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Home My WebLink About12-001 Alexander OPINION OF THE COMMISSION Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Raquel K. Bergen Nicholas A. Colafella Mark Volk DATE DECIDED: 1/31/12 DATE MAILED: 2/15/12 12-001 Gary D. Alexander, Secretary Department of Public Welfare Office of the Secretary P.O. Box 2675 Harrisburg, PA 17105 Dear Secretary Alexander: This Opinion is issued in response to your letter dated August 30, 2011, received September 26, 2011, and your memorandum dated September 28, 2011, by which you requested an advisory from this Commission. I.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 Pennsylvania’s Secretary of Public Welfare in his capacity as a public official with regard to engaging in private business activities related to a currently inactive investment consulting firm that he organized in Rhode Island for the purpose of name reservation. II.FACTUAL BASIS FOR DETERMINATION: In your public capacity, you are the Secretary of Public Welfare. As the Secretary of Public Welfare, you are the head of Pennsylvania’s Department of Public Welfare. See, 71 P.S. § 66. On July 14, 2011, in your private capacity, you organized a company named “Smart Alex Consulting, LLC” (“the Company”) in Rhode Island for the purpose of name reservation. You have submitted a copy of the Company’s Articles of Organization, which document is incorporated herein by reference. Alexander, 12-001 February 15, 2012 Page 2 You state that the Company was formed as an investment consulting firm. You further state that the Company currently has no financial transactions and is inactive. You seek guidance as to whether the Ethics Act would impose any prohibitions or restrictions upon you with regard to engaging in private business activities related to the Company. By letter dated November 30, 2011, you were notified of the date, time and location of the public meeting at which your request would be considered. III.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, this 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 noted that, pursuant to Sections 1107(10) and (11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), 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 the Secretary of Public Welfare, you are a “public official” and an “executive- level State employee” as those terms are defined in the Ethics Act, and therefore you are subject to the provisions of the Ethics Act. See, Confidential Opinion, 94-010. 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 Alexander, 12-001 February 15, 2012 Page 3 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. "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. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness. 65 Pa.C.S. § 1102. In addressing your inquiry under the Ethics Act, Section 1103(a) of the Ethics Act does not prohibit public officials/public employees from having outside business activities or employment. See also, 65 Pa.C.S. § 1101.1(b). 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. Examples of conduct that would Alexander, 12-001 February 15, 2012 Page 4 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, Opinion 89-011; 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. If the private employer or business with which the public official/public employee is associated or a private customer/client would have a matter pending before the governmental body, the public official/public employee would have a conflict of interest as to such matter. Miller, supra; Kannebecker, supra. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion 89-002. A public official/public employee may not, in whole or in part, use his public position to solicit business opportunities for himself or a business with which he is associated. Guloien, Opinion 90-011. In this regard, a public official/public employee would have to exercise diligence and care to ensure that his status as a public official/public employee would not be used in soliciting or obtaining business. Id. In each instance of a conflict of interest, the 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. You are further advised that Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer or give to a public official/public employee and no public official/public employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official/public employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the questions presented. Based upon the facts that you have submitted, the Ethics Act would not preclude you from engaging in private business activities related to the Company, subject to the condition that in your public position, you would comply with all applicable provisions of Section 1103 of the Ethics Act. 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. Specifically not addressed herein is the applicability of the Governor’s Code of Conduct. IV.CONCLUSION: As Pennsylvania’s Secretary of Public Welfare, you are a “public official” and an “executive-level State employee” 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) on July 14, 2011, in your private capacity, you organized a company named “Smart Alex Consulting, LLC” (“the Company”) in Rhode Island for the purpose of name reservation; (2) the Company was formed as an investment consulting firm; and (3) the Company currently has no financial transactions and is inactive, you are advised that the Ethics Act would not preclude you from engaging in private business activities related to Alexander, 12-001 February 15, 2012 Page 5 the Company, subject to the condition that in your public position, you would comply with all applicable provisions of Section 1103 of the Ethics Act. The propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(10) of the Ethics Act, the person who acts in good faith on this Opinion issued to him shall not be subject to criminal or civil penalties for so acting provided the material facts are as stated in the request. This letter is a public record and will be made available as such. By the Commission, Louis W. Fryman Chair