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HomeMy WebLinkAbout15-547 Confidential ADVICE OF COUNSEL July 24, 2015 15-547 This responds to your letter received June 16, 2015, by which you requested a confidential advisory from the Pennsylvania State Ethics Commission (“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 attorney whose law firm handles A cases exclusively, and who plans to sell his law firm or merge it with another law practice and commence employment with the Commonwealth of Pennsylvania as the B of Governmental Body C within Commonwealth Agency D; and in particular, whether such attorney would be permitted to: (1) accept installment payments from the lawyer/law firm which would acquire his interest in his law firm; (2) accept legal fees paid pursuant to Es and Fs for cases handled by his law firm that ended before or were awaiting decision when he accepted the aforesaid Commonwealth employment position; or (3) have involvement with cases handled by his law firm that were pending decision at the time he accepted the aforesaid Commonwealth employment position. Facts: You request a confidential advisory from the Commission based upon submitted facts, the material portion of which may be fairly summarized as follows. You are an attorney, and you currently run a small law firm (the “Firm”) that handles A cases exclusively. You have been offered a position with Commonwealth Agency D as the B of Governmental Body C. You have submitted copies of a position description for the position of B of Governmental Body C and the job classification specifications (job code \[number\]) for the position of B of Governmental Body C, both of which documents are incorporated herein by reference. You state that the mission of Governmental Body C is to assist the A in determining whether Gs are eligible for Hs and/or I. The A will first review a J for Hs to determine if the basic requirements of K eligibility are met. An eligible J is then forwarded to Governmental Body C for determination of an L’s M eligibility for Hs under the N. The determination of Governmental Body C is appealable to the A. Confidential Advice, 15-547 July 24, 2015 Page 2 You state that as the B of Governmental Body C, you would supervise the review and determination of A eligibility. You further state that you would not have direct authority over the outcome of individual cases. You plan to sell the Firm to or merge it with another law practice and to negotiate a sales or merger agreement that will set compensation for your interest in the Firm. You state that if you negotiate a merger agreement, it will be in anticipation of you leaving the Firm and being paid for your interest in the Firm. You further state that it is likely the lawyer/law practice which acquires the Firm will want to pay compensation for your interest in the Firm in installments extending into the period following the commencement of your employment as the B of Governmental Body C. The lawyer/law practice which acquires the Firm will have involvement with Governmental Body C. You state that by the time your employment with Governmental Body C begins, you will have outstanding legal fees for Es or Fs not yet paid by A for cases that ended. You state that all such amounts will be paid to you directly by the A and that the A can take up to \[amount of time\] to pay such amounts. You further state that you will also have cases awaiting decision by the A for which all the work is done. Based upon the above submitted facts, you pose the following questions: (1) Whether, after accepting employment as the B of Governmental Body C, you would be permitted to accept installment payments from the lawyer/law practice which acquires the Firm; (2) Whether you would be permitted to accept legal fees paid pursuant to Es and Fs from the A for cases that ended before you accepted employment as the B of Governmental Body C; (3) Whether you would be permitted to accept legal fees paid pursuant to Fs from A for cases that were awaiting decision by the A when you accepted employment as the B of Governmental Body C; and (4) Whether you would be required to abstain or recuse yourself from involvement with cases that were awaiting decision by the A when you accepted employment as the B of Governmental Body C. 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 assuming employment as the B of Governmental Body C, you would become a public employee subject to the provisions of the Ethics Act. This conclusion is based upon the position description and the job classification specifications, which when reviewed on an objective basis, indicate clearly that the power exists to take or recommend official action of a non-ministerial nature with respect to one or more of the following: contracting; procurement; administering or monitoring grants or subsidies; planning or zoning; inspecting; licensing; regulating; auditing; or other activity(ies) where the economic impact is greater than de minimis on the interests of another person. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities Confidential Advice, 15-547 July 24, 2015 Page 3 (a)Conflict of interest.-- No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). 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 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. 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. In each instance of a conflict of interest, the public official/public employee would be required to abstain from participation. The abstention requirement 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. Per the Pennsylvania Supreme Court’s decision in Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011), in order to violate Section 1103(a) of the Ethics Act, a public official/public employee: … must act in such a way as to put his \[office/public position\] to the purpose of obtaining for himself a private pecuniary benefit. Such directed action implies awareness on the part of the \[public official/public employee\] of the potential pecuniary benefit as well as the motivation to obtain that benefit for himself. Confidential Advice, 15-547 July 24, 2015 Page 4 Kistler, supra, 610 Pa. at 523, 22 A.3d at 227. To violate Section 1103(a) of the Ethics Act, a public official/public employee “must be consciously aware of a private pecuniary benefit for himself, his family, or his business, and then must take action in the form of one or more specific steps to attain that benefit.” Id., 610 Pa. at 528, 22 A.3d at 231. Section 1103(c) of the Ethics Act, 65 Pa.C.S. § 1103(c), provides: § 1103. Restricted activities (c)Accepting improper influence.-- No public official, public employee or nominee or candidate for public office shall solicit or accept anything of monetary value, including a gift, loan, political contribution, reward or promise of future employment, based on any understanding of that public official, public employee or nominee that the vote, official action or judgment of the public official or public employee or nominee or candidate for public office would be influenced thereby. 65 Pa.C.S. § 1103(c). Section 1103(e) of the Ethics Act provides: § 1103. Restricted activities (e)Contingent and severance payments.-- (1) No person shall solicit or accept a severance payment or anything of monetary value contingent upon the assumption or acceptance of public office or employment. (2) This subsection shall not prohibit: (i) Payments received pursuant to an employment agreement in existence prior to the time a person becomes a candidate or is notified by a member of a transition team, a search committee or a person with appointive power that he is under consideration for public office or makes application for public employment. (ii) Receipt of a salary, fees, severance payment or proceeds resulting from the sale of a person’s interest in a corporation, professional corporation, partnership or other entity resulting from termination or withdrawal therefrom upon the assumption or acceptance of public office or employment. (3) Payments made or received pursuant to paragraph (2)(i) and (ii) shall not be based on the agreement, written or otherwise, that the vote or official action of the prospective public official or employee would be influenced thereby. Confidential Advice, 15-547 July 24, 2015 Page 5 65 Pa.C.S. § 1103(e). Pursuant to Section 1103(e) of the Ethics Act, subject to certain statutory exceptions, a person is prohibited from soliciting or accepting a severance payment or anything of monetary value contingent upon the assumption or acceptance of public office or employment. Your specific questions shall now be considered. In response to your first question, you are advised that Sections 1103(c) and 1103(e) of the Ethics Act would not prohibit you from accepting installment payments from the lawyer/law practice which acquires the Firm subject to the condition that such installment payments would not be based on an understanding or agreement that your vote, official action or judgment as the B of Governmental Body C would be influenced thereby. Cf., Glenn, Advice 93-565. As for Section 1103(a) of the Ethics Act, the submitted facts are insufficient to enable a determination as to whether the role of Governmental Body C in matter(s) handled by the lawyer/law practice which acquires the Firm could facilitate the aforesaid installment payments being made to you. Therefore, you are generally advised that the acceptance of installment payments from the lawyer/law practice which acquires the Firm could form the basis for a violation of Section 1103(a) if you would use the authority of your public position or confidential information received by being the B of Governmental Body C in order to facilitate such payments being made to you. With regard to your second and third questions, you are advised that the Ethics Act would not prohibit you from accepting legal fees paid pursuant to Es and Fs from A for cases that ended before or were awaiting decision when you accepted employment as the B of Governmental Body C. In response to your fourth question, you are advised that you would have a conflict of interest in your position as the B of Governmental Body C and would transgress Section 1103(a) of the Ethics Act by having involvement with cases that were awaiting decision by the A when you accepted employment in such position to the extent you would be consciously aware of a private pecuniary benefit for yourself, a member of your immediate family, or a business with which you or a member of your immediate family is associated, and your action would constitute one or more specific steps to attain that benefit. Kistler, supra. As noted above, in each instance of a conflict of interest, you would be required to abstain from participation. 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. Specifically not addressed herein is the applicability of the O or the Rules of Professional Conduct. Conclusion: Based upon the submitted facts that: (1) you are an attorney, and you currently run a small law firm (the “Firm”) that handles A cases exclusively; (2) you have been offered a position with Commonwealth Agency D as the B of Governmental Body C; (3) the mission of Governmental Body C is to assist the A in determining whether Gs are eligible for Hs and/or I; (4) the A will first review a J for Hs to determine if the basic requirements of K eligibility are met; (5) an eligible J is then forwarded to Governmental Body C for determination of an L’s M eligibility for Hs under the N; (6) the determination of Governmental Body C is appealable to the A; (7) as the B of Governmental Body C, you would supervise the review and determination of A eligibility; (8) you would not have direct authority over the outcome of individual cases; (9) you plan to sell the Firm to or merge it with another law practice and to negotiate a sales or merger agreement that will set compensation for your interest in the Firm; (10) if you Confidential Advice, 15-547 July 24, 2015 Page 6 negotiate a merger agreement, it will be in anticipation of you leaving the Firm and being paid for your interest in the Firm; (11) it is likely the lawyer/law practice which acquires the Firm will want to pay compensation for your interest in the Firm in installments extending into the period following the commencement of your employment as the B of Governmental Body C; (12) the lawyer/law practice which acquires the Firm will have involvement with Governmental Body C; (13) by the time your employment with Governmental Body C begins, you will have outstanding legal fees for Es or Fs not yet paid by A for cases that ended; (14) all such amounts will be paid to you directly by the A, and the A can take up to \[amount of time\] to pay such amounts; and (15) you will also have cases awaiting decision by the A for which all the work is done, you are advised as follows. Upon assuming employment as the B of Governmental Body C, you would become a public employee subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. Sections 1103(c) and 1103(e) of the Ethics Act would not prohibit you from accepting installment payments from the lawyer/law practice which acquires the Firm subject to the condition that such installment payments would not be based on an understanding or agreement that your vote, official action or judgment as the B of Governmental Body C would be influenced thereby. As for Section 1103(a) of the Ethics Act, the submitted facts are insufficient to enable a determination as to whether the role of Governmental Body C in matter(s) handled by the lawyer/law practice which acquires the Firm could facilitate the aforesaid installment payments being made to you. Therefore, you are generally advised that the acceptance of installment payments from the lawyer/law practice which acquires the Firm could form the basis for a violation of Section 1103(a) if you would use the authority of your public position or confidential information received by being the B of Governmental Body C in order to facilitate such payments being made to you. The Ethics Act would not prohibit you from accepting legal fees paid pursuant to Es and Fs from A for cases that ended before or were awaiting decision when you accepted employment as the B of Governmental Body C. You would have a conflict of interest in your position as the B of Governmental Body C and would transgress Section 1103(a) of the Ethics Act by having involvement with cases that were awaiting decision by the A when you accepted employment in such position to the extent you would be consciously aware of a private pecuniary benefit for yourself, a member of your immediate family, or a business with which you or a member of your immediate family is associated, and your action would constitute one or more specific steps to attain that benefit. In each instance of a conflict of interest, you would be required to abstain from participation. 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. Confidential Advice, 15-547 July 24, 2015 Page 7 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