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HomeMy WebLinkAbout90-529 NickelsDear Mr. Nickels: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL March 26, 1990 Mr. Thomas J. Nickels 90 -529 Attorney at Law Fifth Floor Thompson Building Pottsville, PA 17901 Re: Conflict of Interest, Public Official, Contracting with Governmental Body, School Board Member, Hardware Business, Business with Which He is Associated. This responds to your letter of January 12, 1990, in which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition upon a school board member or a "business with which he is associated" from contracting with the school district. Facts: As Solicitor for the Blue Mountain School District and at the authorization of the school board member whose conduct is in question, you note that the school board member was elected in the November 1989 General Municipal Election. At the time of his election he was the sole or majority shareholder of a hardware business located in Schuylkill Haven, Pennsylvania. The policy of the school district has been to purchase from that store certain needed items on an open account basis. After noting that certain items can only be obtained at the store, those purchases are made for reasons of convenience, pricing or availability. The purchases may be made by maintenance men, foreman or other school personnel with the bills being paid on a monthly basis. The company has submitted competitive bids for items exceeding four thousand dollars, but the school district requires solicitation of competitive bids from the company for items which do not exceed the four thousand dollar amount. The school board member's attorney indicates that the school board member has or intends to transfer his interests in the company to his wife or children. You conclude by posing four questions under the Ethics Law: whether the school district may continue to purchase items Mr. Thomas J. Nickels Page 2 from the company on an open account basis without a contract of purchase; whether the school district can continue to purchase items from the company on an open account basis if the company is transferred to the school board member's wife and children; whether the company if owned by the school board member, his wife and children may do business with the district if contracts valued at $500.00 or more are awarded pursuant to 65 P.S. 403(f) since the school directors do not receive compensation and whether the company may be awarded a contract in excess of $4,000.00 if solicited through an open and public process. Discussion: As a Director for Blue Mountain School District, the individual is a "public official" as that term is defined in the Ethics Law, Act 9 of 1989. 65 P.S. 5402; 51 Pa. Code §1.1. As such, he is subject to the provisions of the Ethics Law and the restrictions therein are applicable to him. Section 3(a) of the Ethics Law provides: Restricted Activities No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined under the Ethics Law: "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. "Conflict" or "conflict of interest" 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 or 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 j Mr. Thomas J. Nickels Page 3 exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business with which Any business in which the of the person's immediate director, officer, owner, financial interest. he is associated." person or a member family is a employee or has a "Immediate family." A parent, spouse, child, brother or sister. Since the school director is the sole or majority shareholder of the hardware business, it is clear that entity is a "business with which he is associated" as that term is defined under the Ethics Law. 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 the authority of office, would also be in contravention of the Ethics Law. The Commission has been called upon, on various occasions, to determine whether a private pecuniary benefit is prohibited by law. Fletcher, Opinion 89 -018. In order to determine whether a particular private pecuniary benefit is strictly prohibited by law, the provisions of the enabling legislation of the governmental body in question must be reviewed. In Weaver, Opinion 85 -014, the Commission determined that a business which was jointly owned by a school director and his wife could not supply groceries and supplies to the school district because such purchases would result in a financial gain to the school director or the business with which he was associated in contravention to Section 3(a) of the Ethics Act, 170 of 1978, which prohibited a financial gain other than compensation provided for by law. In reaching its decision, the Commission referenced the Public School Code, 24 P.S. 3 -324, which prohibits a school director from engaging in a business transaction with the school district as a private person. In the instant situation, the Public School Code provides as follows: No school director shall, during the term of which he was elected or appointed, as a private person engage in any business Mr. Thomas J. Nickels Page 4 transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act. 24 P.S. S3 -324. 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 interests 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. Fletcher, supra. In the instant situation, the school director is the sole or majority shareholder of the company which seeks to contract with the governmental body. Because of this relationship, he would be in the type of position with the business entity that would implicate the above provision of law. As such, and based upon the prior rulings of this Commission, the school board member would 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 is prohibited by law, the receipt of this private pecuniary benefit through the use of the authority of office, would also be prohibited by Section 3(a) of the Ethics Law. In addition to the foregoing, Section 3(f) of the Ethics Law provides as follows: (f) No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, Mr. Thomas J. Nickels Page 5 including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 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 an amount of $500 or more. 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 Ethics Law, this particular section would also 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 an amount of $500 or more. 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. Mr. Thomas J. Nickels Page 6 Thus, in the event that contracting would be allowed, the above process must be employed. Further, Section 3(f) provides that the public official could not have supervisory or overall responsibility as to the implementation or administration of the contract. As to the four questions you pose, the school member's hardware business could not supply items for purchase by the school district. The above result would be the same even though the school director would transfer his interests in the business to his wife and children because the restrictions relative to Section 3(a) and 3(f) of the Ethics Law not only apply to the public official /employee but also to the members of his "immediate family" which includes spouse and children. The remaining inquiry posed in your letter regarding a $4,000.00 bidding requirement may not be addressed since the Ethics Law has a $500.00 contracting requirement and the restrictions as to Section 3(f) have been outlined above. Lastly, it must be noted that the propriety of the proposed course of conduct has only been addressed under the Ethics Law. Conclusion: As a School Board Member for Blue Mountain School District, the individual is a public official subject to the provisions of the Ethics Law. Based upon the information provided herein, the Ethics Law would prohibit a school director or business with which he or a member of his immediate family is associated from receiving a private pecuniary benefit that is strictly prohibited bylaw. Such would, thus, be received in and through the authority of public office and would not be in accord with the State Ethics Law. Parenthetically, in the event that there had been no such prohibition upon the receipt of this compensation, then the Ethics Law, generally, would not have been 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. In addition, the public official could have no supervisory or overall responsibility as to the implementation or administration of the contract. 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. This letter is a public record and will be made available as such. 0 Mr. Thomas J. Nickels Page 7 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 and must be received at the Commission within 15 days of the date of this Advice pursuant to 51 Pa. Code §2.12. S erely, Vincent J. Dopko, Chief Counsel