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Home My WebLink About84-567 SnyderMr. John L. Snyder 2001 Bethlehem Pike Hatfield, PA 19440 Dear Mr. Snyder: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PA 17120 TELEPHONE: (717) 783 -1610 May 18, 1984 ADVICE OF COUNSEL RE: Auditor, Insurance Agent, Contracting 84 -567 This responds to your letter of April 16, 1984, in which you requested advice from the State Ethics Commission. Issue: You ask whether, as an elected auditor, you may prepare and bid upon an insurance package for the township in which you serve. Facts: You indicate that in November, 1983, you were elected as an auditor for Hilltown Township, hereinafter, the Township. The Township is a second class township in Bucks County and as auditor you are completing the final two years of the term of an auditor who no longer resides within the Township. You are, by profession, a licensed insurance agent and broker. Your office has the capacity to provide insurance coverage for the Township. You are contemplating bidding on the insurance package to be secured or renewed by the Township at renewal time. However, before presenting a bid on such a package, you seek a ruling concerning any conflict of interest in the above situation. Discussion: The Ethics Act, 65 P.S. 402 defines "public official" as any elected official in the executive, legislative, or judicial branch of the State or any political subdivision thereof... ". Therefore, as an elected auditor within the Township you are clearly a "public official" under the definition of this term in the Ethics Act and you must conform your conduct to the requirements of the Ethics Act. The Ethics Act contains no provision which indicates that it is inherently incompatible for an individual to serve as auditor within a township and to provide services as a licensed insurance agent or broker to that same township. However, the Ethics Act requires that a public official may not use his office or confidential information received through his holding of public office to obtain financial gain for himself, his family, or business with which he is associated. See 65 P.S. 403(a). The Ethics Act defines a "business" with which an official is "associated" as follows: Mr. John L. Snyder May 18, 1984 Page 2 "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 holder of stock. 65 P.S. 402. Thus, pursuant to Section 3(a) of the Ethics Act if the insurance "office" which you referred to in your letter, constitutes a "business with which you are associated" as outlined above, Section 3(a) of the Ethics Act would be applicable. In this circumstance, you could not use your position or confidential information acquired during your service as auditor to obtain financial gain for yourself or for your insurance office or agency. For example, you would be prohibited from using confidential information received as an auditor to your benefit or that of your insurance agency in bidding on or obtaining the Township insurance business or in placing the Township insurance policies with respect to the coverages they seek to secure. Likewise, you must abstain from all decisions or discussions including a review of any questions which might arise or be presented to you as auditor with respect to the insurance purchasing or the insurance needs of the Township. You should place the reasons for your abstention and your removal from participation in such areas before the Township and make record of this abstention and the reasons therefore, even assuming that an open and public process, as will be discussed more fully below is used in awarding the . insurance contracts for the Township in question. See Sowers, 80 -050; Welsh, 83 -518; and Skrapits, 84 -501. The Ethics Act also imposes certain restrictions upon contracts entered into between a business which a public official enjoys a specified relationship and the public official's governmental body. Specifically, Section 3(c) of the Ethics Act provides that: (c) No public official or public employee or a member of his immediate family or any business in which the person or a member of the person's immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair market value of the business shall enter into any contract valued at $500 or more with a governmental body 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. Any contract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of making of the contract. 65 P.S. 403(c). Mr. John L. Snyder May 18, 1984 Page 3 Thus, if you, your wife, or a member of your immediate family is a director, officer, owner of more than 5% of the equity of any business (including your insurance office or agency) which seeks to contract with the Township, any contract between the Township and your agency or office, if it is valued at more than $500, must be awarded only after an open and public process has been undertaken. The Commission has concluded that an open and public process includes the following: 1. Prior public notice of the contract possibility; 2. Public disclosure of all proposals received and considered; and 3. Public disclosure of the contract awarded. See Howard, 79 -044. The restrictions of Section 3(c) and the requirement that an open and public process be undertaken are applicable if and only if you or a member of your immediate family stands in the relationship as director, officer, owner, or holder of stock exceeding 5% of the equity at fair market value of the insurance agency, office, or business which seeks to contract with the Township. However, even if you do not stand in this kind of relationship to the agency, office, etc., you would still, as an employee or agent of the insurance company or office be required to refrain from participating in decisions as auditor with respect to the placement, propriety, charges, etc. associated with this Township's insurance business should your agency or office be successful in obtaining this business. Abstention under such circumstances avoids the appearance of a conflict of interest which is also expressed as the "Purpose" of the Ethics Act in Section 1 of the Ethics Act, 65 P.S. 401. See also Knox, 81 -009. Conclusion: The Ethics Act does not prohibit you, as an auditor, from bidding on the insurance package and securing the insurance business of the Township in which you serve as auditor. However, the restrictions and guidelines for your conduct if this activity is undertaken, as outlined above, should be met. Pursuant to Section 7(9)(ii), this 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, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. Mr. John L. Snyder May 18, 1984 Page 4 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 request that the full Commission review this Advice. A personal appearance before the full Commission will be scheduled and a formal Opinion from the Commission will be issued. Any such appeal must be made, in writing, to the Commission within 15 days of service of this Advice pursuant to 51 Pa. Code 2.12. SSC /na Sincerely, \ / 1 ndra S. Chri: "tianson General Counsel