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Home My WebLink About84-501 SkrapitsMr. Frank M. Skrapits, Esquire 2152 Main Street Northampton, PA 18067 Dear Mr. Skrapits: Mailing Address. STATE ETHICS COMMISSION P.O. BOX 1179 HARRISBURG, PA 17108 TELEPHONE: (717) 783 -1610 January 9, 1984 ADVICE OF COUNSEL 84 -501 RE: Conflict of Interest, Sale of Insurance, Borough Council This responds to your letter of December 13, 1983, in which you requested advice from the State Ethics Commission. Facts: As Solicitor for a local Borough Council you request an opinion from the State Ethics Commission in regarding one of the Borough Councilman of his behalf you write. Specifically, one of the Borough Councilman is also an insurance agent and intends to have the current Borough uniformed and non- uniformed pension plans funded by a national life insurance company with whom he is employed. You asked whether if the agent /Councilman should sell such a plan of coverage for the two pension funds, would this constitute a conflict of interest prohibited by the Ethics Act or regulations. 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, the Borough Councilman within this Borough, hereinafter the Councilman, is clearly a public official under the definition of the Ethics Act and he must conform his conduct to the requirements of the Ethics Act. The Ethics Act requires that a public official cannot use his public office for 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: "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. State Ethics Commission • 308 Finance Buil(ling • Harrisburg, Pennsylvania Mr. Frank M. Skrapits, Esquire January 9, 1984 Page 2 Thus, pursuant to Section 3(a) of the Ethics Act, this Councilman would not be able to use his position or confidential information received as a Councilman to obtain financial gain for himself or a business, including the insurance business, if that business falls within the above definition with which he is "associated." For example, he would be prohibited from using confidential information received as a Councilman to his benefit or the benefit of an insurance company by which he is employed in bidding on or obtaining Borough insurance business or in placing the Borough insurance policies with respect to a pension fund or otherwise. Likewise, the Councilman should abstain from discussions relating to and /or voting upon the decisions of the Council to contract with or place insurance with a company with which he may be employed or associated or acting as agent. He should, place the reasons for his abstention on the public record even assuming an open and public process as discussed below is used in awarding the contracts. See Sowers, 80 -050 and Welsh, 83 -518. Further, the Ethics Act forbids a public official from accepting any thing of value based upon the understanding that his official vote or action or judgment would be influenced thereby. See 65 P.S. 403(b). Since any thing of value" includes the promise of future employment, this individual should not allow a promise of benefit to himself, commissions, or continuation of his employment or agency relationship with a national insurance company or any other entity or the possibility of placing this insurance with such a company to influence his votes or official actions or judgment as a Councilman. The Ethics Act futher imposes certain restrictions upon contracts entered into between a business with which a public official or his family is associated and the public official's governmental body. Specifically, Section 3(c) 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 mere with a governmental body unless the contract nas 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. Frank M. Skrapits, Esquire January 9, 1984 Page 3 Thus, if the Councilman, his wife, or a member of his immediate family is a director, officer, or owner of more than 5% of the equity of any business seeking to contract with the Borough, including the insurance agency with which he may be associated, the contract between the Borough and these entities, if it is valued at more than $500, must be awarded in an open and public process which includes the following: 1. prior public notice of the contract possibility; 2. public disclosure of all proposals received and considered; and 3. public disc - losure of the contract awarded. The restrictions of an open and public process are required if and only if the Councilman or a member of his immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair market value of the business seeking to contract with the Borough. Even if the Councilman does not stand in this kind of relationship, he would still, as an employee or agent of the insurance company be required to refrain from discussions and voting on the Borough's award of a contract or decisions relating to the placement of this insurance and place the reasons for this abstention on the public record as discussed above. Abstention under such circumstances avoids the appearance of a conflict of interest which is also expressed as a "purpose" of the Ethics Act. See Section 1 of the Ethics Act, 65 P.S. 401 and Knox, 81 -009. Conclusion: This Councilman should be advised that his conduct must conform to the above discussion in order to comply with the provisions of 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. Mr. Frank M. Skrapits, Esquire January 9, 1984 Page 4 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 made, in writing, to the Commission within 15 days of service of this Advice pursuant to 51 Pa. Code 2.12. SSC /rdp Si nerely, S. ndra S. Chr /i sti anson General Counsel