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HomeMy WebLinkAbout15-535 Ambrose ADVICE OF COUNSEL May 29, 2015 David P. Ambrose Financial Solution Services, LLP Greentree Commons 381 Mansfield Avenue, Suite 131 Pittsburgh, PA 15220 15-535 Dear Mr. Ambrose: This responds to your letter dated April 3, 2015, by which you requested an advisory from the Pennsylvania State Ethics Commission (“Commission”). Issue: Whether, pursuant to Section 1103(a) of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1103(a), an individual who would be appointed as a school director would have a conflict of interest with regard to participating in matters before the school district school board that would pertain to the school district’s insurance package, where the individual is currently the broker of record for the school district and its insurance package. Facts: You request an advisory from the Commission based upon submitted facts that may be fairly summarized as follows. You have submitted a letter of interest to the Central Valley School District (“School District”) to fill a vacancy on the School District School Board (“School Board”) for a term ending in December 2015. You are affiliated with an entity named “Financial Solution Services” or “Financial Solution Services, LLP” (“Financial Solutions”). You are currently the broker of record for the School District and its insurance package, which includes property and liability coverage and workers’ compensation insurance. You seek guidance as to whether, if you would be appointed as a School Director for the School District, you would have a conflict of interest with regard to participating in matters before the School District School Board that would pertain to the School District’s insurance package. 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 Ambrose, 15-535 May 29, 2015 Page 2 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 in that capacity be 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 immediate family is associated. The term does not include an action having a de minimis economic impact or which Ambrose, 15-535 May 29, 2015 Page 3 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. Subject to the statutory exclusions to the Ethics Act’s definition of the term “conflict” or “conflict of interest,” 65 Pa.C.S. § 1102, 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 Ambrose, 15-535 May 29, 2015 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. Ambrose, 15-535 May 29, 2015 Page 5 It is administratively noted that the Public School Code provides in 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. 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 you and Financial Solutions. You are advised that Financial Solutions is a business with which you are associated to the extent that you are a director, officer, owner, employee, or holder of a financial interest in Financial Solutions. Upon taking office as a School Director for the School District, you generally would have a conflict of interest under Section 1103(a) of the Ethics Act in matter(s) before the School Board that would financially impact you or a business with which you are associated, including but not limited to matter(s) pertaining to the School District’s insurance package. 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 yourself or a business with which you are associated through a detriment to a business competitor. See, Pepper, Opinion 87-008. As noted above, in each instance of a conflict of interest, you 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. You are further advised that the restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed whenever applicable. Section 1103(f) of the Ethics Act would not be applicable as to a contract between the School District and you or a business with which you are associated that was entered into prior to you taking office as a School Director. Cf., Lewis, Advice 13-587; Bowers, Advice 07-588; Burkhart, Advice 03-535. However, any contract renewals or future contract(s) between you or a business with which you are associated and the School District valued at $500 Ambrose, 15-535 May 29, 2015 Page 6 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. 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) you have submitted a letter of interest to the Central Valley School District (“School District”) to fill a vacancy on the School District School Board (“School Board”) for a term ending in December 2015; (2) you are affiliated with an entity named “Financial Solution Services” or “Financial Solution Services, LLP” (“Financial Solutions”); and (3) you are currently the broker of record for the School District and its insurance package, which includes property and liability coverage and workers’ compensation insurance, you are advised as follows. Upon taking office as a School Director for the School District, you would in that capacity be a public official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. The submitted facts do not identify the precise nature of the relationship between you and Financial Solutions. Financial Solutions is a business with which you are associated to the extent that you are a director, officer, owner, employee, or holder of a financial interest in Financial Solutions. Upon taking office as a School Director for the School District, you generally would have a conflict of interest under Section 1103(a) of the Ethics Act in matter(s) before the School Board that would financially impact you or a business with which you are associated, including but not limited to matter(s) pertaining to the School District’s insurance package. 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 yourself or a business with which you are associated through a detriment to a business competitor. In each instance of a conflict of interest, you 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. Section 1103(f) of the Ethics Act would not be applicable as to a contract between the School District and you or a business with which you are associated that was entered into prior to you taking office as a School Director. However, any contract renewals or future contract(s) between you or a business with which you are associated 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. 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 . Ambrose, 15-535 May 29, 2015 Page 7 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