HomeMy WebLinkAbout14-520 Confidential
ADVICE OF COUNSEL
May 16, 2014
14-520
This responds to your letter dated March 19, 2014, by which you requested a
confidential 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
serving as a school director, who in a private capacity is an A of a company that
provides fundraising opportunities for various organizations, with regard to such
company entering into fundraising arrangements with groups affiliated with the school
district; and whether the restrictions of Section 1103(f) of the Ethics Act (pertaining to
contracting) would apply to such fundraising arrangements.
Facts:
As Solicitor for the \[name of school district\] (“School District”), you have
been authorized to request a confidential advisory from the Pennsylvania State Ethics
Commission on behalf of Individual B, who is a School Director for the School District.
You have submitted facts, the material portion of which may be fairly summarized as
follows.
Individual B was first elected as a School Director in \[month, year\].
In a private capacity, Individual B is an A of a company named \[name of
company\] (“the Company”). Among other business endeavors, the Company provides
fundraising opportunities for various organizations (“Client Organizations”), including
schools.
Fundraisers are arranged by a member of the Company’s sales team. The
Company does not enter into a formal contract with a Client Organization as to a
fundraising arrangement, and there is no expectation of any particular result. Rather,
\[description of fundraising process\].
The Company has historically provided fundraising opportunities for various
groups affiliated with the School District (“School District Client Organizations”),
including \[list of groups\]. You state that many of the School District Client Organizations
are considered booster organizations, which under School District policy are
organizations separate from the School District and operate independently of the School
District. You state that School District Client Organizations are not required to seek
approval or consent from the School District School Board (“School Board”) prior to
engaging in fundraising with the Company. The selection of the Company to provide
fundraising opportunities occurs within the sole discretion of each individual School
District Client Organization. You state that School District Client Organizations are not
Confidential Advice, 14-520
May 16, 2014
Page 2
authorized to act on the School District’s behalf and that they cannot enter into a valid
contract on the School District’s behalf. You further state that neither the School District
nor the Public School Code requires that the School Board approve any fundraising
arrangement between a School District Client Organization and the Company as no
public dollars are expended on behalf of the School District to engage in these
fundraisers.
Individual B’s job duties as an A of the Company largely involve \[type of duties\],
and he is not involved with sales. You state that while Individual B may have contact
with Client Organizations, he now refrains from any contact with School District Client
Organizations and \[description of step taken to insulate Individual B from such matters\].
You state that Individual B does not broadcast his membership on the School Board to
Client Organizations or attempt to use his public office to convince other groups to use
the Company for fundraising. You further state that any Company fundraisers
conducted by School District Client Organizations during the 2013-2014 school year
were C.
Based upon the above submitted facts, you pose the following questions:
(1) Whether Individual B would violate the Ethics Act as a result of the
Company entering into fundraising arrangements with School District
Client Organizations; and
(2) Whether the restrictions of Section 1103(f) of the Ethics Act, pertaining to
contracting, would apply to fundraising arrangements between School
District Client Organizations and the Company.
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 School Director for the School District, Individual B 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
Confidential Advice, 14-520
May 16, 2014
Page 3
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 are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest."
Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
with which he or a member of his immediate family is
associated.
"Authority of office or employment."
The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business."
Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self-employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated."
Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or
has a financial interest.
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.
Confidential Advice, 14-520
May 16, 2014
Page 4
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
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
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May 16, 2014
Page 5
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.
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 school districts to contract with businesses with which school directors are
associated for the purchase of goods or services as long as the requirements of the
Ethics Act are observed.
In applying the above provisions of the Ethics Act to the instant matter, you are
advised as follows.
The Company is a business with which Individual B is associated in his capacity
as an A. Pursuant to Section 1103(a) of the Ethics Act, Individual B generally would
have a conflict of interest as a School Director in matter(s) before the School Board that
would financially impact him or the Company.
In response to your first question, you are advised that the elements of a violation
of Section 1103(a) of the Ethics Act would not be established as a result of the
Company entering into fundraising arrangements with School District Client
Organizations subject to the condition that Individual B would not use the authority of his
position as a School Director or confidential information received by holding such public
position in furtherance of the Company securing such fundraising arrangements.
Confidential Advice, 14-520
May 16, 2014
Page 6
With regard to your second question, you are advised as follows.
You have factually submitted that the Company does not enter into a formal
contract with a Client Organization as to a fundraising arrangement. You have factually
submitted that many of the School District Client Organizations are considered booster
organizations, which under School District policy are organizations separate from the
School District and operate independently of the School District. You have further
factually submitted that School District Client Organizations are not authorized to act on
the School District’s behalf, cannot enter into a valid contract on the School District’s
behalf, and are not required to seek approval or consent from the School Board prior to
engaging in fundraising with the Company. You have additionally factually submitted
that no public dollars are expended on behalf of the School District to engage in the
fundraising arrangements with the Company.
Under the submitted facts, you are advised that to the extent the Company would
not be contracting with the School District, or entering into subcontracts with person(s)
awarded contract(s) with the School District, the restrictions and requirements of
Section 1103(f) of the Ethics Act would not apply to fundraising arrangements between
the Company and the School District. Cf., Perini, Advice 08-506.
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 School Director for the \[name of school district\] (“School
District”), Individual B 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) Individual B was first elected as a School Director in \[month,
year\]; (2) in a private capacity, Individual B is an A of a company named \[name of
company\] (“the Company”); (3) among other business endeavors, the Company
provides fundraising opportunities for various organizations (“Client Organizations”),
including schools; (4) fundraisers are arranged by a member of the Company’s sales
team; (5) the Company does not enter into a formal contract with a Client Organization
as to a fundraising arrangement, and there is no expectation of any particular result, but
rather, \[description of fundraising process\]; (6) the Company has historically provided
fundraising opportunities for various groups affiliated with the School District (“School
District Client Organizations”); (7) many of the School District Client Organizations are
considered booster organizations, which under School District policy are organizations
separate from the School District and operate independently of the School District; (8)
School District Client Organizations are not required to seek approval or consent from
the School District School Board (“School Board”) prior to engaging in fundraising with
the Company; (9) the selection of the Company to provide fundraising opportunities
occurs within the sole discretion of each individual School District Client Organization;
(10) School District Client Organizations are not authorized to act on the School
District’s behalf, and they cannot enter into a valid contract on the School District’s
behalf; (11) neither the School District nor the Public School Code requires that the
School Board approve any fundraising arrangement between a School District Client
Organization and the Company as no public dollars are expended on behalf of the
School District to engage in these fundraisers; (12) Individual B’s job duties as an A of
the Company largely involve \[type of duties\], and he is not involved with sales; (13)
while Individual B may have contact with Client Organizations, he now refrains from any
contact with School District Client Organizations and \[description of step taken to
insulate Individual B from such matters\]; (14) Individual B does not broadcast his
membership on the School Board to Client Organizations or attempt to use his public
office to convince other groups to use the Company for fundraising; and (15) any
Company fundraisers conducted by School District Client Organizations during the
2013-2014 school year were C, you are advised as follows.
Confidential Advice, 14-520
May 16, 2014
Page 7
The Company is a business with which Individual B is associated in his capacity
as an A. Pursuant to Section 1103(a) of the Ethics Act, Individual B generally would
have a conflict of interest as a School Director in matter(s) before the School Board that
would financially impact him or the Company. The elements of a violation of Section
1103(a) of the Ethics Act would not be established as a result of the Company entering
into fundraising arrangements with School District Client Organizations subject to the
condition that Individual B would not use the authority of his position as a School
Director or confidential information received by holding such public position in
furtherance of the Company securing such fundraising arrangements. To the extent the
Company would not be contracting with the School District, or entering into subcontracts
with person(s) awarded contract(s) with the School District, the restrictions and
requirements of Section 1103(f) of the Ethics Act would not apply to fundraising
arrangements between the Company and the School District. 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
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