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HomeMy WebLinkAbout1598 Mellow In Re: Robert Mellow, : File Docket: 09-038 Respondent : X-ref: Order No. 1598 : Date Decided: 3/22/12 : Date Mailed: 3/26/12 Before: John J. Bolger, Vice Chair Donald M. McCurdy Raquel K. Bergen Nicholas A. Colafella 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.” A Response to the Investigative Complaint/Findings Report was filed, which asserted Constitutional privileges and raised various affirmative defenses as New Matter. A hearing was requested. A Consent Agreement and Findings were subsequently submitted by the parties to the Commission for consideration. The submitted Findings are set forth as the Findings in this Order. The Consent Agreement has been approved. I.ALLEGATIONS: That Robert Mellow, a public official/public employee in his capacity as a nd Pennsylvania State Senator, representing the 22 Senatorial District, 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 office for the private pecuniary benefit of himself and/or a member of his immediate family and/or a business with which he and/or a member of his immediate family is associated when he identified, and/or selected a location for his senatorial district office and/or authorized the Pennsylvania Senate to enter into leases for that district office space from a company identified as Brad Inc., which was a business with which he and/or a member of his immediate family is/are associated; and when Brad Inc., a business with which he and/or his then spouse are associated entered into contracts in excess of $500.00 with his governmental body to provide district office space without an open and public process. II.FINDINGS: nd 1. Robert Mellow has served as a State Senator representing the 22 Senatorial District since approximately 1971 until December 2010. nd a. The 22 Senatorial District covers portions of Lackawanna, Luzerne and Monroe Counties in Northeast Pennsylvania. Mellow, 09-038 Page 2 2. Senator Robert Mellow was married to Diane Mellow for approximately thirty-nine (39) years. a. The Mellows’ divorce was finalized in or about April 2007. 3. In addition to office space in the Capitol Complex in Harrisburg, Pennsylvania, Members of the Senate are permitted to have District Office facilities and all expenses associated with the operation of the District Office, paid by the Commonwealth. 4. At the beginning of each two year legislative session, the Senate enacts financial operating rules of the Senate. a. The Financial Operating Rules of the Senate include issues concerning, amongst others: Personnel Equipment and Furnishing Control Inventory District Office Expenses Capitol Office Expenses Duration of Rules Changes to Rules Procedure to Changing Rules 5. The financial operating rules of the Senate are formulated by the Committee on Management Operations (COMO). 6. Mellow has served on the COMO since 1991 in his capacity as either President Pro Tempore or Minority Leader. 7. The resolutions enacted for the 2003-2004 and 2005-2006 legislative sessions included the following for Item V, District Office Expenses: “Expenses authorized shall include: (a) Aggregate office rental, utilities and telephone in accordance with policies as may be established by the Senate Committee on Management Operations. Whenever a Member or any of his immediate family has an equity interest in a district office, the Chief Clerk shall obtain an independent appraisal of the office rental cost. (b) Insurance. (c) Printing Service. (d) Telephone and answering service. (e) Postage and mailing services. (f) Publications and subscriptions. (g) Nondurable supplies. (h) Member, employee and visitor parking. (i) Janitorial maintenance and cleaning services. (j) Other items authorized for expenses as defined in the General Appropriations Act and policies of the Senate Committee on Management Operations.” 8. On December 19, 1989, the State Ethics Commission issued 89-014R which concluded it was impermissible under Section 3(a) of the Ethics Act for a member of the General Assembly to charge the rent of his district office in a building he owns to his legislative district account and for him to purchase airline tickets from a travel Mellow, 09-038 Page 3 agency of which he is President. 9. A reconsideration of 89-014R was sought by Counsels to the House and Senate and the Commission issued 89-014R2, Reconsideration ruling on June 22, 1990, denying the reconsideration request. a. A copy of Commission Opinion 89-014R2, issued June 22, 1990, was specifically issued to C.J. Hafner, II, Chief Counsel to the Senate Democratic Floor Leader. b. At the time 89-014R2 was issued to the Chief Counsel to the Senate Democratic Floor Leader, Mellow was serving as the Senate Democratic Floor Leader. c. Mellow had specific knowledge of the Commission’s Opinion in Cappabianca, 89-014R2, in light of the fact that his counsel, C.J. Hafner, II, specifically received a copy of same from the Commission. 10. Senator Mellow had maintained a District Office at 524 Main Street, Peckville, Pennsylvania, from the initial lease of December 1, 1990, until approximately December 2010. a. The initial lease for Senator Mellow’s District Office at 524 Main Street, Peckville, PA, covering the period December 1, 1990, through December 31, 1991, was entered into between the Senate of Pennsylvania as the lessee and G & G Realty as the lessor. b. G & G Realty is an entity created by Gabriel J. Giordano, an employee (Legislative Assistant) of Senator Mellow’s District Office. c. Mellow had the authority to select whatever location he chose for his District Office. d. Renewal leases were entered into between the Senate and the Giordanos d/b/a G & G Realty on December 1, 1994, and March 1, 1999. e. The leases were renewed in 1991, 1992, 1993, 1995, 1996, 1997 and 1998. f. The leases would not have been automatically renewed if Senator Mellow wanted to select another location for his District Office. g. Beginning in 2001, the Senate began leasing the 524 Main Street property from Brad Inc. 11. The Senate of Pennsylvania made monthly rental payments to G & G Realty from or about November 1990 until or about February 2001. a. Payments began at $962.50 in 1990 and increased to $1,237.50 in November 1994 and then increased to $1,533.34 by March 1999. b. The combined amount of the mortgage principal and interest paid by G & G Realty totaled $135,660.93 between 1990 and September 2000. c. The Senate lease payments made to G & G Realty during this same time totaled $145,816.82. 12. On January 8, 2001, the Giordanos transferred ownership of the 518-524 Main Mellow, 09-038 Page 4 Street property to Brad, Inc., a Pennsylvania corporation, for the sum of one dollar. a. At the time of the transfer, G & G’s mortgage on the property had been satisfied. 13. Articles of Incorporation for Brad, Inc. were filed with the Pennsylvania Department of State on or about December 1, 2000. a. The corporation was formed approximately one month prior to the ownership transfer of Senator Mellow’s District Office from G & G Realty to Brad, Inc. 14. Corporate documents identify stockholders of Brad, Inc. as Diane Mellow and Celestine Giordano. a. The original stock issue for Brad, Inc. occurred on December 20, 2000, with Patrick J. Mellody receiving one (1) share and a total of 1,000 shares evenly split between Diane Mellow and Celestine Giordano. b. Diane Mellow was married to Robert J. Mellow at the time of the stock issuance. 1. Diane Mellow was appointed President of Brad, Inc. while Celestine Giordano was named Secretary and Treasurer. 15. Senator Mellow and his wife had a continuing relationship with Brad, Inc. since the corporation’s formation in December 2000. a. Senator Mellow’s wife was corporate President and owner of 50% of the stock. b. Senator Mellow was receiving payments from Brad, Inc. beginning in March 2001. 16. On December 11, 2000, a checking account was opened in the name of Brad, Inc. at Old Forge Bank, now Penn Security Bank. a. Authorized signatures on the account were Gabriel Giordano, Celestine Giordano, Robert J. Mellow and Diane Mellow; all listed as being “of Brad, Inc.” b. This account was opened prior to the initial organizational meeting of Brad Inc. on December 20, 2000. c. Minutes of an organizational meeting for Brad, Inc. held on December 20, 2000, confirmed that Diane Mellow was elected President of the corporation. d. Minutes further reflect that by corporate resolution, Old Forge Bank was selected as the financial institution for Brad, Inc. with Diane Mellow and Celestine Giordano having signature authority. e. No changes to the authorized signatures of this account were ever made until after the Mellows’ divorce, and Robert Mellow remained a signator on the account until that time. 17. At the time of the Giordanos’ transfer of ownership of 518-524 Main Street, Peckville to Brad, Inc., neither Senator Mellow nor Diane Mellow had invested any capital in the corporation, or the property. Mellow, 09-038 Page 5 a. Equity in the property was realized primarily as a result of rent payments made by the Commonwealth to G & G Realty for Senator Mellow’s District Office space. 18. As of January 2001, the only asset of Brad, Inc. was the building at 524 Main Street, Peckville, Pennsylvania, that was transferred from the Giordanos. 19. Pursuant to the assignment made on January 8, 2001, a lease agreement was entered into between Brad, Inc. and the Senate of Pennsylvania for the District Office space at 524 Main Street, Peckville, Pennsylvania. a. The lessee’s rental payment was to be $2,400.00 per month and was due for the month of March 2001 and each month thereafter by the first of each month. b. It was provided for that if for any reason Robert Mellow no longer serves as State Senator of Pennsylvania, the lease may be terminated at the option of the lessee. 20. On or about March 1 of each year beginning in March 2002 and continuing until September 2008, leases between Brad, Inc. and the Senate were renewed for the same terms and conditions as outlined in the lease effective March 1, 2001. a. The annual renewals occurred in March 2002, March 2003, March 2004, March 2005, March 2006, March 2007 and March 2008. b. The Senate adopted new financial operating rules, which in part, governed district office leases every other year since 2001 through and including 2009. c. The leases would not have been automatically renewed if Senator Mellow wanted to select another location for his district office. 1. State Senators are responsible for choosing the location of their District Office. 2. Senator Mellow never advised the Chief Clerk’s office in any years between 2002 and 2008 of any intention to terminate the lease or relocate his District Office, resulting in the renewal of the lease with Brad, Inc. on an annual basis. d. From 2001 through 2008 the only district office space ever identified by Senator Mellow to the Chief Clerk’s office was 524 Main Street, Peckville, Pennsylvania. 21. At the time Brad, Inc. entered into the lease with the Senate, Diane Mellow, Senator Mellow’s wife, was President of Brad, Inc. 22. After Brad, Inc. assumed ownership of the 524 Main Street property, the corporation obtained a loan from Old Forge Bank on March 8, 2001, in the amount of $100,000. a. Brad, Inc. utilized the proceeds of the loan to issue payments to Senator Mellow and Gabriel Giordano in the amounts of $65,000 and $35,000 [respectively]. 23. Monthly rental payments were made by the Senate payable to Brad, Inc. for Senator Robert Mellow’s District Office at 524 Main Street, Peckville from March 1, 2001, Mellow, 09-038 Page 6 through September 30, 2008. a. Monthly rental payments were in the amount of $2,400.00 with separate payments issued to Brad, Inc. for utilities pursuant to the lease provisions. 24. Rental payments authorized to Brad, Inc. by the Senate between August 2004 and August 2008 for office space used as the District Office for Senator Robert Mellow, 524 Main Street, Peckville totaled $117,600.00. 25. An additional payment was made by the Senate to Brad, Inc. on September 29, 2008, for the monthly rent of September 2008 after the property was sold. a. On September 29, 2008, Senate check #18952 in the amount of $2,400.00 was deposited in the Brad, Inc. account. b. The total amount paid to Brad, Inc. as a result leasing district office space to the Senate for Mellow covering the period from July 2004 through September 2008 was $120,000.00, which includes $117,600.00 detailed in the previous finding and the $2,400.00 Senate check made on September 29, 2008. 26. The deposits to the Brad, Inc. account consisted of payments received from the Senate related to Senator Mellow’s District Office at 524 Main Street, Peckville and other tenants at that location. a. Brad, Inc. did not have any other property interests beyond the parcels commonly known as 524 Main Street, Peckville. 27. Between August 2004 and September 2008 the primary deposits to the Brad, Inc. account were as follows: Senate (rent): $120,000.00 Senate (utilities): $28,854.33 Friends of Bob Mellow (rent): $26,486.87 James J. Mellow Co. (rent): $24,004.74 Cash: $23,111.97 28. Disbursements were made from the Brad, Inc. account between 2004 and 2008 to Diane Mellow, Robert Mellow, Celestine Giordano, Gabriel Giordano. a. Diane Mellow and Celestine Giordano received monthly payments generally in the amount of $350.00 with the word “draw” written in the memo portion of the checks. 1. Between August 2004 and September 2008, payments totaling $17,208.38 were made by Brad Inc. to Celestine Giordano and payments totaling $17,050.00 were made to Diane Mellow. b. Payments to Robert Mellow and Gabriel Giordano were made in 2005 and again in 2008 after the property was sold. 29. Between February 2005 and September 2008 payments totaling $166,668.66 were issued to Senator Mellow from the Brad, Inc. account. a. These payments are in addition to the $65,000 payment made by Brad, Inc. to Senator Mellow on March 26, 2001. Mellow, 09-038 Page 7 30. Brad, Inc. check number 2293 dated September 22, 2008, in the amount of $100,000.00 payable to Robert Mellow cleared the Brad, Inc. account at Old Forge Bank on September 30, 2008. a. The signature of Robert Mellow appears on the back side of check number 2293 endorsing it for deposit. b. Check number 2293 was deposited on September 29, 2008, in two (2) different accounts solely in the name of Robert Mellow at First National Community Bank (FNCB), 102 East Drinker Street, Dunmore, PA 18512. c. $95,000.00 of the deposit was applied to a real estate loan secured by a residential property in the name of Robert J. Mellow located at 110 Oak Hill Drive, Archbald, PA. 1. Lackawanna County Recorder of Deeds instrument number 200815183, recorded June 20, 2008, confirmed a mortgage amount of $240,000.00 for the above listed property in the name of Robert J. Mellow. d. The remaining $5,000.00 was deposited into a checking account at FNCB controlled by Robert Mellow. 31. Brad, Inc. check number 2298 dated September 26, 2008, in the amount of $30,000.00 was issued in the name of Robert Mellow [and] was used to purchase a $30,000.00 Certificate of Deposit (CD) on September 29, 2008, at Old Forge Bank. a. The CD is in the name of Robert J. Mellow only. 32. Brad, Inc.’s primary source of funds was the Senate of Pennsylvania. 33. Robert Mellow assumed Diane Mellow’s interest in Brad, Inc. as a result of the Mellows’ divorce settlement, which was finalized in or about April 2007. a. A letter signed by Diane Mellow on November 28, 2006, provided that she was resigning her position as an officer and/or member of the Board of Directors of Brad, Inc. effective immediately. b. A Stock Power document signed by Diane Mellow on November 30, 2006, transferred all of her shares of Brad, Inc. to Senator Mellow. 1. The Stock Power noted the following: “Know all men by these presents, that I, the undersigned do hereby nominate, constitute and appoint Robert J. Mellow as and for my true and lawful attorney for me and in my name, place and stead to transfer any and all shares of common stock that I own in Brad, Inc. on the official minute book of the said corporation.” c. Diane Mellow signed an Irrevocable Proxy on November 30, 2006, which included the following: “I, the under undersigned, hereby designate Robert J. Mellow as my proxy to vote any and all shares of the common stock of Brad, Inc. as he so desires.” d. The parties stipulated to the entry of a Domestic Relations Order on or about Mellow, 09-038 Page 8 April 3, 2007, and the Order was approved by the Court on April 16, 2007. 34. Subsequent to Diane Mellow assigning her interest in Brad, Inc. to Senator Mellow, he became President of Brad, Inc. on November 30, 2006. 35. Robert Mellow disclosed to the Chief Clerk of the Senate in or about April 2007 that he had acquired his wife’s ownership interest in Brad, Inc. as a result of his divorce. 36. Robert Mellow never disclosed to the Chief Clerk of the Senate until or about April 2007 that either he and/or his wife had an ownership interest in Brad, Inc. 37. In April 2007 and May 2007, discussions occurred among Senator Mellow, Chief Clerk Faber, Fred Giles, Esquire, Counsel to the Chief Clerk, and C.J. Hafner, Senate Counsel regarding Mellow’s interest in Brad, Inc. and potential Ethics Act concerns. 38. During Senator Mellow’s April 20, 2007, conversation with Chief Clerk Faber, he advised Faber of the following: a. That he had received a 50% ownership interest in Brad, Inc. as part of his divorce from Diane. b. That Diane Mellow was a 50% owner of Brad, Inc. 39. Mellow never advised Faber of the following: a. That Diane Mellow had an interest in and was an officer of Brad Inc. b. That Robert Mellow received payments in excess of $100,000 from Brad, Inc. as of April 20, 2007. c. That Brad, Inc. payments made to Diane Mellow were deposited into a joint personal account and used to pay, in part, common living expenses. 40. As a result of the April 2007 and subsequent conversations, three (3) options were presented for Mellow to pursue which included: ? Brad, Inc. sell the building. ? Senator Mellow move his District office to another physical location. ? Senator Mellow divesting himself of any interest in Brad, Inc. 41. Senator Mellow made the affirmative decision to maintain his district office in the building owned by Brad, Inc. and to attempt to sell the property. a. Any of the other options would have terminated the payments Senator Mellow was receiving from Brad, Inc. as a result of its ownership of 524 Main Street, Peckville. b. As a result of Mellow’s decision, the Senate continued to make rental payments to Brad, Inc. 42. Based on Senator Mellow’s representation to Faber that he intended to sell the building, Faber did not pursue a property appraisal of the 524 Main Street, Peckville, PA, property. 43. Brad, Inc. transferred ownership of the property on September 18, 2008. Mellow, 09-038 Page 9 a. During this time, monthly rental and utility payments continued to be made by the Pennsylvania Senate to Brad, Inc. b. As a result of Mellow’s affirmative decision not to relocate his office or divest himself of his interest in Brad, Inc., that entity received an additional 17 months of rental income. 44. Between May 2007 through September 2008, the Senate of Pennsylvania made rent payments to Brad, Inc. totaling $40,800 (17 months @$2,400/mo). 45. Brad, Inc. retained ownership of 524 Main Street, Peckville, PA, with Robert Mellow having a fifty (50) percent interest and serving as Corporate President interest [sic] until the property was sold to IBIS Realty on or about September 18, 2008, for the sum of $350,000.00. a. Settlement occurred on September 22, 2008. 46. Negotiations on the sale of 524 Main Street, Peckville, PA, to the IBIS Realty began as early as May 30, 2008. a. The purchasers wanted confirmation that the Senate would lease the facility for 2½ years. b. The property was appraised at $550,000 in 2008. c. The prior appraised value of the property was $190,000 in 2006. d. The higher value was due in part to increased rents to be paid by the Senate for Mellow’s district office and parking which had not been charged in prior leases. 47. Settlement on 518-524 Main Street, Peckville, PA 18452 occurred on September 22, 2008. a. The sale price of the property was $350,000. b. $130,000 of the sale proceeds was received by Senator Mellow. 48. On October 14, 2008, a lease was entered into between IBIS Realty (lessor) and the Senate of Pennsylvania (lessee) for office space located at and known as 524 Main Street, Peckville, PA, consisting of approximately 2,400 square feet to be used and occupied as a district office and for no other purpose for the term of six years and three months. a. The full lease required payments of $345,000.00 from the Senate to IBIS Realty to cover the rent and parking for Senator Mellow’s District Office. b. If the lease would go to full term, rent payments from the Senate would cover all but $5,000 of the selling price. III.DISCUSSION: As a Pennsylvania State Senator from approximately 1971 until December 2010, Respondent Robert Mellow (hereinafter also referred to as “Respondent,” “Respondent Mellow,” and “Mellow”) was a public official/public employee subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. Mellow, 09-038 Page 10 The allegations are that Respondent Mellow violated Sections 1103(a) and 1103(f) of the Ethics Act, 65 Pa.C.S. §§ 1103(a) and 1103(f): (1) when he identified and/or selected a location for his senatorial district office and/or authorized the Pennsylvania Senate to enter into leases for that district office space from a company identified as Brad, Inc., which was a business with which he and/or a member of his immediate family is/are associated; and (2) when Brad, Inc. entered into contracts in excess of $500 with his governmental body to provide district office space, without an open and public process. Per the Consent Agreement, the Investigative Division has exercised its prosecutorial discretion to nol pros any allegations regarding Respondent’s use of office relating to the lease of district office space prior to 2007, along with the allegations arising under Section 1103(f) of the Ethics Act . Based upon the nol pros, we need not address those allegations that are no longer before us. 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 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. As noted above, the parties have submitted a Consent Agreement and Findings. The parties' submitted Findings are set forth above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. nd Respondent served as a Pennsylvania State Senator representing the 22 Senatorial District from approximately 1971 until December 2010. Mellow, 09-038 Page 11 In addition to having office space in the Capitol Complex in Harrisburg, Pennsylvania, Members of the Pennsylvania Senate (“Senate”) are permitted to have district office facilities with the associated operating expenses paid by the Commonwealth. A State Senator is responsible for choosing the location of his/her district office. However, per State Ethics Commission rulings issued in 1989 and 1990, it is impermissible under the Ethics Act for a Member of the General Assembly to charge the rent of his district office in a building he owns to his legislative district account. See, Cappabianca, Opinions 89-014- R and 89-014-R2. As a State Senator, Respondent had the authority to select the location for his district office. From December 1, 1990, until approximately December 2010, Respondent maintained a district office in a building located at 524 Main Street, Peckville, Pennsylvania, hereinafter referred to as “the Peckville District Office Property.” From the initial lease of December 1, 1990, until or about February 2001, the Senate leased the Peckville District Office Property from “G & G Realty.” G & G Realty is an entity created by Gabriel J. Giordano, an employee (Legislative Assistant) of Respondent’s district office. Between 1990 and September 2000, the Senate lease payments made to G & G Realty totaled $145,816.82 and exceeded the mortgage principal and interest paid by G & G Realty during this same time period. On January 8, 2001, ownership of the Peckville District Office Property was transferred to a Pennsylvania corporation named “Brad, Inc.” for the sum of one dollar. Brad, Inc. had been formed approximately one month prior to the transfer of ownership of the Peckville District Office Property. Respondent and Respondent’s wife, Diane Mellow, had a continuing relationship with Brad, Inc. from the time the corporation was formed in December 2000. Diane Mellow was President and owner of 50% of the stock of Brad, Inc. Celestine Giordano was Secretary and Treasurer and a stockholder of Brad, Inc. Respondent, Diane Mellow, Gabriel Giordano, and Celestine Giordano had signature authority on Brad, Inc.’s checking account from December 11, 2000, until after the Mellows divorced in or about April 2007. At the time of the transfer of ownership of the Peckville District Office Property to Brad, Inc., neither Respondent nor Diane Mellow had invested any capital in the corporation or the property. Equity in the property was realized primarily as a result of rent payments made by the Commonwealth to G & G Realty for Respondent’s district office space. At the time of the transfer, G & G’s mortgage on the property had been satisfied. After Brad, Inc. assumed ownership of the Peckville District Office Property, Brad, Inc. obtained a loan from Old Forge Bank on March 8, 2001, in the amount of $100,000. Brad, Inc. utilized the proceeds of the loan to issue payments to Respondent and Gabriel Giordano in the amounts of $65,000 and $35,000 respectively. From March 1, 2001, through September 2008, the Senate leased the Peckville District Office Property from Brad, Inc. Respondent never advised the Chief Clerk’s office in any years between 2002 and 2008 of any intention to terminate the lease or relocate his district office, resulting in the renewal of the lease with Brad, Inc. on an annual basis. From March 1, 2001, through September 30, 2008, the Senate made monthly rental payments in the amount of $2,400 payable to Brad, Inc. for the Peckville District Office Property. The Senate issued separate payments to Brad, Inc. for utilities. Brad, Inc.’s primary source of funds was the Senate. Between August 2004 and September 2008, payments totaling $17,050 were made by Brad, Inc. to Diane Mellow. Between February 2005 and September 2008, payments totaling $166,668.66 were Mellow, 09-038 Page 12 issued to Respondent from the Brad, Inc. account. These payments were in addition to the $65,000 payment made by Brad, Inc. to Respondent in March 2001. Respondent assumed Diane Mellow’s interest in Brad, Inc. as a result of the Mellows’ divorce settlement, which was finalized in or about April 2007. Respondent became President of Brad, Inc. on November 30, 2006. A Stock Power document signed by Diane Mellow on November 30, 2006, transferred all of her shares of Brad, Inc. to Respondent. Diane Mellow signed an Irrevocable Proxy on November 30, 2006, which designated Respondent as her proxy to vote any and all shares of the common stock of Brad, Inc. as he desired. Until or about April 2007, Respondent never disclosed to the Chief Clerk of the Senate that he and/or his wife had an ownership interest in Brad, Inc. In or about April 2007, Respondent disclosed to the Chief Clerk of the Senate that he had acquired his wife’s ownership interest in Brad, Inc. as a result of his divorce. In April 2007 and May 2007, discussions occurred among Respondent, Chief Clerk Faber, Fred Giles, Esquire, Counsel to the Chief Clerk, and C.J. Hafner, Senate Counsel, regarding Respondent’s interest in Brad, Inc. and potential Ethics Act concerns. As a result of the April 2007 and subsequent conversations, three (3) options were presented for Respondent to pursue, which included: (1) Brad, Inc. selling the building; (2) Respondent moving his district office to another physical location; and (3) Respondent divesting himself of any interest in Brad, Inc. Respondent made the affirmative decision to maintain his district office in the Peckville District Office Property owned by Brad, Inc. and to attempt to sell the property. Any of the other options would have terminated the payments Respondent was receiving from Brad, Inc. as a result of its ownership of the Peckville District Office Property. As a result of Respondent’s decision, the Senate continued to make rental payments to Brad, Inc. Based on Respondent’s representation to Faber that Respondent intended to sell the building, Faber did not pursue a property appraisal of the Peckville District Office Property (which the Senate’s Financial Operating Rules have at times required when a Member or any of his immediate family has an equity interest in a district office). As a result of Respondent’s affirmative decision to not relocate his office or divest himself of his interest in Brad, Inc., that entity received an additional 17 months of rental income. Between May 2007 and September 2008, the Senate made rent payments to Brad, Inc. totaling $40,800 (17 months @$2,400 per month). Brad, Inc. retained ownership of the Peckville District Office Property with Respondent having a 50% interest and serving as Corporate President until the property was sold to IBIS Realty on or about September 18, 2008, for the sum of $350,000. Respondent received $130,000 of the sale proceeds. Negotiations on the sale of the Peckville District Office Property to IBIS Realty began as early as May 30, 2008. The purchasers wanted confirmation that the Senate would lease the facility for 2½ years. On October 14, 2008, a lease was entered into between IBIS Realty (lessor) and the Senate (lessee) for district office space at the Peckville District Office Property for the term of six years and three months. The full lease required payments of $345,000 from the Senate to IBIS Realty for rent and parking. Having highlighted the Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations as follows: Mellow, 09-038 Page 13 3. The Investigative Division will recommend the following in relation to the above allegations: a. Mellow’s actions in 2007 in authorizing the continuation of a Senate lease regarding the location of his senatorial district office from Brad Inc., a business with which he was associated in 2007, when his divorce was finalized, resulted in a transgression of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a); b. Any actions by Mellow prior to 2004 relating to the selection, identification, authorization and/or leasing of district office space from Brad Inc., occurred beyond the five year statute of limitations set forth in section 1108(m) (65 Pa.C.S. § 1108(m)) of the Ethics Act, as interpreted by the Commission; c. As part of a negotiated settlement agreement, any allegations regarding Mellow’s use of office relating to the lease of district office space prior to 2007, along with the allegations arising under § 1103(f), namely that Mellow violated Section 1103(f) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(f) when a business with which he and/or his then spouse were associated entered into contracts in excess of $500.00 with his governmental body to provide district office space without an open and public process are hereby nol prossed; d. The Investigative Division hereby agrees to continue its review of any alleged Statement of Financial Interests filing deficiencies arising under Section 1105(b) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1105(b), and specifically reserves the right to proceed with said review and/or adjudication following the resolution of any other proceedings involving Mellow. e. The Investigative Division hereby further agrees that any subsequent review of deficiencies arising under Section 1105(b) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1105(b), if warranted, will be pursued only through the Commission’s Civil Compliance Process, as opposed to an Investigative Process, as permitted under the Regulations of the Commission, 51 Pa. Code § 19.3(b). 4. Mellow agrees to make payment in the amount of $21,000.00 in settlement of this matter by way of certified check or money order made payable to the Commonwealth of Pennsylvania, Mellow, 09-038 Page 14 and forwarded to the Pennsylvania State Ethics Commission within thirty (30) days of the issuance of the final adjudication in this matter. 5. Mellow agrees to not accept any reimbursement, compensation or other payment from the Commonwealth of Pennsylvania, which represents a full or partial reimbursement of the amount paid in settlement of this matter. 6. Mellow’s acceptance and execution of this Consent Agreement is solely for the purpose of resolving the matter currently pending before the Pennsylvania State Ethics Commission and is in no way related to or admissible, except as may be judicially ordered, in any other proceedings or matters that may be currently ongoing or which may be initiated in the future. Mellow, by accepting and executing this Consent Agreement does not admit the legal and factual conclusions herein, or the attached Findings, but agrees to the resolution of this matter as set forth in this Consent Agreement. 7. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter with the exception as noted in paragraph 3(d) and 3(e) above; and will make no 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 from complying with any judicial or agency subpoena or warrant directing appearance, testimony and/or production of documents. Consent Agreement, at 1-3. In considering the Consent Agreement, we agree with the parties that Respondent’s actions in 2007 in authorizing the continuation of the Senate lease with Brad, Inc. for the Peckville District Office Property resulted in a transgression of Section 1103(a) of the Ethics Act. Factually, as of November 30, 2006, Respondent was President and a 50% owner of Brad, Inc. Brad, Inc. was a business with which Respondent was associated. In April 2007 and May 2007, discussions occurred among Respondent, Chief Clerk Faber, Fred Giles, Esquire, Counsel to the Chief Clerk, and C.J. Hafner, Senate Counsel, regarding Respondent’s interest in Brad, Inc. and potential Ethics Act concerns. As a result of the April 2007 and subsequent conversations, three (3) options were presented for Respondent to pursue, which included: (1) Brad, Inc. selling the building; (2) Respondent moving his district office to another physical location; and (3) Respondent divesting himself of any interest in Brad, Inc. Respondent made the affirmative decision to maintain his district office in the Peckville District Office Property owned by Brad, Inc. and to attempt to sell the property. Any of the other options would have terminated the payments Respondent was receiving from Brad, Inc. as a result of its ownership of the Peckville District Office Property. Respondent’s decision to maintain his district office in the Peckville District Office Property was a use of the authority of his public position as a State Senator. As a result of Respondent’s affirmative decision to not relocate his district office or divest himself of his Mellow, 09-038 Page 15 interest in Brad, Inc., that entity received an additional 17 months of rental income totaling $40,800. With each element of a transgression of Section 1103(a) established, we hold that Respondent’s actions in 2007 in authorizing the continuation of a Senate lease regarding the location of his senatorial district office from Brad, Inc., a business with which he was associated in 2007, when his divorce was finalized, resulted in a transgression of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a). As part of the Consent Agreement, Respondent has agreed to make payment in the amount of $21,000 in settlement of this matter by way of certified check or money order made 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. Respondent has agreed to not accept any reimbursement, compensation or other payment from the Commonwealth of Pennsylvania representing a full or partial reimbursement of the amount paid in settlement of this matter. We note that the Investigative Division has agreed to continue its review of any alleged Statement of Financial Interests filing deficiencies arising under Section 1105(b) of the Ethics Act and has reserved the right to proceed with said review and/or adjudication following the resolution of any other proceedings involving Respondent. The Investigative Division has also agreed that any subsequent review of deficiencies arising under Section 1105(b) of the Ethics Act, if warranted, will be pursued only through the Commission’s Civil Compliance Process, as opposed to an Investigative Process, as permitted under the Regulations of this Commission, 51 Pa. Code § 19.3(b). Such procedural determinations are within the Investigative Division’s discretion and need not be further addressed in this adjudication and Order. We further note that, per the Consent Agreement, Respondent’s acceptance and execution of the Consent Agreement is solely for the purpose of resolving the matter currently pending before this Commission and is in no way related to or admissible, except as may be judicially ordered, in any other proceedings or matters that may be currently ongoing or which may be initiated in the future. Per the Consent Agreement, Respondent, by accepting and executing the Consent Agreement, does not admit the legal and factual conclusions therein, or the Findings submitted by the parties, but agrees to the resolution of this matter as set forth in the Consent Agreement. 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 $21,000 by way of certified check or money order made payable to the Commonwealth of Pennsylvania and forwarded to this Commission by no th later than the thirtieth (30) day after the mailing date of this adjudication and Order. Per the Consent Agreement of the parties, Respondent is further directed to not accept any reimbursement, compensation or other payment from the Commonwealth of Pennsylvania representing a full or partial reimbursement of the amount paid in settlement of this matter. Compliance with the foregoing will result in the closing of this case with no further action by this Commission except as noted in paragraph 3(d) and 3(e) of the Consent Agreement of the parties. Noncompliance will result in the institution of an order enforcement action. IV.CONCLUSIONS OF LAW: Mellow, 09-038 Page 16 1. As a Pennsylvania State Senator from approximately 1971 until December 2010, Respondent Robert Mellow (“Mellow”) was a public official/public employee subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. 2. Mellow’s actions in 2007 in authorizing the continuation of a Senate lease regarding the location of his senatorial district office from Brad, Inc., a business with which he was associated in 2007, when his divorce was finalized, resulted in a transgression of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a). In Re: Robert Mellow, : File Docket: 09-038 Respondent : Date Decided: 3/22/12 : Date Mailed: 3/26/12 ORDER NO. 1598 1. As a Pennsylvania State Senator, Robert Mellow’s actions in 2007 in authorizing the continuation of a Senate lease regarding the location of his senatorial district office from Brad, Inc., a business with which he was associated in 2007, when his divorce was finalized, resulted in a transgression of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a). 2. Per the Consent Agreement of the parties, Robert Mellow is directed to make payment in the amount of $21,000 by way of certified check or money order made payable to the Commonwealth of Pennsylvania and forwarded to the Pennsylvania th State Ethics Commission by no later than the thirtieth (30) day after the mailing date of this Order. 3. Per the Consent Agreement of the parties, Robert Mellow is further directed to not accept any reimbursement, compensation or other payment from the Commonwealth of Pennsylvania representing a full or partial reimbursement of the amount paid in settlement of this matter. 4. Compliance with paragraphs 2 and 3 of this Order will result in the closing of this case with no further action by this Commission except as noted in paragraph 3(d) and 3(e) of the Consent Agreement of the parties. a. Non-compliance will result in the institution of an order enforcement action. BY THE COMMISSION, ___________________________ John J. Bolger, Vice Chair Chair Louis W. Fryman and Commissioner Mark Volk did not participate in this matter.