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HomeMy WebLinkAbout14-564 Holland ADVICE OF COUNSEL December 17, 2014 Fred A. Holland, Esquire Murphy, Butterfield & Holland, P.C. 442 William Street Williamsport, PA 17701 14-564 Dear Mr. Holland: This responds to your letters dated November 10, 2014, and November 18, 2014, 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 permit a company that sells produce (“the Produce Vendor”) to enter into an arrangement to supply produce and fruit to a corporation which provides food services for school districts (“the Food Services Corporation”), where: (1) an owner of the Produce Vendor is a school director for a particular school district; (2) the Food Services Corporation has a contract with such school district for the provision of food services; and (3) the Food Services Corporation would use the produce and fruit supplied to it by the Produce Vendor at all school districts served by the Food Services Corporation, including such school district. Facts: You have been authorized by a company named “JAC’s Produce, LLC” (“JAC’s Produce”) to request an advisory from the Pennsylvania State Ethics Commission on behalf of JAC’s Produce. You have submitted facts, the material portion of which may be fairly summarized as follows. Gregory Anthony (“Mr. Anthony”) is a School Director for the South Williamsport Area School District (“School District”). Mr. Anthony was elected for a term of office that began in December 2011 and ends in December 2015. A corporation named “Nutrition, Inc.” previously provided food services to the School District under a contract that ran from July 1, 2009, through June 30, 2014. When the School District solicited proposals for a new food services contract from businesses known to provide food services, Nutrition, Inc. was the only entity to respond to the solicitation. The School District subsequently entered into a food services contract (“Contract”) with Nutrition, Inc. which runs from July 1, 2014, through June 30, 2015, with provisions allowing for up to four annual renewals. Nutrition, Inc. provides food services to other school districts in addition to the School District. Holland, 14-564 December 17, 2014 Page 2 In his private capacity, Mr. Anthony is an owner of JAC’s Produce. The produce supplier that had been supplying produce for Nutrition, Inc. recently ceased operations, and Nutrition, Inc. approached vendors, including JAC’s Produce, for the purpose of seeking the provision of products which Nutrition, Inc. needs to fulfill its contracts with all local school districts, including the School District. You state that JAC’s Produce intends to sell produce and fruit to Nutrition, Inc. in accordance with terms and conditions as may be negotiated between the parties. You further state that such sales are not contemplated to be made subject to a written contract and that Nutrition, Inc. will be free to place orders with companies other than JAC’s Produce at any time. Produce and fruit sold to Nutrition, Inc. by JAC’s Produce would be used at all school districts served by Nutrition, Inc., including the School District. You state that as a School Director, Mr. Anthony will not have any supervisory or overall responsibility for the implementation or administration of the Contract or of any subcontract with JAC’s Produce. You further state that if “he” is engaged in business with Nutrition, Inc., Mr. Anthony will not participate in discussions or any vote regarding any food service contract that might involve Nutrition, Inc. Based upon the above submitted facts, you ask whether the proposed business relationship between JAC’s Produce and Nutrition, Inc. would be in compliance with the Ethics Act, and especially Section 1103(f) of the Ethics Act (pertaining to contracting). 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. 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 following terms related to Section 1103(f) are defined in the Ethics Act as follows: Holland, 14-564 December 17, 2014 Page 3 § 1102. Definitions "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. "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. "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any agency performing a governmental function. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. 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 with which the public official/public employee is associated, or subcontracting with any person who has been awarded a contract with such 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. In applying the above provisions of the Ethics Act to the instant matter, you are advised as follows. As a School Director for the School District, Mr. Anthony is a “public official” as that term is defined by the Ethics Act. JAC’s Produce is a business with which Mr. Anthony is associated in his capacity as an owner. Holland, 14-564 December 17, 2014 Page 4 An agreement or arrangement for JAC’s Produce to supply Nutrition, Inc. with produce and fruit to use in fulfillment of the Contract or renewal thereof would constitute a subcontract with Nutrition, Inc. for purposes of Section 1103(f) of the Ethics Act. You are advised that where such a subcontract with Nutrition, Inc. would be valued at $500 or more, Section 1103(f) of the Ethics Act would not prohibit JAC’s Produce from entering into the subcontract subject to the condition that the requirements of Section 1103(f) of the Ethics Act as to an open and public process would have been satisfied as to the Contract or renewal thereof. It is noted that Section 1103(f) of the Ethics Act provides that where the restrictions of Section 1103(f) are not observed, a court may declare the contract or subcontract void if an action is properly filed with the court within 90 days of the making of the contract or subcontract. 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: Based upon the submitted facts that: (1) Gregory Anthony (“Mr. Anthony”) is a School Director for the South Williamsport Area School District (“School District”); (2) Mr. Anthony was elected for a term of office that began in December 2011 and ends in December 2015; (3) a corporation named “Nutrition, Inc.” previously provided food services to the School District under a contract that ran from July 1, 2009, through June 30, 2014; (4) when the School District solicited proposals for a new food services contract from businesses known to provide food services, Nutrition, Inc. was the only entity to respond to the solicitation; (5) the School District subsequently entered into a food services contract (“Contract”) with Nutrition, Inc. which runs from July 1, 2014, through June 30, 2015, with provisions allowing for up to four annual renewals; (6) Nutrition, Inc. provides food services to other school districts in addition to the School District; (7) in his private capacity, Mr. Anthony is an owner of a company named “JAC’s Produce, LLC” (“JAC’s Produce”); (8) the produce supplier that had been supplying produce for Nutrition, Inc. recently ceased operations, and Nutrition, Inc. approached vendors, including JAC’s Produce, for the purpose of seeking the provision of products which Nutrition, Inc. needs to fulfill its contracts with all local school districts, including the School District; (9) JAC’s Produce intends to sell produce and fruit to Nutrition, Inc. in accordance with terms and conditions as may be negotiated between the parties; (10) such sales are not contemplated to be made subject to a written contract, and Nutrition, Inc. will be free to place orders with companies other than JAC’s Produce at any time; (11) produce and fruit sold to Nutrition, Inc. by JAC’s Produce would be used at all school districts served by Nutrition, Inc., including the School District; (12) as a School Director, Mr. Anthony will not have any supervisory or overall responsibility for the implementation or administration of the Contract or of any subcontract with JAC’s Produce; and (13) if “he” is engaged in business with Nutrition, Inc., Mr. Anthony will not participate in discussions or any vote regarding any food service contract that might involve Nutrition, Inc., you are advised as follows. As a School Director for the School District, Mr. Anthony is a “public official” as that term is defined by the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. JAC’s Produce is a business with which Mr. Anthony is associated in his capacity as an owner. An agreement or arrangement for JAC’s Produce to supply Nutrition, Inc. with produce and fruit to use in fulfillment of the Contract or renewal thereof would constitute a subcontract with Nutrition, Inc. for purposes of Section 1103(f) of the Ethics Act. You are advised that where such a subcontract with Nutrition, Inc. would be valued at $500 or more, Section 1103(f) of the Ethics Act would not prohibit JAC’s Produce from entering into the subcontract subject to the condition that the requirements of Section 1103(f) of the Ethics Act as to an open and public process would have been satisfied as to the Contract or renewal thereof. Holland, 14-564 December 17, 2014 Page 5 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