HomeMy WebLinkAbout17-524 LutzSTATE ETHICS COMMISSION
309 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
(717) 783 -1610
1- 800 -932 -0936
ADVICE OF COUNSEL
April 19, 2017
To the Requesters:
Mr. Owen P. O'Neil
Executive Director and Chief Executive Officer
Mr. Freddy E. Lutz, Jr.
Member of the Board of Directors
Lehigh and Northampton Transportation Authority
17 -524
Dear Gentlemen:
This responds to your letter dated February 16, 2017, 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 S. § 1101 et se q,, would impose prohibitions or restrictions upon an individual
serving as a MemTer of the Board of Directors ( "Board ") of the Lehigh and Northampton
Transportation Authority ( "Authority ") with regard to participating in discussions, votes,
or other actions of the Authority Board pertaining to the Authority's proposed use of an
entity's electronic bid/request for proposal management system that government
agencies may use free of charge, where: (1) the individual is employed with the entity;
and (2) firms awarded Authority contracts through the entity's system would pay the
entity fees based on the value of the Authority contracts.
Facts: You request an advisory from the Commission based upon submitted
acts, the material portion of which may be fairly summarized as follows.
Mr. Freddy E. Lutz, Jr. ( "Mr. Lutz ") is a Member of the Authority Board. In a
private capacity, Mr. Lutz is employed with an entity named "PennBid." Mr. Lutz does
not have a financial controlling interest in PennBid.
In the interest of improved recordkeeping and compliance, the Authority desires
to use an electronic bid/request for proposal management ( "e- Procurement ") system.
Authority staff researched various options after developing a list of e�- Procurement
system features that would allow for specific needs to be addressed. Most of the e-
Procurement platforms reviewed were found to be not relevant to the Authority's needs
for various reasons.
PennBid has an e- Procurement platform ( "the PennBid System ") to distribute
bids /requests for proposals and similar documents, manage and track responses and
submittals, and manage required documentation. Government agencies may use the
FAX: (717) 787 -0806 • Web Site: www.ethics.state,pa.us • e -mail: ethics(o?state.pa.us
O'Neil /Lutz, 17 -524
Page12 , 2017
PennBid System free of charge. A firm awarded a contract posted through the PennBid
System pays PennBid a fee that ranges from 0.125% to 0.25% of the awarded contract
value, up to a maximum fee of $5,000.
Authority staff believes that the Authority's use of the PennBid System would be
the most advisable course of action in consideration of the fact that the PennBid System
meets the Authority`s bid /requests for proposals management needs at no cost to the
Authority. The Authority would not procure the use of the PennBid System through a
competitive proposal process since there would be no cost to the Authority to use the
PennBid System.
Authority staff estimates that firms awarded Authority contracts through the
PennBid System would typically pay PennBid fees of no more than $250.. Mr. Lutz's
compensation as a PennBid employee is based on a salary and a commission on
revenue generated from clients, and he has agreed that he would not accept
compensation based on revenue generated from the Authority's use of the PennBid
System.
Although the Authority would not procure the use of the PennBid System through
a competitive proposal process, the Authority Board would review and vote on the use
of the PennBid System because the employer of a Board Member would have the
potential to financially benefit from the Authority's use of the PennBid System.
Based upon the above submitted facts, you ask what actions Mr. Lutz should
take in order to avoid any issues of conflict of interest and ensure transparency if and
when the matter of the Authority's proposed use of the PennBid System would be
brought before the Authority Board for approval.
Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(l 1) of
f e tics 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 Authority Board, Mr. Lutz is a public official subject to the
provisions of the Ethics Act.
Sections 1103(a) and 11030) of the Ethics Act provide:
§ 1143. Restricted activities
(a) Conflict of interest, - -No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
0) 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
O'Neil/Lutz, 17 -524
April 19, 2017
Page 3
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), Q).
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 employyee 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.
"Business." Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self - employed individual, holding compan ,
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.
"De minimis economic impact." An economic
consequence which has an insignificant effect.
65 Pa.C.S. § 1102.
O'NeiilLutz, 17 -524
April 19, 2017
Page 4
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
con ict, Section 1103(] 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.
One of the exclusions to the statutory definition of "conflict" or "conflict of
interest," referred to herein as 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;
Schweinsburq, 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. See, Fidler, Order 1637. You are cautioned that the economic impact of an
individual's conduct may aggregate over time, rather than be limited to a particular
increment of time such as a month or year. Confidential Opinion, 05 -001; Corey /Mann,
Opinion 13 -006; Corey /Mann, Opinion 14 -003.
[n ap lying the above provisions of the Ethics Act to the instant matter, you are
advised as follows.
PennBid is a business with which Mr. Lutz is associated in his capacity as an
employee. Unless the de minimis exclusion would be applicable, Mr. Lutz would have a
conflict of interest as to discussion(s), vote(s), and /or other action(s) of the Authority
Board pertaining to the Authority's proposed use of the PennBid System.
The submitted facts do not enable a conclusive determination as to whether the
de minimis exclusion would be applicable as to any potential financial- impact upon Mr.
Lutz or PennBid.
As noted above, in each instance of a conflict of interest, Mr. Lutz 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 11030) 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.
Conclusion: Based upon the submitted facts that: (1) Freddy E. Lutz, Jr., is a
Member er o the Board of Directors ( "Board ") of the Lehigh and Northampton
Transportation Authority ( "Authority "}, (2) in a private capacity, Mr. Lutz is employed with
an entity named "PennBid "; (3 Mr. Lutz does not have a financial controlling interest in
PennBid; (4) in the interest of improved recordkeeping and compliance, the Authority
O'Neil /Lutz, 17 -524
April
Page 5
desires to use an electronic bid /request for proposal management ( "e- Procurement ")
system; (5) Authority staff researched various options after developing a list of e-
Procurement system features that would allow for specific needs to be addressed; (6)
most of the e- Procurement platforms reviewed were found to be not relevant tot the
Authority's needs for various reasons; (7) PennBid has an e- Procurement platform ( "the
PennBid System ") to distribute bids /requests for proposals and similar documents,
manage and track responses and submittals, and manage required documentation; (8)
government agencies may use the PennBid System free of charge; (9) a firm awarded a
contract posted through the PennBid System pays PennBid a fee that ranges from
0.125% to 0.25% of the awarded contract value, up to a maximum fee of $5,000; (10)
Authority staff believes that the Authority's use of the PennBid System would be the
most advisable course of action in consideration of the fact that the PennBid System
meets the Authority's bid /requests for proposals management needs at no cost to the
Authority; (11) the Authority would not procure the use of the PennBid System through a
competitive proposal process since there would be no cost to the Authority to use the
PennBid System; (12) Authority staff estimates that firms awarded Authority contracts
through the PennBid System would typically pay PennBid fees of no more than $250;
(13) P. Lutz's compensation as a PennBid employee is based on a salary and a
commission on revenue generated from clients; and he has agreed that he would not
accept compensation based on revenue generated from the Authority's use of the
PennBid System; and (14) although the Authority would not procure the use of the
PennBid System through a competitive proposal process, the Authority Board would
review and vote on the use of the PennBid System because the employer of a Board
Member would have the potential to financially benefit from the Authority's use of the
PennBid System, you are advised as follows.
As a Member of the Authority Board, Mr. Lutz is a public official subject to the
provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §
1101 et sec.. PennBid is a business with which Mr. Lutz is associated in his capacity as
an employee. Unless the de minimis exclusion set forth in the Ethics Act's definition of
"conflict" or "conflict of interest," 65 Pa.C.S..§ 1102, would be applicable, Mr. Lutz would
have a conflict of interest as to discussion(s), vote(s), and/or other action(s) of the
Authority Board pertaining to the Authority's proposed use of the PennBid System. The
submitted facts do not enable a conclusive determination as to whether the de minimis
exclusion would be applicable as to any potential financial impact upon Mr. Lutz or
PennBid.
In each instance of a conflict of interest, Mr. Lutz would be required to abstain
from participation, which would include voting unless one of the statutory exceptions of
Section 11 30) of the Ethics Act would be applicable. Additionally, the disclosure
requirements of Section 11030) 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.
O'Neil /Lutz, 17 -524
April 19, 2017
Page 6
Any such appeal must be in writing and must be actually
received at the Commission within thirty (30) days of the date of th s
Advice pursuant to 51 Pa. Code § f3.2(h). The appeal may be
received at the Commission by hand delivery, United States marl,
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,
dn
Robin M. Hittie
Chief Counsel