HomeMy WebLinkAbout13-587 Lewis
ADVICE OF COUNSEL
December 20, 2013
Frederick D. Lewis, Jr.
20811 State Route 92
Susquehanna, PA 18847
13-587
Dear Mr. Lewis:
This responds to your undated letter postmarked November 21, 2013, received
November 22, 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 an individual with
regard to serving as a school director for a school district where the individual, in a
private capacity, is the majority stockholder of an S corporation that has school bus
contracts with the school district.
Facts:
You request an advisory from the Pennsylvania State Ethics Commission
based upon the following submitted facts.
You have been elected as a School Director for the Blue Ridge School District
(“School District”). You are the majority stockholder of an S Corporation named “Lewis
Bussing Inc.” (the “Corporation”). The School District has school bus contracts with
you/the Corporation.
Based upon the above submitted facts, you pose the following questions:
(1) Whether you would be permitted to keep the contracts between you/the
Corporation and the School District while serving on the School District
School Board, and if so, what matters would you be prohibited from voting
on;
(2) Whether the School District School Board would be required by law to
advertise your contracts and put them out for bids when next year’s
contracts are to be awarded; and
(3) Whether you could serve on the School District School Board with no
restrictions if you would sell your stock in the Corporation.
Lewis, 13-587
December 20, 2013
Page 2
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.
Upon taking office as a School Director for the School District, you would become
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:
§ 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
Lewis, 13-587
December 20, 2013
Page 3
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). 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).
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
Lewis, 13-587
December 20, 2013
Page 4
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.
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
may not have any supervisory or overall responsibility as to the implementation or
administration of the contract with the governmental body.
Lewis, 13-587
December 20, 2013
Page 5
It is administratively noted that the Public School Code of 1949 as amended
(“Public School Code”) provides in pertinent part:
§ 3-324. Not to be employed by or do business with
district; exceptions
(a) No school director shall, during the term for which he
was elected or appointed, as a private person engaged in
any business transaction with the school district in which he
is elected or appointed, be employed in any capacity by the
school district in which he is elected or appointed, or receive
from such school district any pay for services rendered to the
district except as provided in this act…
….
(c) It shall not be a violation of this section for a school
district to contract for the purchase of goods or services from
a business with which a school director is associated to the
extent permitted by and in compliance with 65 Pa.C.S. Ch.
11 (relating to ethics standards and financial disclosure).
24 P.S. §§ 3-324(a), (c). On its face, Section 3-324(c) of the Public School Code
permits contracting between school districts and businesses with which school directors
are associated as long as the requirements of the Ethics Act are observed.
Having established the above general principles, your specific questions shall
now be considered.
In response to your first question, you are advised as follows.
The Corporation is a business with which you are associated in your capacity as
an owner. Subject to the statutory exclusions to the definition of “conflict” or “conflict of
interest” as set forth in Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102, pursuant to
Section 1103(a) of the Ethics Act, you would have a conflict of interest as a School
Director in matters that would financially impact you or the Corporation.
As long as the restrictions and requirements of the Ethics Act would be observed,
the Ethics Act would not prohibit you/the Corporation from keeping your current
contracts with or continuing to do business with the School District while you would be
serving as a School Director. However, in your public capacity as a School Director,
you would have a conflict of interest under Section 1103(a) of the Ethics Act in matters
pertaining to actual or anticipated contract(s) between the School District and you/the
Corporation. At such times as there would be a reasonable and legitimate anticipation
that the School District would award a contract to you/the Corporation, you would have
a conflict of interest in related matters, such as preparing or approving the specifications
for such contract. Where you/the Corporation would bid for a School District contract,
you would have a conflict of interest as to such contract and could not participate in
reviewing or selecting bids or proposals or awarding the contract. You would also be
prohibited from using the authority of your public position, or confidential information
accessed or received as a result of being a School Director, to effectuate a private
pecuniary benefit to you/the Corporation through a detriment to a business competitor.
See, Pepper, Opinion 87-008.
In addition, you generally would have a conflict of interest with respect to voting
to approve the payment of any bills or invoices that would be submitted by you/the
Corporation.
Lewis, 13-587
December 20, 2013
Page 6
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.
Section 1103(f) of the Ethics Act would not be applicable as to a contract
between the School District and you/the Corporation that was entered into prior to you
taking office as a School Director. Cf., Bowers, Advice 07-588; Burkhart, Advice 03-
535. However, any contract renewals or future contract(s) between you/the Corporation
and the School District valued at $500 or more would be subject to the restrictions and
requirements of Section 1103(f) of the Ethics Act to the extent that you would be a
School Director and the Corporation would be a business with which you, your spouse
or child would be associated.
Your second question cannot be addressed in this advisory; the State Ethics
Commission does not have the statutory jurisdiction to provide advisory opinions
addressing Section 1103(f) of the Ethics Act as to the proposed conduct of a
governmental body, such as the School District School Board.
In response to your third question, you are advised as follows. Even if you would
sell your stock in the Corporation: (1) to the extent the Corporation would be a business
with which you or a member of your immediate family would be associated, the
restrictions of Section 1103(a) of the Ethics Act would be applicable as set forth above;
and (2) to the extent the Corporation would be a business with which you, your spouse,
or child would be associated, the restrictions and requirements of Section 1103(f) of the
Ethics Act would be applicable as set forth above.
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:
Upon taking office as a School Director for the Blue Ridge School
District (“School District”), you would become 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 have been elected as a School Director for
the School District; (2) you are the majority stockholder of an S Corporation named
“Lewis Bussing Inc.” (the “Corporation”); and (3) the School District has school bus
contracts with you/the Corporation, you are advised as follows.
The Corporation is a business with which you are associated in your capacity as
an owner. Subject to the statutory exclusions to the definition of “conflict” or “conflict of
interest” as set forth in Section 1102 of the Ethics Act, 65 Pa.C.S. § 1102, pursuant to
Section 1103(a) of the Ethics Act, you would have a conflict of interest as a School
Director in matters that would financially impact you or the Corporation. As long as the
restrictions and requirements of the Ethics Act would be observed, the Ethics Act would
not prohibit you/the Corporation from keeping your current contracts with or continuing
to do business with the School District while you would be serving as a School Director.
However, in your public capacity as a School Director, you would have a conflict of
interest under Section 1103(a) of the Ethics Act in matters pertaining to actual or
anticipated contract(s) between the School District and you/the Corporation. At such
times as there would be a reasonable and legitimate anticipation that the School District
would award a contract to you/the Corporation, you would have a conflict of interest in
related matters, such as preparing or approving the specifications for such contract.
Where you/the Corporation would bid for a School District contract, you would have a
conflict of interest as to such contract and could not participate in reviewing or selecting
bids or proposals or awarding the contract. You would also be prohibited from using the
Lewis, 13-587
December 20, 2013
Page 7
authority of your public position, or confidential information accessed or received as a
result of being a School Director, to effectuate a private pecuniary benefit to you/the
Corporation through a detriment to a business competitor. In addition, you generally
would have a conflict of interest with respect to voting to approve the payment of any
bills or invoices that would be submitted by you/the Corporation. 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. Section 1103(f) of
the Ethics Act would not be applicable as to a contract between the School District and
you/the Corporation that was entered into prior to you taking office as a School Director.
However, any contract renewals or future contract(s) between you/the Corporation and
the School District valued at $500 or more would be subject to the restrictions and
requirements of Section 1103(f) of the Ethics Act to the extent that you would be a
School Director and the Corporation would be a business with which you, your spouse
or child would be associated.
Even if you would sell your stock in the Corporation: (1) to the extent the
Corporation would be a business with which you or a member of your immediate family
would be associated, the restrictions of Section 1103(a) of the Ethics Act would be
applicable as set forth above; and (2) to the extent the Corporation would be a business
with which you, your spouse, or child would be associated, the restrictions and
requirements of Section 1103(f) of the Ethics Act would be applicable as set forth
above.
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