The URL can be used to link to this page

Home My WebLink About85-558 LewisSTATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 June 28 1985 ADVICE OF COUNSEL Mr. Claude J. Lewis 85 -558 Department of Commerce Legal Office 446 Formum Building Harrisburg, PA 17120 Re: Pennsylvania Minority Business Development Authority, Executive Director, Relative of Loan Applicant. Conflict of Interest Dear Mr. Lewis: This responds to your letter of June 20, 1985, wherein you request the advice of the State Ethics Commission. Issue: Whether the Pennsylvania Minority Business Development Authority may grant a loan to a business operated by the brother -in -law and business partner of the Authority Executive Director. Facts: As counsel for the Pennsylvania Minority Business Development Authority, hereinafter the Authority, you have presented the above question. The Authority currently is considering the loan application of Neil H. Dorsey t/a Dorsey's Radio & TV Service and Record Shop, hereinafter the Shop. The loan is requested in order to expand this business enterprise. Mr. Dorsey, the applicant, is the brother -in -law of William F. Peterson, the Executive Director of the Authority. While Mr. Peterson has no pecuniary interest in the shop, he is a general partner with Mr. Dorsey in another business, Tele- Bargains Center. This business leases office space from the Shop. You have indicated that there is no other business or financial relationship between Mr. Peterson and the Shop. On June 13, 1985, the loan application was tabled by the Loan Evaluation Committee of the Authority pending a review of applicable law. You have indicated that Mr. Peterson had removed himself from the above referenced meeting during the consideration of this application. We note that Mr. Peterson is one of five voting members of the Loan Evaluation Committee. After the review by the committee a presentation is made to the full board of the Authority. Mr. Claude J. Lewis June 28, 1985 Page 2 You have posed various questions regarding the propriety of approving this loan application and Mr. Peterson's participation in relation thereto. Discussion: At the outset, it must be noted that the Ethics Commission may only address your question within the purview of the Ethics Act. The Commission may not and will not offer advice with respect to any duties or obligations that may be imposed by other provisions of law such as the State Adverse Interest Act, the Governor's Code of Conduct, or the provisions of the Pennsylvania Minority Business Development Authority Act. As Executive Director of the Authority, Mr. Peterson is clearly a public employee as that term is defined in the State Ethics Act. 65 P.S. §402. As such, his conduct must conform to the requirements thereof. Shuff, 83 -511. Generally, the State Ethics Act provides that: Section 3. Restricted activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. 403(a). Additionally, the Act defines member of ones immediate family as follows: Section 2. Definitions. "Immediate family." A spouse residing in the person's household and minor dependent children. 65 P.S. 402. The Act also defines business with which one is associated as follows: Section 2. Definitions. "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. As can be seen, the relationship between Mr. Dorsey and Mr. Peterson does not fall within the definition above. Additionally, as defined in the Act the Shop is not a business with which he is associated. In light of these factors, there would appear to be no prohibitions placed upon Mr. Peterson or the Authority under Section 3(a). Mr. Claude J. Lewis June 28, 1985 Page 3 The Ethics Commission, however, is also empowered to address other areas of possible conflict pursuant to Section 3(d). 65 P.S. §403(d). Fritzinger, 80 -008; Yaw, 85 -011. The parameters of the type of activity encompassed by this provision are generally reviewed in light of the preamble to the Ethics Act which enunciates the legislative intent of the Act. A public official or employee, pursuant to this provision, is to ensure that their personal financial interests present neither a conflict nor the appearance of a conflict with the public trust. 65 P.S. §401. Such a conflict may exist where an individual represents one or more adverse interests, Alfano, 80 -007 where an individual serves in positions that are incompatible or conflicting; Nelson, 85 -009, or where such an official or employee accepts compensation to which he is not entitled. Domalakes, 85 -010. In situations such as the one presented herein, the Commission has determined that the definitional limitations applicable to Section 3(a) of the Act are not relevant to questions addressed under the above provision. Leete, 82 -005. As such, the Commission has placed restrictions upon various ac tons of public officials and employees when acting upon matters that involve relatives outside of the previously cited definition. O'Reilly, 83 -012. As a result, Mr. Peterson may not participate to any degree in the Committee's and Authority's consideration and disposition of this loan application. This result is required not only because of the above f ami l i a relationship but also because of the nature and extent of the business relationship between Mr. Peterson and the applicant. In addition to abstaining from the Authority's action in this matter, Mr. Peterson should also publicly disclose such abstention and have such recorded in the appropriate records of the Authority. It is further advised that Mr. Peterson must not counsel or advise Mr. Dorsey in relation to this matter and that he should remain completely detached from the application process in its entirety. We also note that Mr. Peterson should not obtain either directly or indirectly any benefit for himself or Tele- Bargains Center as a result of any loan that is granted by the Authority to Mr. Dorsey. Additionally, it is noted that under certain circumstances where a public official or employee participates as a private individual in a grant program for which he has official responsibilities, the Commission has ruled that the official must abstain from decisions regarding others who were also applying for the same funds. Generally, this determination was made where there were limited funds available for distribution and where only a few of the many app plicants would be securing approval. The Commissions ruling was grounded upon the concept that an official under such circumstances could effectively deny all Mr. Claude J. Lewis June 28, 1985 Page 4 applications other than the one in which he is interested, thereby insuring the availability of funds for the project in which he was interested. Coploff, 83 -005. We reference to this situation not to imply any improper motivation but merely to supply a complete response to your question. We will assume that this particular situation does not exist in relation to your request. Conclusion: The Executive Director of the Pennsylvania Minority Business Development Authority may not particiapte to any extent in the Authority's review of a loan application submitted by that official's brother -in -law, especially where the official and applicant are partners in another business. If the guidelines set forth above are followed, the Director will avoid both, the conflict of interest and the appearance of such a conflict. 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. 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 Commission w i l l 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. JJC /sfb Sincer ohn J. C$m� General ounsel