HomeMy WebLinkAbout10-567 Nanovic
ADVICE OF COUNSEL
April 9, 2010
Thomas S. Nanovic, Esquire
57 Broadway
P.O. Box 359
Jim Thorpe, PA 18229-0359
10-567
Dear Mr. Nanovic:
This responds to your faxed letter dated February 19, 2010, by which you
requested an advisory from the Pennsylvania State Ethics Commission.
Issue:
Whether the Public Official and Employee Ethics Act (“Ethics Act”), 65
Pa.C.S. § 1101 et seq., would present any prohibitions or restrictions upon an individual
serving as a member of an industrial development authority board, who in a private
capacity is the owner of a sole-proprietorship that provides consulting services, with
regard to: (1) accepting a contract to provide consulting services to the industrial
development authority while serving as a member of the authority board, where such
contract would be awarded through an open and public process; or (2) accepting a
contract to provide consulting services to the industrial development authority within one
year of resigning from the authority board, where such contract would not be awarded
through an open and public process.
Facts:
As Solicitor for the Carbon County Industrial Development Authority (“the
Authority”), you have been authorized by Authority Board Member Thomas J. McCall
(“Mr. McCall”) to request an advisory from the Pennsylvania State Ethics Commission
on his behalf. You have submitted facts, the material portion of which may be fairly
summarized as follows.
You state that the Authority would like to hire a consultant to develop a strategic
plan for the Authority to take a more active role in commercial/industrial development in
Carbon County, Pennsylvania. Mr. McCall is the owner of a sole-proprietorship known
as “CMS Consulting” (“CMS”). You state that CMS is ideally suited to perform the
consulting services desired by the Authority. You further state that the Authority would
like to award CMS a contract for the aforesaid consulting services (“the Proposed
Contract”) without going through an open and public process.
Based upon the above submitted facts, you pose the following specific questions:
1. If the Authority Board would choose to go through an open and public
process to hire a consultant, whether the Ethics Act would permit Mr.
McCall, as the sole-proprietor of CMS, to accept the Proposed Contract
while continuing to serve on the Authority Board; and
Nanovic, 10-567
April 9, 2010
Page 2
2. If Mr. McCall would resign from the Authority Board and the Authority
would choose not to go through an open and public process to hire a
consultant, whether the Ethics Act would require Mr. McCall, as the sole-
proprietor of CMS, to wait one year before accepting the Proposed
Contract.
Discussion:
It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester
based upon the facts that the requester has submitted. In issuing the advisory based
upon the facts that the requester has submitted, the Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts that have not
been submitted. It is the burden of the requester to truthfully disclose all of the material
facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a
defense to the extent the requester has truthfully disclosed all of the material facts.
It is further initially noted that, pursuant to the same aforesaid Sections of the
Ethics Act, an opinion/advice may be given only as to prospective (future) conduct. To
the extent that your inquiry relates to conduct that has already occurred, such past
conduct may not be addressed in the context of an advisory opinion. However, to the
extent your inquiry relates to future conduct, your inquiry may and shall be addressed.
As a Member of the Authority Board, Mr. McCall is a public official subject to the
provisions of the Ethics Act.
The following provisions of the Ethics Act are pertinent to your first specific
question.
Sections 1103(a) and 1103(j) of the Ethics Act provide:
§ 1103. Restricted activities
(a)Conflict of interest.--
No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
(j)Voting conflict.--
Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or
by any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three-member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
Nanovic, 10-567
April 9, 2010
Page 3
65 Pa.C.S. §§ 1103(a), (j).
The following terms related to Section 1103(a) are defined in the Ethics Act as
follows:
§ 1102. Definitions
"Conflict" or "conflict of interest."
Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment."
The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business."
Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self-employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated."
Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or
has a financial interest.
65 Pa.C.S. § 1102.
Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is
prohibited from using the authority of public office/employment or confidential
information received by holding such a public position for the private pecuniary benefit
of the public official/public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated.
In each instance of a conflict of interest, the public official/public employee would
be required to abstain fully from participation. The abstention requirement would not be
limited merely to voting, but would extend to any use of authority of office, including, but
not limited to, discussing, conferring with others, and lobbying for a particular result.
Juliante, Order 809.
Subject to certain statutory exceptions, in each instance of a voting conflict,
Section 1103(j) of the Ethics Act requires the public official/public employee to abstain
and to publicly disclose the abstention and reasons for same, both orally and by filing a
written memorandum to that effect with the person recording the minutes.
Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows:
Nanovic, 10-567
April 9, 2010
Page 4
§ 1103. Restricted activities
(f)Contract.--
No public official or public employee or
his spouse or child or any business in which the person or
his spouse or child is associated shall enter into any contract
valued at $500 or more with the governmental body with
which the public official or public employee is associated or
any subcontract valued at $500 or more with any person
who has been awarded a contract with the governmental
body with which the public official or public employee is
associated, unless the contract has been awarded through
an open and public process, including prior public notice and
subsequent public disclosure of all proposals considered and
contracts awarded. In such a case, the public official or
public employee shall not have any supervisory or overall
responsibility for the implementation or administration of the
contract. Any contract or subcontract made in violation of
this subsection shall be voidable by a court of competent
jurisdiction if the suit is commenced within 90 days of the
making of the contract or subcontract.
65 Pa.C.S. § 1103(f).
The term “contract” is defined in the Ethics Act as follows:
§ 1102. Definitions
"Contract."
An agreement or arrangement for the
acquisition, use or disposal by the Commonwealth or a
political subdivision of consulting or other services or of
supplies, materials, equipment, land or other personal or real
property. The term shall not mean an agreement or
arrangement between the State or political subdivision as
one party and a public official or public employee as the
other party, concerning his expense, reimbursement, salary,
wage, retirement or other benefit, tenure or other matters in
consideration of his current public employment with the
Commonwealth or a political subdivision.
65 Pa.C.S. § 1102.
Section 1103(f) does not operate to make contracting with the governmental
body permissible where it is otherwise prohibited. Rather, where a public official/public
employee, his spouse or child, or a business with which he, his spouse or child is
associated, is otherwise appropriately contracting with the governmental body, or
subcontracting with any person who has been awarded a contract with the
governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an
“open and public process” be observed as to the contract with the governmental body.
Section 1103(f) of the Ethics Act also provides that the public official/public employee--
in his public capacity--may not have any supervisory or overall responsibility as to the
implementation or administration of the contract with the governmental body.
In applying the above provisions of the Ethics Act to your first specific question,
you are advised as follows. CMS is a business with which Mr. McCall is associated in
his capacity as the owner. Subject to the statutory exclusions to the definition of
“conflict” or “conflict of interest” as set forth in Section 1102 of the Ethics Act, 65 Pa.C.S.
§ 1102, pursuant to Section 1103(a) of the Ethics Act, Mr. McCall would have a conflict
Nanovic, 10-567
April 9, 2010
Page 5
of interest as an Authority Board Member in matters that would financially impact him or
CMS.
You are further advised that the Ethics Act itself would not prohibit Mr. McCall, in
his private capacity as the sole proprietor of CMS, from seeking to enter into a contract,
including the Proposed Contract, to provide consulting services to the Authority.
However, in his public capacity as an Authority Board Member, Mr. McCall would have
a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to
actual or anticipated contract(s) between the Authority and himself/CMS. In each
instance of a conflict of interest, Mr. McCall would be required to abstain fully from
participation. The abstention requirement would not be limited to voting, but rather
would extend to any use of authority of office.
At such times as there would be a reasonable and legitimate anticipation that the
Authority would award a contract to Mr. McCall/CMS, Mr. McCall would have a conflict
of interest in related matters, such as preparing or approving the specifications for such
contract.
Where Mr. McCall/CMS would bid for an Authority contract, Mr. McCall would
have a conflict of interest as to such contract and could not participate in reviewing or
selecting bids or proposals or awarding the contract. Mr. McCall would also be
prohibited from using the authority of his public position, or confidential information
accessed or received as a result of being an Authority Board Member, to effectuate a
private pecuniary benefit to himself/CMS through a detriment to a business competitor.
See, Pepper, Opinion 87-008.
In addition, Mr. McCall generally would have a conflict of interest with respect to
voting to approve the payment of any bills or invoices that would be submitted by
himself/CMS to the Authority. As noted above, in each instance of a conflict of interest,
Mr. McCall would be required to abstain fully from participation and in the instance of a
voting conflict, to abstain fully and satisfy the disclosure requirements of Section 1103(j)
of the Ethics Act.
The requirements of Section 1103(f) of the Ethics Act would have to be observed
whenever applicable. If, while serving as an Authority Board Member, Mr. McCall or
any business with which he is associated (such as CMS) would enter into a contract
with the Authority, or would subcontract with a person awarded a contract with the
Authority, and the value of the contract/subcontract would be $500 or more, the
restrictions of Section 1103(f) of the Ethics Act would be applicable.
Parenthetically, although the contracting in question would not be prohibited
under the Ethics Act itself where the requirements of Sections 1103(a), 1103(f), and
1103(j) of the Ethics Act would be satisfied, a problem could exist as to such contracting
under the Economic Development Financing Law.
It is administratively noted that the Economic Development Financing Law
provides in pertinent part:
§ 382. Competition in award of contracts
. . . .
(d) No member of the authority or officer or
employe thereof shall, either directly or indirectly, be a party
to or be in any manner interested in any contract or
agreement with the authority for any matter, cause or thing
whatsoever by reason whereof any liability or indebtedness
shall in any way be created against such authority. If any
contract or agreement shall be made in violation of the
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April 9, 2010
Page 6
provisions of this section the same shall be null and void and
no action shall be maintained thereon against such authority.
73 P.S. § 382(d).
Because this Advice may not interpret the above quoted provision of the
Economic Development Financing Law, it is suggested that Mr. McCall seek legal
advice in that regard.
The post-termination restrictions of the Ethics Act are pertinent to your second
specific question and shall now be addressed.
Upon termination of service as an Authority Board Member, Mr. McCall would
become a “former public official” subject to Section 1103(g) of the Ethics Act. Section
1103(g) of the Ethics Act restricts a former public official/public employee with regard to
“representing” a “person” before “the governmental body with which he has been
associated”:
§ 1103. Restricted activities
(g) Former official or employee.--
No former public
official or public employee shall represent a person, with
promised or actual compensation, on any matter before the
governmental body with which he has been associated for
one year after he leaves that body.
65 Pa.C.S. § 1103(g) (Emphasis added).
The terms “represent,” “person,” and “governmental body with which a public
official or public employee is or has been associated” are specifically defined in the
Ethics Act as follows:
§ 1102. Definitions
"Represent."
To act on behalf of any other person in
any activity which includes, but is not limited to, the
following: personal appearances, negotiations, lobbying and
submitting bid or contract proposals which are signed by or
contain the name of a former public official or public
employee.
"Person."
A business, governmental body,
individual, corporation, union, association, firm, partnership,
committee, club or other organization or group of persons.
"Governmental body with which a public official
or public employee is or has been associated."
The
governmental body within State government or a political
subdivision by which the public official or employee is or has
been employed or to which the public official or employee is
or has been appointed or elected and subdivisions and
offices within that governmental body.
65 Pa.C.S. § 1102.
The term “person” is very broadly defined. It includes, inter alia, corporations and
other businesses. It also includes the former public employee himself, Confidential
Opinion, 93-005, as well as a new governmental employer. Ledebur, Opinion 95-007.
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April 9, 2010
Page 7
The term “representation” is also broadly defined to prohibit acting on behalf of
any person in any activity. Examples of prohibited representation include: (1) personal
appearances before the former governmental body or bodies; (2) attempts to influence;
(3) submission of bid or contract proposals which are signed by or contain the name of
the former public official/public employee; (4) participating in any matters before the
former governmental body as to acting on behalf of a person; and (5) lobbying.
Popovich, Opinion 89-005.
Upon termination of service as an Authority Board Member, the governmental
body with which Mr. McCall would be deemed to have been associated would be the
Authority. Therefore, for the first year following termination of service as an Authority
Board Member, Section 1103(g) of the Ethics Act would apply and restrict Mr. McCall
with regard to “representation” of a “person,” including himself/CMS as a consultant,
before the Authority with promised or actual compensation. See, Shaub, Order 1242.
Having set forth the restrictions of Section 1103(g) of the Ethics Act, your second
specific question shall now be addressed.
You are advised that during the first year following termination of Mr. McCall’s
service as an Authority Board Member, Section 1103(g) of the Ethics Act would prohibit
Mr. McCall, as the sole proprietor of CMS, from entering into a contract with the
Authority, including but not limited to the Proposed Contract, regardless of whether such
contract would or would not be awarded by the Authority through an open and public
process. See, Shaub, Order 1242; Confidential Opinion, 97-008; Confidential Opinion,
93-005; Hough, Advice 08-550.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act.
Conclusion:
As a Member of the Board of the Carbon County Industrial
Development Authority (“the Authority”), Thomas J. McCall (“Mr. McCall”) is a public
official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics
Act”), 65 Pa.C.S. § 1101 et seq. Based upon the submitted facts that: (1) the Authority
would like to hire a consultant to develop a strategic plan for the Authority to take a
more active role in commercial/industrial development in Carbon County, Pennsylvania;
(2) Mr. McCall is the owner of a sole-proprietorship known as “CMS Consulting”
(“CMS”); and (3) the Authority would like to award CMS a contract for the aforesaid
consulting services (“the Proposed Contract”) without going through an open and public
process, you are advised as follows.
CMS is a business with which Mr. McCall is associated in his capacity as the
owner. Subject to the statutory exclusions to the definition of “conflict” or “conflict of
interest” as set forth in Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102, pursuant to
Section 1103(a) of the Ethics Act, Mr. McCall would have a conflict of interest as an
Authority Board Member in matters that would financially impact him or CMS. The
Ethics Act itself would not prohibit Mr. McCall, in his private capacity as the sole
proprietor of CMS, from seeking to enter into a contract, including the Proposed
Contract, to provide consulting services to the Authority. However, in his public capacity
as an Authority Board Member, Mr. McCall would have a conflict of interest under
Section 1103(a) of the Ethics Act in matters pertaining to actual or anticipated
contract(s) between the Authority and himself/CMS. At such times as there would be a
reasonable and legitimate anticipation that the Authority would award a contract to Mr.
McCall/CMS, Mr. McCall would have a conflict of interest in related matters, such as
preparing or approving the specifications for such contract. Where Mr. McCall/CMS
would bid for an Authority contract, Mr. McCall would have a conflict of interest as to
such contract and could not participate in reviewing or selecting bids or proposals or
awarding the contract. Mr. McCall would also be prohibited from using the authority of
his public position, or confidential information accessed or received as a result of being
an Authority Board Member, to effectuate a private pecuniary benefit to himself/CMS
Nanovic, 10-567
April 9, 2010
Page 8
through a detriment to a business competitor. Mr. McCall generally would have a
conflict of interest with respect to voting to approve the payment of any bills or invoices
that would be submitted by himself/CMS to the Authority. In each instance of a conflict
of interest, Mr. McCall would be required to abstain fully from participation and in the
instance of a voting conflict, to abstain fully and satisfy the disclosure requirements of
Section 1103(j) of the Ethics Act. The requirements of Section 1103(f) of the Ethics Act
would have to be observed whenever applicable. Although the contracting in question
would not be prohibited under the Ethics Act itself where the requirements of Sections
1103(a), 1103(f), and 1103(j) of the Ethics Act would be satisfied, a problem could exist
as to such contracting under the Economic Development Financing Law, and therefore,
it is suggested that Mr. McCall seek legal advice in that regard.
Upon termination of service as an Authority Board Member, Mr. McCall would
become a “former public official” subject to Section 1103(g) of the Ethics Act. The
governmental body with which Mr. McCall would be deemed to have been associated
upon termination of service as an Authority Board Member would be the Authority. For
the first year following termination of service as an Authority Board Member, Section
1103(g) of the Ethics Act would apply and restrict Mr. McCall with regard to
“representation” of a “person,” including himself/CMS as a consultant, before the
Authority with promised or actual compensation. During the first year following
termination of Mr. McCall’s service as an Authority Board Member, Section 1103(g) of
the Ethics Act would prohibit Mr. McCall, as the sole proprietor of CMS, from entering
into a contract with the Authority, including but not limited to the Proposed Contract,
regardless of whether such contract would or would not be awarded by the Authority
through an open and public process.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act.
Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense
in any enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, provided the requester has disclosed
truthfully all the material facts and committed the acts complained of in reliance on the
Advice given.
.
This letter is a public record and will be made available as such
Finally, if you disagree with this Advice or if you have any
reason to challenge same, you may appeal the Advice to the full
Commission. A personal appearance before the Commission will be
scheduled and a formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually
received at the Commission within thirty (30) days of the date of this
Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be
received at the Commission by hand delivery, United States mail,
delivery service, or by FAX transmission (717-787-0806). Failure to
file such an appeal at the Commission within thirty (30) days may
result in the dismissal of the appeal.
Sincerely,
Robin M. Hittie
Chief Counsel