Ethics Act, 65 Pa.C.S. § 1103(f), occurred as
to the allegation that Goal Line Financial Group, a business with which Bobiak is
associated, entered into a contract with the Borough in excess of $500.00 without
an open and public process, as there was no contract between Goal Line Financial
Group and the Borough.
4. A violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred
when Bobiak authorized the placements of funds from a Borough workers' pension
account and Borough account to a business with which he is associated.
In Re: Stephen Bobiak,
Respondent
File Docket: 08 -058
Date Decided: 9/22/09
Date Mailed: 10/6/09
ORDER NO. 1536
1 Stephen Bobiak ( "Bobiak "), a public official in his capacity as a Council Member for
Frackville Borough ( "Borough ") since January 3, 2006, violated Section 1103(a) of
the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a),
when he, as a Member and President of Borough Council, authorized and /or
participated in decisions to name a business with which he is associated, Goal Line
Financial Group, as the Borough's broker /Agent of Record for insurance matters as
to the Borough's account with Capital Blue Cross.
2. No violation of Section 1103(f) of the Ethics Act, 65 Pa.C.S. §1103(f), occurred as
to the allegation that Goal Line Financial Group, a business with which Bobiak is
associated, entered into a contract with the Borough in excess of $500.00 without
an open and public process, as there was no contract between Goal Line Financial
Group and the Borough.
3. A violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred
when Bobiak authorized the placements of funds from a Borough workers' pension
account and Borough account to a business with which he is associated.
4. Per the Consent Agreement of the parties, Bobiak is directed to make payment in
the amount of $4,500.00 payable to the Commonwealth of Pennsylvania and
forwarded to the Pennsylvania State Ethics Commission by no later than the
thirtieth (30 day after the mailing date of this Order.
5. Compliance with Paragraph 4 of this Order will result in the closing of this case with
no further action by this Commission.
a. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
Louis W. Fryman, Chair