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HomeMy WebLinkAbout13-582 Garner ADVICE OF COUNSEL December 4, 2013 David G. Garner, Esquire 221 East High Street, Suite 1 Pottstown, PA 19464 13-582 Dear Mr. Garner: This responds to your letter of October 31, 2013, 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 prohibitions or restrictions upon a member and chairman of the board of a municipal authority, who in a private capacity is the Pennsylvania sales representative for a manufacturer, with regard to the municipal authority purchasing a paving product from the manufacturer. Facts: As Solicitor for the Pottstown Borough Authority (“Authority”), you have been authorized by Thomas E. Carroll (“Mr. Carroll”), who is a Member and Chairman of the Authority Board, to request an advisory from the Pennsylvania State Ethics Commission on his behalf. You have submitted facts, the material portion of which may be fairly summarized as follows. The Authority was created pursuant to the Municipality Authorities Act, 53 Pa.C.S. § 5601 et seq. Members of the Authority Board are appointed by Council of the Borough of Pottstown. After Mr. Carroll retired from his full-time working career a few years ago, he began consulting on various types of projects. Mr. Carroll recently began to serve as the Pennsylvania Sales Representative for KB Industries, which manufactures a porous flexible paving product called “FLEXI-Pave” (the “Paving Product”). The Paving Product is made from recycled tires and filters out nitrates and phosphates. You state that the Paving Product has potential for use in addressing storm water concerns and in more conventional paving applications and that other vendors appear to offer similar products. While there are presently no specific situations in which the Authority is contemplating purchasing/utilizing the Paving Product, Authority staff believes that there could be circumstances where the Paving Product would be deemed the best product to Garner, 13-582 December 4, 2013 Page 2 use for a situation. You state that since Mr. Carroll is the only representative authorized to sell the Paving Product in Pennsylvania, he would necessarily be involved in any transaction with the Authority and would derive a commission based upon any purchase by the Authority. Based upon the above submitted facts, you ask whether Mr. Carroll would have a conflict of interest with regard to a decision by the Authority to purchase the Paving Product. 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 Member and Chairman of the Authority Board, Mr. Carroll is a public official 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: Garner, 13-582 December 4, 2013 Page 3 § 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. 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. 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 could form the basis for a conflict of interest under Section 1103(a) of the Ethics Act would include the pursuit of a private business opportunity in the course of public action (Metrick, Order 1037) and 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). Garner, 13-582 December 4, 2013 Page 4 Per State Ethics Commission precedent, a conflict of interest under Section 1103(a) of the Ethics Act may be based upon an ongoing business relationship (Kitner, Order 1542; Burchfield, Order 1492; Johnson, Order 1338; Confidential Opinion, 06- 001; Kannebecker, supra; Miller, supra), or a reasonable and legitimate expectation that a business relationship will form (Gerhard, Order 1460; Mann, Opinion 07-005; Moore, Opinion 04-004; Confidential Opinion, 00-006; Amato, Opinion 89-002). In each instance of a conflict of interest, the public official/public employee would be required to abstain 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 lobbying 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 would require 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 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. Garner, 13-582 December 4, 2013 Page 5 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, in his public capacity, 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, you are advised as follows. The submitted facts do not identify the precise nature of the relationship between KB Industries and Mr. Carroll as the Pennsylvania Sales Representative for KB Industries. You are advised that KB Industries is a business with which Mr. Carroll is associated to the extent that he is a director, officer, owner, employee, or holder of a financial interest in KB Industries. 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, Mr. Carroll would have a conflict of interest in matters before the Authority Board that would financially impact him or a business with which he is associated. Mr. Carroll would specifically have a conflict of interest in matter(s) pertaining to the Authority’s purchase of the Paving Product from KB Industries if for no other reason than the fact that Mr. Carroll would derive a commission based upon any such purchase by the Authority. Mr. Carroll would also be prohibited from using the authority of his public position, or confidential information accessed or received as a result of being a Member/Chairman of the Authority Board, to effectuate a private pecuniary benefit to himself or a business with which he is associated through a detriment to a business competitor. See, Pepper, Opinion 87-008. As noted above, in each instance of a conflict of interest, Mr. Carroll would be required to abstain fully 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 restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed whenever applicable. It is administratively noted that the Municipality Authorities Act provides in part: § 5614. Competition in award of contracts. . . . . (e) CONFLICT OF INTEREST.--No member of the authority or officer or employee of the authority may directly or indirectly be a party to or be interested in any contract or agreement with the authority if the contract or agreement establishes liability against or indebtedness of the authority. Any contract or agreement made in violation of this subsection is void, and no action may be maintained on the agreement against the authority. Garner, 13-582 December 4, 2013 Page 6 53 Pa.C.S. § 5614(e). Because this Advice may not interpret the above quoted provision of the Municipality Authorities Act, it is suggested that Mr. Carroll 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 and Chairman of the Board of the Pottstown Borough Authority (“Authority”), Thomas E. Carroll (“Mr. Carroll”) is 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) the Authority was created pursuant to the Municipality Authorities Act, 53 Pa.C.S. § 5601 et seq.; (2) Members of the Authority Board are appointed by Council of the Borough of Pottstown; (3) after Mr. Carroll retired from his full-time working career a few years ago, he began consulting on various types of projects; (4) Mr. Carroll recently began to serve as the Pennsylvania Sales Representative for KB Industries, which manufactures a porous flexible paving product called “FLEXI-Pave” (the “Paving Product”); (5) the Paving Product is made from recycled tires and filters out nitrates and phosphates; (6) the Paving Product has potential for use in addressing storm water concerns and in more conventional paving applications, and other vendors appear to offer similar products; (7) while there are presently no specific situations in which the Authority is contemplating purchasing/utilizing the Paving Product, Authority staff believes that there could be circumstances where the Paving Product would be deemed the best product to use for a situation; and (8) since Mr. Carroll is the only representative authorized to sell the Paving Product in Pennsylvania, he would necessarily be involved in any transaction with the Authority and would derive a commission based upon any purchase by the Authority, you are advised as follows. The submitted facts do not identify the precise nature of the relationship between KB Industries and Mr. Carroll as the Pennsylvania Sales Representative for KB Industries. KB Industries is a business with which Mr. Carroll is associated to the extent that he is a director, officer, owner, employee, or holder of a financial interest in KB Industries. 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, Mr. Carroll would have a conflict of interest in matters before the Authority Board that would financially impact him or a business with which he is associated. Mr. Carroll would specifically have a conflict of interest in matter(s) pertaining to the Authority’s purchase of the Paving Product from KB Industries if for no other reason than the fact that Mr. Carroll would derive a commission based upon any such purchase by the Authority. Mr. Carroll would also be prohibited from using the authority of his public position, or confidential information accessed or received as a result of being a Member/Chairman of the Authority Board, to effectuate a private pecuniary benefit to himself or a business with which he is associated through a detriment to a business competitor. In each instance of a conflict of interest, Mr. Carroll would be required to abstain fully 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 restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed whenever applicable. It is suggested that Mr. Carroll seek legal advice as to the applicability of the Municipality Authorities Act to the proposed conduct. 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 Garner, 13-582 December 4, 2013 Page 7 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