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HomeMy WebLinkAbout10-591 McDonough ADVICE OF COUNSEL June 29, 2010 James McDonough 62 ½ W. Elm Street Fairchance, PA 15436 10-591 Dear Mr. McDonough: This responds to your letter dated May 12, 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 impose any prohibitions or restrictions upon a borough council member, who in a private capacity is the owner of a small motor vehicle repair business located in the borough, with regard to contracting with the borough to provide maintenance for the borough’s vehicles. Facts: As a Member of Council for Fairchance Borough (“Borough”), you request an advisory from the Pennsylvania State Ethics Commission based upon submitted facts that may be fairly summarized as follows. You were elected to serve a term as a Member of Borough Council beginning January 1, 2010. In a private capacity, you are the owner of a small motor vehicle repair business (hereinafter referred to as “the Vehicle Repair Shop”) located in the Borough. You state that you have provided maintenance for the Borough’s vehicles for many years. You have submitted a copy of a document from the Borough entitled “Fairchance Borough Profit & Loss Detail January 2004 through December 2009” (“Profit and Loss Detail”). You state that the Profit and Loss Detail reflects money that was paid to you for services performed on Borough vehicles in 2009. You state that the Borough Solicitor reviewed the matter at your request and that he advised you: (1) that you would not be able to enter into a contract with the Borough for services in excess of $1,000.00; and (2) that you would need to comply with certain requirements under Section 1103 of the Ethics Act. Based upon the above submitted facts, you ask whether state laws and regulations would permit you to enter into contracts with the Borough to perform substantially the same work that you performed for the Borough in 2009 as reflected by the Profit and Loss Detail. 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 McDonough, 10-591 June 29, 2010 Page 2 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 Borough Council Member, you are a public official as that term is defined in the Ethics Act, and therefore you are subject to the provisions of the Ethics Act. Sections 1103(a) and 1103(j) of the Ethics Act provide: § 1103. Restricted Activities (a)Conflict of interest.-- No public official or public employee shall engage in conduct that constitutes a conflict of interest. (j)Voting conflict.-- Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three-member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), (j). The following terms related to Section 1103(a) are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or McDonough, 10-591 June 29, 2010 Page 3 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 advocating for a particular result. Juliante, Order 809. Subject to certain statutory exceptions, in each instance of a voting conflict, Section 1103(j) of the Ethics Act requires the public official/public employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes. Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows: § 1103. Restricted activities (f)Contract.-- No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person McDonough, 10-591 June 29, 2010 Page 4 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 may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. In applying the above provisions of the Ethics Act to the instant matter, it is noted that Section 1103(a) of the Ethics Act does not prohibit public officials/public employees from having outside business activities or employment; however, the public official/public employee may not use the authority of his public position--or confidential information obtained by being in that position--for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89-011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order 1037; (2) the use of governmental facilities, such as governmental telephones, postage, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official/public employee is associated in his private capacity or private client(s). Miller, Opinion 89-024; Kannebecker, Opinion 92-010. A McDonough, 10-591 June 29, 2010 Page 5 reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion 89-002. In each instance of a conflict of interest, the public official/public employee would be required to abstain from participation, and in the instance of a voting conflict, to abstain and fully satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. In applying the above provisions of the Ethics Act to the instant matter, you are advised that the Vehicle Repair Shop is a business with which you are associated in your capacity as the owner. Pursuant to Section 1103(a) of the Ethics Act, in your capacity as a Borough Council Member, you generally would have a conflict of interest in matters that would financially impact you, the Vehicle Repair Shop, or the Vehicle Repair Shop’s customer(s)/client(s). See, Kannebecker, supra; Miller, supra. See, Coll, Advice 05-501 (Self-employed public official would not have a conflict of interest as to a customer/client from which he/his business would receive only a de minimis (insignificant) financial benefit). You are further advised that the Ethics Act itself would not prohibit you, in your private capacity as the owner of the Vehicle Repair Shop, from contracting to perform work for the Borough. However, in your public capacity as a Borough Council Member, you 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 Borough and you/the Vehicle Repair Shop. In each instance of a conflict of interest, you 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 Borough would award a contract to you/the Vehicle Repair Shop, you would have a conflict of interest in related matters, such as preparing or approving the specifications for such contract. Where you/the Vehicle Repair Shop would bid for a Borough contract, you 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. You would also be prohibited from using the authority of your public position, or confidential information accessed or received as a result of being a Borough Council Member, to effectuate a private pecuniary benefit to yourself/the Vehicle Repair Shop through a detriment to a business competitor. See, Pepper, Opinion 87-008. In addition, you 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 you/the Vehicle Repair Shop to the Borough. As noted above, in each instance of a conflict of interest, you 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 a Borough Council Member, you/the Vehicle Repair Shop would enter into a contract with the Borough, or would subcontract with a person awarded a contract with the Borough, 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 Borough Code. It is administratively noted that the Borough Code provides in pertinent part: McDonough, 10-591 June 29, 2010 Page 6 § 46404. Penalty for personal interest in contracts or purchases Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. But in the case of a member of council or mayor, if he knows that he is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who shall knowingly violate the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($1000), or not exceeding one hundred eighty days' imprisonment, or both. 53 P.S. § 46404. Because this Advice may not interpret the above quoted provision of the Borough Code, it is suggested that you seek legal advice in that regard. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Conclusion: As a Member of Council for Fairchance Borough (“Borough”), you are a public official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. Based upon the submitted facts that: (1) you were elected to serve a term as a Member of Borough Council beginning January 1, 2010; (2) in a private capacity, you are the owner of a small motor vehicle repair business (hereinafter referred to as “the Vehicle Repair Shop”) located in the Borough; and (3) you have provided maintenance for the Borough’s vehicles for many years, you are advised as follows. The Vehicle Repair Shop is a business with which you are associated in your capacity as the owner. Pursuant to Section 1103(a) of the Ethics Act, in your capacity as a Borough Council Member, you generally would have a conflict of interest in matters that would financially impact you, the Vehicle Repair Shop, or the Vehicle Repair Shop’s customer(s)/client(s). The Ethics Act itself would not prohibit you, in your private capacity as the owner of the Vehicle Repair Shop, from contracting to perform work for the Borough. However, in your public capacity as a Borough Council Member, you 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 Borough and you/the Vehicle Repair Shop. At such times as there would be a reasonable and McDonough, 10-591 June 29, 2010 Page 7 legitimate anticipation that the Borough would award a contract to you/the Vehicle Repair Shop, you would have a conflict of interest in related matters, such as preparing or approving the specifications for such contract. Where you/the Vehicle Repair Shop would bid for a Borough contract, you 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. You would also be prohibited from using the authority of your public position, or confidential information accessed or received as a result of being a Borough Council Member, to effectuate a private pecuniary benefit to yourself/the Vehicle Repair Shop through a detriment to a business competitor. You 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 you/the Vehicle Repair Shop to the Borough. In each instance of a conflict of interest, you 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 Borough Code, and therefore, it is suggested that you seek legal advice in that regard. 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