HomeMy WebLinkAbout16-556 Eberly
ADVICE OF COUNSEL
September 13, 2016
Douglas L. Eberly, Chief Counsel
Pennsylvania Milk Marketing Board
2301 North Cameron Street
Harrisburg, PA 17110-9408
16-556
Dear Mr. Eberly:
This responds to your letters received June 20, 2016, and July 25, 2016, by
which you requested an 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 individual with
regard to performing the duties of his public position as a Member of the Pennsylvania
Milk Marketing Board if a company owned by the individual and his two sons-in-law
would purchase a milk subdealer licensed by the Pennsylvania Milk Marketing Board.
Facts:
You have been authorized by Jim Van Blarcom (“Mr. Van Blarcom”) to
request an advisory from the Commission on his behalf. You have submitted facts, the
material portion of which may be fairly summarized as follows.
Mr. Van Blarcom is a Member of the Pennsylvania Milk Marketing Board
(“Board”). The Board is an independent agency of the Commonwealth created pursuant
to the Pennsylvania Milk Marketing Law (“Milk Marketing Law”), 31 P.S. § 700j-101 et
seq. The Board administers the Milk Marketing Law, the Milk Marketing Fee Act, the
Milk Producers’ Security Act, and regulations promulgated by the Board.
Pursuant to the Milk Marketing Law, the Board regulates the economic aspects of
the milk industry in Pennsylvania. The Milk Marketing Law requires the Board to set
minimum producer, wholesale, and retail prices for milk transactions that occur in
Pennsylvania. The Board annually issues pricing orders for six Milk Marketing Areas in
Pennsylvania based upon evidence presented to the Board at public hearings.
In addition to establishing minimum prices for milk transactions, the Board issues
licenses under the Milk Marketing Law to milk dealers, milk subdealers, milk haulers,
and milk testers. Individual dairy farms are not licensed by the Board. With regard to
milk subdealers, the Board approves initial license applications at public meetings, and
subsequent annual license renewals are generally deemed approved without the
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September 13, 2016
Page 2
necessity of specific approval at a public meeting. As of July 7, 2016, the Board
licensed 155 milk subdealers.
A milk subdealer purchases packaged fluid milk products from a milk dealer at a
discount from the base minimum wholesale price. The discount is set by Board order
based upon evidence received at public hearings, and the discount is not mandatory but
rather is given at the discretion of the milk dealer. The milk subdealer then sells the
packaged fluid milk products to its customers, such as stores, schools, and restaurants,
at the base minimum wholesale price.
The Milk Marketing Law requires milk subdealers to post bonds to secure their
purchases from milk dealers. The bonds are calculated pursuant to the Milk Marketing
Law and Board regulations and are updated annually with license renewals.
The Board enforces the Milk Marketing Law as to milk subdealers by issuing
citations for alleged violations of the Milk Marketing Law, the Milk Marketing Fee Act,
and the Milk Producers’ Security Act. The Milk Marketing Law provides that the Board
may, after a hearing, suspend or revoke a license for violations. Most citations are
resolved by a negotiated consent order and payment of a monetary penalty in lieu of
suspension.
Mr. Van Blarcom and his two sons-in-law own a company named “Sugar Branch
Farms, LLC” (the “Company”). Mr. Van Blarcom holds an ownership interest of
approximately 40% in the Company. The Company is in the business of dairy farming.
As part of its long term business plan, the Company is considering expanding beyond
dairy farming by purchasing a milk subdealer licensed by the Board.
Based upon the above submitted facts, you ask whether the Ethics Act would
impose prohibitions or restrictions upon Mr. Van Blarcom with regard to performing the
duties of his position as a Member of the Board if the Company would purchase a milk
subdealer licensed by the Board.
You state that if the Company would purchase a licensed milk subdealer, Mr.
Van Blarcom anticipates that he would continue to participate in Board actions that
would affect milk subdealers as a class, such as establishing minimum prices via public
hearing and Board order. You state that Mr. Van Blarcom would not take part in any
action that would specifically affect the milk subdealer owned by the Company,
including but not limited to citation proceedings and licensing proceedings. You further
state that if necessary, Mr. Van Blarcom would also recuse himself from actions or
proceedings involving actual or potential competitors of the milk subdealer and actions
or proceedings involving the milk dealer from which the milk subdealer would purchase
packaged milk.
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 Member of the Board, Mr. Van Blarcom 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
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September 13, 2016
Page 3
(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
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.
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September 13, 2016
Page 4
"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.
"De minimis economic impact."
An economic
consequence which has an insignificant effect.
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 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.
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.
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.
A conflict of interest would not exist to the extent the “de minimis exclusion”
and/or the “class/subclass exclusion” set forth within the Ethics Act’s definition of the
term "conflict" or "conflict of interest," 65 Pa.C.S. § 1102, would be applicable.
Eberly, 16-556
September 13, 2016
Page 5
The de minimis exclusion precludes a finding of conflict of interest as to an action
having a de minimis (insignificant) economic impact. Thus, when a matter that would
otherwise constitute a conflict of interest under the Ethics Act would have an
insignificant economic impact, a conflict would not exist and Section 1103(a) of the
Ethics Act would not be implicated. See, Kolb, Order 1322; Schweinsburg, Order 900.
The Commission has determined the applicability of the de minimis exclusion on a
case-by-case basis, considering all relevant circumstances. In the past, the
Commission has found amounts up to approximately $1,200 to be de minimis.
In order for the class/subclass exclusion to apply, two criteria must be met: (1)
the affected public official/public employee, immediate family member, or business with
which the public official/public employee or immediate family member is associated
must be a member of a class consisting of the general public or a true subclass
consisting of more than one member; and (2) the public official/public employee,
immediate family member, or business with which the public official/public employee or
immediate family member is associated must be affected "to the same degree" (in no
way differently) than the other members of the class/subclass. 65 Pa.C.S. § 1102; see,
Kablack, Opinion 02-003; Rubenstein, Opinion 01-007. The first criterion of the
exclusion is satisfied where the members of the proposed subclass are similarly
situated as the result of relevant shared characteristics. The second criterion of the
exclusion is satisfied where the individual/business in question and the other members
of the class/subclass are reasonably affected to the same degree by the proposed
action. Kablack, supra.
Having established the above general principles, you are advised as follows.
The Company is a business with which Mr. Van Blarcom is associated in his
capacity as an owner. If the Company would purchase a milk subdealer licensed by the
Board, hereinafter referred to as “the Milk Subdealer,” then Mr. Van Blarcom would
have a conflict of interest and would violate Section 1103(a) of the Ethics Act by
participating in his official capacity as a Member of the Board in matter(s) involving the
Company/the Milk Subdealer if: (1) he would be consciously aware of a private
pecuniary benefit for himself or the Company/the Milk Subdealer; (2) his action(s) would
constitute one or more specific steps to attain that benefit; and (3) neither of the
statutory exclusions to the definition of "conflict" or "conflict of interest" as set forth in the
Ethics Act, 65 Pa.C.S. § 1102, would be applicable.
Action(s) or proceeding(s) involving actual or potential competitors of the Milk
Subdealer or action(s) or proceeding(s) involving the milk dealer from which the Milk
Subdealer would purchase packaged milk could present a conflict of interest for Mr. Van
Blarcom if there would be some basis for a conflict of interest such as a private
pecuniary benefit to Mr. Van Blarcom or the Company/Milk Subdealer.
As noted above, in each instance of a conflict of interest, Mr. Van Blarcom 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.
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 Milk Marketing Law.
Conclusion:
Based upon the submitted facts that: (1) Jim Van Blarcom (“Mr.
Van Blarcom”) is a Member of the Pennsylvania Milk Marketing Board (“Board”); (2) the
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September 13, 2016
Page 6
Board is an independent agency of the Commonwealth created pursuant to the
Pennsylvania Milk Marketing Law (“Milk Marketing Law”), 31 P.S. § 700j-101 et seq.; (3)
the Board administers the Milk Marketing Law, the Milk Marketing Fee Act, the Milk
Producers’ Security Act, and regulations promulgated by the Board; (4) pursuant to the
Milk Marketing Law, the Board regulates the economic aspects of the milk industry in
Pennsylvania; (5) the Milk Marketing Law requires the Board to set minimum producer,
wholesale, and retail prices for milk transactions that occur in Pennsylvania; (6) the
Board annually issues pricing orders for six Milk Marketing Areas in Pennsylvania based
upon evidence presented to the Board at public hearings; (7) in addition to establishing
minimum prices for milk transactions, the Board issues licenses under the Milk
Marketing Law to milk dealers, milk subdealers, milk haulers, and milk testers; (8)
individual dairy farms are not licensed by the Board; (9) with regard to milk subdealers,
the Board approves initial license applications at public meetings, and subsequent
annual license renewals are generally deemed approved without the necessity of
specific approval at a public meeting; (10) as of July 7, 2016, the Board licensed 155
milk subdealers; (11) a milk subdealer purchases packaged fluid milk products from a
milk dealer at a discount from the base minimum wholesale price; (12) the discount is
set by Board order based upon evidence received at public hearings, and the discount
is not mandatory but rather is given at the discretion of the milk dealer; (13) the milk
subdealer then sells the packaged fluid milk products to its customers, such as stores,
schools, and restaurants, at the base minimum wholesale price; (14) the Milk Marketing
Law requires milk subdealers to post bonds to secure their purchases from milk dealers;
(15) the bonds are calculated pursuant to the Milk Marketing Law and Board regulations
and are updated annually with license renewals; (16) the Board enforces the Milk
Marketing Law as to milk subdealers by issuing citations for alleged violations of the
Milk Marketing Law, the Milk Marketing Fee Act, and the Milk Producers’ Security Act;
(17) the Milk Marketing Law provides that the Board may, after a hearing, suspend or
revoke a license for violations; (18) most citations are resolved by a negotiated consent
order and payment of a monetary penalty in lieu of suspension; (19) Mr. Van Blarcom
and his two sons-in-law own a company named “Sugar Branch Farms, LLC” (the
“Company”); (20) Mr. Van Blarcom holds an ownership interest of approximately 40% in
the Company; (21) the Company is in the business of dairy farming; and (22) as part of
its long term business plan, the Company is considering expanding beyond dairy
farming by purchasing a milk subdealer licensed by the Board, you are advised as
follows.
As a Member of the Board, Mr. Van Blarcom 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. The Company is a business with which Mr. Van Blarcom is associated in
his capacity as an owner. If the Company would purchase a milk subdealer licensed by
the Board, hereinafter referred to as “the Milk Subdealer,” then Mr. Van Blarcom would
have a conflict of interest and would violate Section 1103(a) of the Ethics Act by
participating in his official capacity as a Member of the Board in matter(s) involving the
Company/the Milk Subdealer if: (1) he would be consciously aware of a private
pecuniary benefit for himself or the Company/the Milk Subdealer; (2) his action(s) would
constitute one or more specific steps to attain that benefit; and (3) neither of the
statutory exclusions to the definition of "conflict" or "conflict of interest" as set forth in the
Ethics Act, 65 Pa.C.S. § 1102, would be applicable. Action(s) or proceeding(s)
involving actual or potential competitors of the Milk Subdealer or action(s) or
proceeding(s) involving the milk dealer from which the Milk Subdealer would purchase
packaged milk could present a conflict of interest for Mr. Van Blarcom if there would be
some basis for a conflict of interest such as a private pecuniary benefit to Mr. Van
Blarcom or the Company/Milk Subdealer.
In each instance of a conflict of interest, Mr. Van Blarcom 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
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September 13, 2016
Page 7
disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied
in the event of a voting conflict.
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