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HomeMy WebLinkAbout11-506 Racunas ADVICE OF COUNSEL February 28, 2011 Matthew D. Racunas, Esquire Law Offices of Patricia L. McGail, LLC 1714 Lincoln Way White Oak, PA 15131 11-506 Dear Mr. Racunas: This responds to your four letters dated January 11, 2011, 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 three borough councilmen or--in the event of a tie vote by borough council--a borough mayor with regard to voting on a motion to permit a non-profit organization to use a vacant parcel of property owned by the borough, where: (1) the non-profit organization would install a small log cabin structure or kiosk on the property; (2) the intended use of the structure would be to provide information promoting the borough and its local businesses; (3) the non-profit organization would pay for the structure; (4) the non-profit organization would not pay any compensation to the borough for the use of the parcel of property but would agree to indemnify the borough should any claims arise; (5) the borough mayor and one borough councilman’s spouse sit on the board of directors of the non-profit organization; (6) one borough councilman is a member of the non-profit organization, but neither he nor anyone in his family sits on the non-profit organization’s board of directors; and (7) one borough councilman’s spouse is employed as a secretary with the non-profit organization. Facts: You have been authorized by Cathy Rape (“Mayor Rape”), Mayor of Harmony Borough (“Borough”), located in Butler County, Pennsylvania, and by Borough Council Members David Szakelyhidi (“Councilman Szakelyhidi”), Jack Shanks (“Councilman Shanks”), and Frank Luek (“Councilman Luek”) to request an advisory from the Pennsylvania State Ethics Commission on their behalf. You have submitted facts that may be fairly summarized as follows. The Borough owns an undeveloped parcel of property (“the Parcel”) that is currently vacant. The Borough attempted to sell the Parcel in the past but received no interest. You state that a local non-profit organization named “Historic Harmony, Inc.” (“Historic Harmony”) recently approached the Borough for permission to install a small Racunas, 11-506 February 28, 2011 Page 2 log cabin structure or kiosk (“the Structure”) on the Parcel. The intended use of the Structure would be to provide information that would promote the Borough and its local businesses. You state that Historic Harmony would pay for the Structure. You further state that Historic Harmony does not intend to pay any compensation to the Borough for the use of the Parcel but would agree to indemnify the Borough should any claims arise. Mayor Rape and Councilman Szakelyhidi’s spouse sit on the Board of Directors of Historic Harmony. Councilman Shanks is a member of Historic Harmony, but neither he nor anyone in his family sits on the Board of Directors of Historic Harmony. Councilman Luek’s spouse is employed as a secretary with Historic Harmony. Based upon the above submitted facts, you ask whether the Ethics Act would permit Councilman Szakelyhidi, Councilman Shanks, Councilman Luek, and--in the event of a tie vote by Borough Council--Mayor Rape to vote on a motion to allow Historic Harmony to use the Parcel. You express your view that Historic Harmony would gain no pecuniary benefit or a de minimis pecuniary benefit from the use of the Parcel. It is administratively noted that you previously obtained an Advice of Counsel, Racunas, Advice 10-586, issued June 9, 2010, and a Supplemental Advice, Racunas, Advice 10-586-S, issued August 25, 2010, under similar facts with respect to the prospective conduct of Councilman Luek. 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. Mayor Rape, Councilman Szakelyhidi, Councilman Shanks, and Councilman Luek are public officials 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 Racunas, 11-506 February 28, 2011 Page 3 approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three-member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), (j). The following terms related to Section 1103(a) are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Immediate family." A parent, spouse, child, brother or sister. "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. Racunas, 11-506 February 28, 2011 Page 4 A non-profit entity is a “business” as that term is defined by the Ethics Act. Rendell v. State Ethics Commission, 603 Pa. 292, 983 A.2d 708 (2009). In each instance of a conflict of interest, a public official/public employee would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. It is noted that the above statutory definition of the term “conflict” or “conflict of interest” contains, in pertinent part, an exclusion referred to herein as the “de minimis exclusion.” The de minimis exclusion precludes a finding of conflict of interest as to an action having a de minimis (insignificant) economic impact. Thus, when a matter that would otherwise constitute a conflict of interest under the Ethics Act would have an insignificant economic impact, a conflict would not exist and Section 1103(a) of the Ethics Act would not be implicated. See, Kolb, Order 1322; Schweinsburg, Order 900. Having set forth the above principles, your specific question shall now be addressed. With regard to Mayor Rape, Councilman Szakelyhidi, and Councilman Luek, you are advised as follows. Historic Harmony is: (1) a business with which Mayor Rape is associated in her capacity as a Director for Historic Harmony, see, Rendell, supra; (2) a business with which Councilman Szakelyhidi’s spouse is associated in her capacity as a Director for Historic Harmony, id.; and (3) a business with which Councilman Luek’s spouse is associated in her capacity as an employee of Historic Harmony, see, Racunas, Advice 10-586-S. Subject to the statutory exclusions to the definition of “conflict” or “conflict of interest” as set forth in the Ethics Act, 65 Pa.C.S. § 1102, pursuant to Section 1103(a) of the Ethics Act, Mayor Rape, Councilman Szakelyhidi, and Councilman Luek would each have a conflict of interest in matters before Borough Council that would financially impact Historic Harmony. In each instance of a conflict of interest, the aforesaid borough official(s) with the conflict (that is, Mayor Rape, Councilman Szakelyhidi, and/or Councilman Luek) would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. In the instant matter, it would appear that Historic Harmony would realize some pecuniary benefit through using the Parcel without paying rent or other compensation to the Borough. Based upon the submitted facts, the amount of such pecuniary benefit cannot be determined. You are advised that unless the de minimis exclusion would be applicable, Section 1103(a) of the Ethics Act would prohibit Councilman Szakelyhidi, Councilman Luek, and--in the event of a tie vote by Borough Council--Mayor Rape from voting on the proposed motion to permit Historic Harmony to use the Parcel. With regard to Councilman Shanks, you are advised as follows. Based upon the submitted facts, Historic Harmony would not be considered a business with which Councilman Shanks or a member of his immediate family is associated because neither he nor a member of his immediate family is a director, officer, owner, employee, or holder of a financial interest in same. Cf., Rubenstein, 09-575. Councilman Shank’s membership in Historic Harmony would not in and of itself form the basis for a conflict of interest for him under the Ethics Act in matters pertaining to Historic Harmony. Racunas, 11-506 February 28, 2011 Page 5 Accordingly, you are advised that absent some basis for a conflict of interest such as a private pecuniary benefit to Councilman Shanks, a member of his immediate family, or a business with which he or a member of his immediate family is associated, Section 1103(a) of the Ethics Act would not prohibit Councilman Shanks from voting on the proposed motion to permit Historic Harmony to use the Parcel. The propriety of the proposed conduct has only been addressed under the Ethics Act. Specifically not addressed herein is the applicability of the Borough Code. Conclusion: Harmony Borough (“Borough”) Mayor Cathy Rape (“Mayor Rape”) and Borough Council Members David Szakelyhidi (“Councilman Szakelyhidi”), Jack Shanks (“Councilman Shanks”), and Frank Luek (“Councilman Luek”) are public officials 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) a local non-profit organization named “Historic Harmony, Inc.” (“Historic Harmony”) recently approached the Borough for permission to install a small log cabin structure or kiosk (“the Structure”) on the Parcel; (2) the intended use of the Structure would be to provide information that would promote the Borough and its local businesses; (3) Historic Harmony would pay for the Structure; (4) Historic Harmony does not intend to pay any compensation to the Borough for the use of the Parcel but would agree to indemnify the Borough should any claims arise; (5) Mayor Rape and Councilman Szakelyhidi’s spouse sit on the Board of Directors of Historic Harmony; (6) Councilman Shanks is a member of Historic Harmony, but neither he nor anyone in his family sits on the Board of Directors of Historic Harmony; and (7) Councilman Luek’s spouse is employed as a secretary with Historic Harmony, you are advised as follows. With regard to Mayor Rape, Councilman Szakelyhidi, and Councilman Luek, Historic Harmony is: (1) a business with which Mayor Rape is associated in her capacity as a Director for Historic Harmony; (2) a business with which Councilman Szakelyhidi’s spouse is associated in her capacity as a Director for Historic Harmony; and (3) a business with which Councilman Luek’s spouse is associated in her capacity as an employee of Historic Harmony. Subject to the statutory exclusions to the definition of “conflict” or “conflict of interest” as set forth in the Ethics Act, 65 Pa.C.S. § 1102, pursuant to Section 1103(a) of the Ethics Act, Mayor Rape, Councilman Szakelyhidi, and Councilman Luek would each have a conflict of interest in matters before Borough Council that would financially impact Historic Harmony. In each instance of a conflict of interest, the aforesaid borough official(s) with the conflict (that is, Mayor Rape, Councilman Szakelyhidi, and/or Councilman Luek) would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. Unless the de minimis exclusion would be applicable, Section 1103(a) of the Ethics Act would prohibit Councilman Szakelyhidi, Councilman Luek, and--in the event of a tie vote by Borough Council--Mayor Rape from voting on the proposed motion to permit Historic Harmony to use the Parcel. With regard to Councilman Shanks, Historic Harmony would not be considered a business with which Councilman Shanks or a member of his immediate family is associated because neither he nor a member of his immediate family is a director, officer, owner, employee, or holder of a financial interest in same. Councilman Shank’s membership in Historic Harmony would not in and of itself form the basis for a conflict of interest for him under the Ethics Act in matters pertaining to Historic Harmony. Absent some basis for a conflict of interest such as a private pecuniary benefit to Councilman Shanks, a member of his immediate family, or a business with which he or a member of his immediate family is associated, Section 1103(a) of the Ethics Act would not prohibit Councilman Shanks from voting on the proposed motion to permit Historic Harmony to use the Parcel. Racunas, 11-506 February 28, 2011 Page 6 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