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Home My WebLink About12-562 Gustafson ADVICE OF COUNSEL September 26, 2012 Ronald C. Gustafson 312 Petroleum Street Oil City, PA 16301 12-562 Dear Mr. Gustafson: This responds to your letter dated August 2, 2012, 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 an individual in his public capacity as a city council member if, in his private capacity as a building contractor, the individual would be awarded a contract with a local economic development agency for a façade project that would be partially funded by a grant from a city grant program. Facts: You seek an advisory from the Pennsylvania State Ethics Commission based upon submitted facts that may be fairly summarized as follows. You are currently serving in your first year as a Member of the City Council of the City of Oil City (“City”), Pennsylvania. In your private capacity, you are a building contractor by trade. The Oil Region Alliance (“ORA”) is a local economic development agency and private, non-profit corporation that is located in the City. You state that the City contributes a small amount each year toward ORA’s operations, with last year’s contribution totaling $10,000. You state that you did not vote on the current City budget. In the past, you served on a preservation advisory committee that makes suggestions with regard to historic preservation initiatives for the Oil Region Heritage Area, a subsection of ORA. You have not served on ORA’s Board of Directors or on ORA’s Heritage Advisory Committee. Over the past ten to twelve years, you bid on and were occasionally awarded projects overseen by ORA. You recently bid on a façade project (“Façade Project”) at ORA’s main offices which would be partially funded by a grant from the City’s Main Street Façade Grants Program (the “Façade Grants Program”). City Council votes whether to award a grant from the Façade Grants Program, and a grant is made directly to the property owner. Gustafson, 12-562 September 26, 2012 Page 2 You seek guidance as to whether the Ethics Act would impose any prohibitions or restrictions upon you with regard to the potential award of the Façade Project to you. You state that if you would be awarded the Façade Project, you would abstain from voting on whether to award a grant from the Façade Grants Program for the Façade Project. 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. As a City 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 Gustafson, 12-562 September 26, 2012 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. "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. 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. The use of authority of office is not limited merely to voting, but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. Per State Ethics Commission precedent, a public official/public employee generally would have a conflict of interest in his official capacity in matters involving a business client. See, Kannebecker, Opinion 92-010; Miller, Opinion 89-024. 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). The Pennsylvania Supreme Court has held that in order to violate Section 1103(a) of the Ethics Act, a public official/public employee “must be consciously aware of a private pecuniary benefit for himself, his family, or his business, and then must take action in the form of one or more specific steps to attain that benefit.” Kistler v. State Ethics Commission, 610 Pa. 516, 528, 22 A.3d 223, 231 (2011). Gustafson, 12-562 September 26, 2012 Page 4 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. In applying the above provisions of the Ethics Act to your specific inquiry, you are advised that the Ethics Act itself would not prohibit you, in your private capacity, from contracting with ORA with regard to the Façade Project. However, you would have a conflict of interest in your public capacity as a City Council Member with regard to matter(s) pertaining to ORA and/or the Façade Project, including but not limited to City Council’s decision as to whether to award a grant from the Façade Grants Program for the Façade Project. You would also have a conflict of interest as to the grant applications of any applicants competing with ORA for such grant funding. As noted above, in each instance of a conflict of interest, you 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. 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 the City Council of the City of Oil City (“City”), Pennsylvania, 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 are currently serving in your first year as a City Council Member; (2) in your private capacity, you are a building contractor by trade; (3) the Oil Region Alliance (“ORA”) is a local economic development agency and private, non-profit corporation that is located in the City; (4) the City contributes a small amount each year toward ORA’s operations, with last year’s contribution totaling $10,000; (5) you did not vote on the current City budget; (6) in the past, you served on a preservation advisory committee that makes suggestions with regard to historic preservation initiatives for the Oil Region Heritage Area, a subsection of ORA; (7) you have not served on ORA’s Board of Directors or on ORA’s Heritage Advisory Committee; (8) you recently bid on a façade project (“Façade Project”) at ORA’s main offices which would be partially funded by a grant from the City’s Main Street Façade Grants Program (the “Façade Grants Program”); and (9) City Council votes on whether to award a grant from the Façade Grants Program, and a grant is made directly to the property owner, you are advised as follows. The Ethics Act itself would not prohibit you, in your private capacity, from contracting with ORA with regard to the Façade Project. However, you would have a conflict of interest in your public capacity as a City Council Member with regard to matter(s) pertaining to ORA and/or the Façade Project, including but not limited to City Council’s decision as to whether to award a grant from the Façade Grants Program for the Façade Project. You would also have a conflict of interest as to the grant applications of any applicants competing with ORA for such grant funding. In each instance of a conflict of interest, you 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. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Gustafson, 12-562 September 26, 2012 Page 5 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