Loading...
HomeMy WebLinkAbout89-541 SilverstrimJ. Andrew Silverstrim 89 -541 Borough of South Williamsport 329 -331 West Southern Avenue South Williamsport, PA 17701 Re: Conflict of Interest, Public Official, Contracting with Governmental Body, Councilmember, Borough Dear Mr. Silverstrim: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL May 22, 1989 This responds to your letter of April 18, 1989, in which you requested advice from the State Ethics Commission. Issue: Whether the State Ethics Act presents any prohibitions upon a councilmen or a business with which he is associated from contracting with the borough. Facts: After stating that Pennsylvania recently passed the mandatory recycling law, Act 101, you recite that you hold a seat on Borough Council in South Williamsport and that you also currently hold the position of Vice President of Inter - County Waste Haulers, Inc. a group of garbage haulers in the Williamsport area which bids on recycling services to five area municipalities including South Williamsport. After noting that you also hold the five percent interest in Inter - County Waste Haulers, Inc., you state that the business goes directly with your main source of income, Silverstrim Sanitation, in which you are a 50% partner. You paraphrase Section 1404 of the borough code and then question whether a conflict exists if either you or Inter - County Waste Haulers, Inc. would bid on a contract for recycling services for the Borough of South Williamsport. You then inquire as to whether you would have to resign from the Borough if a conflict does exist and as to the timing of your resignation. You then advise that your personal attorney believes that Section 412 and 403(c) of the Ethics Act override 1404 of the Borough Code; however, you state that the Borough solicitor is not totally in accord with the foregoing. After attaching photocopies of the letters of two attorneys, you conclude by requesting advice on these issues from the Ethics J. Andrew Silverstrim May 22, 1989 Page 2 Commission. Discussion: As a Councilmember for South Williamsport Borough, you are a "public official" as that term is defined in the State Ethics Act. 65 P.S. S402; 51 Pa. Code §1.1. As such, you are subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. Generally, the State Ethics Act places no per se absolute prohibition upon a public official's employment in a business that contracts with his governmental body. The Act does, however, provide as follows: 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). Under Section 3(a) quoted above, this Commission has determined that use of office by a public official to obtain a financial gain for himself or a member of his immediate family or a business with which he is associated which is not provided for in law transgresses the above provision of law. Thus, use of office by a public official to obtain a financial gain which is not authorized as part of his compensation is prohibited by Section 3(a): Hoax /McCutcheon, Orders No. 128, 129, affirmed McCutcheon v. State Ethics Commission, 77 Pa. Comm. Ct. 529, A.2d (1983); Yacobet, Order No. 412 -R, affirmed Yacobet v. State Ethics Commission, Pa. Commw. Ct. , 531 A.2d 536 (1987). Similarly, Section 3(a) of the Ethics Act would prohibit a public official /employee from using public office to advance his own interests; Koslow, Order 458 -R, affirmed Koslow v. State Ethics Commission, Pa. Commw. Ct. , 540 A.2d 1374 (1988). Likewise, a public official /employee may not use the status or position of public office for his own personal advantage; Huff, Opinion 84 -015. 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. J. Andrew Silverstrim May 22, 1989 Page 3 Since you are a Vice President and a 5% owner of Inter - County Waster Haulers, Inc., it is clear that entity is a "business with which he is associated" as that term is defined under the Ethics Act. The Commission has determined that if a particular statutory enactment prohibits an official's receipt of a particular benefit, then that official's receipt of such a prohibited benefit, in and through his public office, would also be a use of his office in contravention of the Ethics Act. The Commission has been called upon, on various occasions, to determine whether a specific benefit or financial gain is prohibited by law. See, Allen, Advice 86 -518. In order to determine whether a particular benefit or gain is strictly prohibited by law, the provisions of the enabling legislation of the governmental body in question must be reviewed. In the instant situation, the Borough Code provides as follows: 546404. Penalty for personal interest in contracts or purchases Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough of relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. But in the case of a councilman or mayor, if he knows that he is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who shall knowingly J. Andrew Silverstrim May 22, 1989 Page 4 violate the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($1000), or not exceeding one hundred eighty days'imprisonment, or both. 1966, Feb. 1, P.L. (1965) , No. 581, 51404. The above quoted Code does not appear to contain any exception to the above provision that is applicable in the instant situation. This Commission, has in the past, determined that in a situation where a public official individually or through a business entity that he owns, operates, has a financial interest therein or works as an employee, that entity would be prohibited from receiving compensation for providing services or transacting business with the governmental body pursuant to the above provision of law. See, Weaver, Opinion 85 -014. In the instant situation, Inter - County Waster Hauler, Inc. is the company which seeks to contract with the governmental body. Because of your relationship, you are in the type of position with the business entity that would appear to implicate the above provision of law. As such, and based upon the prior rulings of this Commission, Inter - County Waste Hauler, Inc. would appear to be prohibited from receiving any funds from the governmental body for services rendered or in relation to such a business transaction. Because that financial gain appears to be prohibited by law, the receipt of this financial gain in and through public position, would also appear to be prohibited by Section 3(a) of the State Ethics Act. See, Fvda, Order No. 438 - R. In addition to the foregoing, the State Ethics Act provides as follows: Section 3(c) of the Ethics Act provides: (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 J. Andrew Silverstrim May 22, 1989 Page 5 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). In relation to the above provision of law, the State Ethics Commission has generally determined that this provision is a procedure to be used when a public official or employee contracts with his own governmental body in excess of $500. Bryan, Opinion 80 -014; Lynch, Opinion 79 -047. The Commission, however, has also determined that the above provision of law is not a general authorization for a public official to contract with his own governmental body where such is otherwise prohibited by law. The above provision of law clearly is intended to be a procedure to be utilized where contracting is otherwise allowed by law. For example, if a particular business transaction was prohibited under Section 3(a) of the State Ethics Act, this particular section would prohibit a public official from engaging in the contracting process. Parenthetically, where contracting is otherwise allowed or where there appears to be no expressed prohibitions to such contracting, the above particular provision of law would require that an additional procedure, the open and public process, must be used in all situations where a public official is otherwise appropriately contracting with his own governmental body in excess of $500. This open and public process would require: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered and; (4) public disclosure of the contract awarded and offered and accepted. See, Cantor, 82 -004. As to the argument that Section 12 of the Ethics Act would preempt Section 1404 of the Borough Code, that argument has been considered and rejected by the Commission. See Arner, Advice 87 -654. The rational of the Commission is that 3(c) is a J. Andrew Silverstrim May 22, 1989 Page 6 procedure to be utilized for contracting when such contracting is otherwise allowed in law, as noted above. As to your question as to whether you should resign from Borough Council, that question may not be addressed since it is beyond the scope of the Ethics Act; however, you are advised that the contracting would be prohibited while you serve as a member of Borough Council. Lastly, it must be noted that the propriety of the proposed course of conduct has only been addressed under the Ethics Act. Conclusion: As a Council member, you are a public official subject to the provisions of the Ethics Act. Based upon the information provided herein, the Ethics Act would prohibit you or a business with which he is associated from receiving any financial gain that is strictly prohibited by law. A member of council who received such compensation individually or through a business with which he is associated, would be receiving a financial gain that is strictly prohibited by law. Such would, thus, be received in and through public office and would not be in accord with the State Ethics Act. Parenthetically, in the event that there had been no such prohibition upon the receipt of this compensation, then the Ethics Act, generally, would not have precluded in and of itself this contracting possibility. However, the public official could not participate in any actions relating to the business transaction and all contracting or business transactions with such company must be accomplished through an open and public process as set forth above. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. 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. such. This letter is a public record and will be made available as 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 will be scheduled and a formal Opinion from the Commission will be issued. Any such appeal must be in writing J. Andrew Silverstrim May 22, 1989 Page 7 and must be received at the Commission within 15 days of the date of this Advice pursuant to 51 Pa. Code 52.12. Sincerely, ,kl Vincent J. Dopko, General Counsel