HomeMy WebLinkAbout84-551 CareyPatricia A. Carey, Esquire
Balaban & Balaban
Governor's Row
27 N. Front Street
P. 0. Box 1284
Harrisburg, PA 17108 -1284
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PA 17120
TELEPHONE: (717) 783 -1610
April 23, 1984
ADVICE OF COUNSEL
84 -551
RE: Inter - County Hospitalization Plan, HealthGuard of Lancaster,
Incorporated, Esther Holder and John Hoober
Dear Ms. Carey:
This responds to your letter of March 5, 1984, in which you requested
Advice from the State Ethics Commission.
Issue: You ask whether the elected Treasurer of Lancaster County and the
County Administrator may, consistent with the Ethics Act, serve on the Board
or be associated with certain corporate entities with which the County may
contract and if so, what restrictions are placed upon their activities as
public officials or public employees with respect to such a contracting
procedure.
Facts: You present two situations for our consideration. The first is the
situation of Mrs. Esther Holder, hereinafter Holder, who is the elected
Treasurer of Lancaster County, hereinafter the County. Holder was appointed
to serve the balance of an unexpired term as Treasurer as of April, 1983, but
she was subsequently elected to serve in the same office as of January, 1984,
and she currently serves in this position. In this capacity, she has no
responsibility and is in no way involved with the County's contracting
procedures relative to insurance plans which are in question here. As County
Treasurer she functions as the "receivables arm" of the County. In this
capacity she invests County funds but she does not participate in the
solicitation of bids, proposals or in the receipt or acceptance of such bids
or proposals. Generally, the County Treasurer under the provisions of the
County Code, does not have the power to make contracts on behalf of the
County. This responsibility, pursuant to the County Code under 16 P.S. 1801
rests with the County Commissioners.
Patricia A. Carey, Esquire
April 23, 1984
Page 2
The County Commissioners are responsible for seeking and approving
contracts to secure goods and services on behalf of all County offices and
agencies. The County Commissioners are required, pursuant to the County Code,
to vote on and approve contracts for the County in access of $4,000 only after
the solicitation of bids and are required to accept the lowest responsible bid
for the contract in accordance with 16 P.S. 1802(b). There are several
exceptions to the requirement that all County contracts in excess of $4,000 be
bid and awarded to the lowest responsible bidder. One of these exceptions
states that contracts for insurance such as the ones in question here, do not
need to be bid nor do they need to be awarded to the lowest responsible
bidder.
However, you indicate that the County Commissioners in an effort to
secure the lowest price and the most reasonable for insurance coverages,
has undertaken and maintained a procedure whereby proposals and comparable
quotations are solicited from various insurance agencies. While the County
Commissioners understand that this solicitation of insurance quotation is not
mandatory, they undertake this process in an effort to obtain the best price
for such services.
Further, you indicate that Mrs. Holder is the Chairman of the Board of
Directors of a corporation known as HealthGuard of Lancaster, and is Treasurer
of the Board of Inter - County Hospitalization Plan, Inc. You indicate that
Mrs. Holder has been associated with the Board of Inter - County Hospitalization
Plan, Incorporated, hereinafter Inter - County, since 1973 but that she has no
financial interest in either Inter - County or HealthGuard.
Inter- County is a non- profit hospitalization plan established in 1937
which operates in compliance with Title 40, Chapter 61 of the Pennsylvania
Insurance Code. HealthGuard of Lancaster County, hereinafter HealthGuard, is
a prospective HMO, a profit corporation established in 1983, which operates in
compliance with Title 40, Chapter 7, of the Pennsylvania Insurance Code.
HealthGuard was incorporated in Pennsylvania as of December, 1983, and it
filed for a certificate of authority as a HMO on February 24, 1984. The stock
of HealthGuard, although not presently available, may be made available to
providers of health care. HealthGuard is a wholly owned subsidiary of
Inter - County.
Inter - County has written insurance benefits and coverages for the County
employees since July 15, 1975, and the contract which was initiated at that
time remains in force at present. However, medical and surgical insurance
benefits and major medical benefits were added to the policy as of July 15,
1979, and these particular benefits also remain in force today. The contracts
for these coverages, however, are re- negotiated on a yearly basis.
Patricia A. Carey, Esquire
April 23, 1984
Page 3
In addition to the situation of Mrs. Holder and her association with
HealthGuard and Inter - County, you also ask us to review the factual situation
of a Mr. John Hoober, hereinafter Hoober, who also serves within the County as
County Administrator. Hoober was appointed as County Administrator in
December, 1978, and his function as County Administrator is to be the general
manager of the County. In this capacity, he is responsible for preparing the
budget to be submitted to the Commissioners as well as for serving as chief
liaison officer between department heads and the County Commissioners. Part
of his day -to -day responsibilities include analysis and interpretation of
departmental policy together with his general exercise of a discretion in
administrative decision - making. Mr. Hoober does not possess the power to
initiate or undertake contracts on behalf of the County. However, in his
capacity as County Administrator he is involved in discussions and making
recommendations to the County Commissioners regarding purchases by the County
of any magnitude.
With respect to management of employee benefits, including health and
major medical insurance, however, the director of personnel rather than Mr.
Hoober, as County Administrator, has primary jurisdiction. The director of
personnel typically would make recommendations to the County Commissioners
regarding health and medical plans for employees. You note that Mr. Hoober
has specifically refrained and will refrain from taking any part (as County
Administrator) if he were asked to do so, in any discussions regarding
Inter - County and /or HealthGuard or making any recommendations to the County
Commissioners regarding these corporations or what, if any, insurance
coverages should be obtained by the County.
Finally, you indicate that Mr. Hoober is currently a member of the Board
of Directors of HealthGuard and Inter - County, with which he has been
associated since 1971. However, Mr. Hoober, as with Mrs. Holder, has no
financial interest in either company. Likewise, neither Mr. Hoober nor Mrs.
Holder owns any stock in either of these corporations.
Discussion: As an elected Treasurer within Lancaster County Mrs. Holder is a
public official as that term is defined in the State Ethics Act. As the
County Administrator, Mr. Hoober is a public employee as that term is defined
in the State Ethics Act. See 65 P.S. 402. Thus, each of these individuals is
within the jurisdiction of the Ethics Act and their conduct must conform to
the requirements of the Ethics Act.
With each of these individuals, it is clear that they are "associated"
with HealthGuard because they serve on the Board of Directors of HealthGuard.
See the definition of "business with which he is associated ", 65 P.S. 402. It
is also clear that HealthGuard as an entity organized for profit is a
"business" as that term is defined in the State Ethics Act. Because each of
•these individuals is associated with the County, it is clear that with respect
to the County's contracts with HealthGuard, if any, these individuals would be
required to comply with the provisions of Section 3(c) of the Ethics Act which
provides as follows:
Patricia A. Carey, Esquire
April 23, 1984
Page 4
(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 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).
If the County were to contract with HealthGuard in an amount in excess of
$500, an open and public process must be met. The solicitation for proposals
process, which you have indicated the County currently undertakes and intends
to continue to undertake, is sufficient to comply with the provisions of
Section 3(c) of the Ethics Act, so long as there is public disclosure as well
of all proposals considered and contracts awarded.
Additionally, these individuals must also abide by the requirements of
Section 3(a) of the Ethics Act with respect to any contract that might be
considered or awarded to HealthGuard in particular. Section 3(a) of the
Ethics Act provides that:
(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).
Again, because HealthGuard is a "business" with which these individuals
are "associated ", as a public official and as a public employee respectively,
they must abstain from participating in any discussions, recommendations,
decisions or votes with respect to the County's contracting for insurance with
particular reference to any contract which might be considered or awarded to
HealthGuard.
Although it is not clear that Inter - County is a "business" because it may
not be organized for profit, it would still be important for these individuals
to observe the requirements of Section 1 of the Ethics Act with respect to the
County's potential contracts with Inter - County as well. Specifically, Section
1 of the State Ethics Act requires that a public official must avoid both
conflicts of interest and the appearance of a conflict with the public trust.
Patricia A. Carey, Esquire
April 23, 1984
Page 5
There is no reference to a limitation in Section 1 of the Ethics Act that
would make it applicable only to situations where a business organized for
profit is concerned. See Grove, 83 -013. Thus, the activities of Mr. Hoober
and Mrs. Holder with respect to Inter - County insofar as they should abstain
from discussions, recommendations, decisions or votes on any County and
Inter - County contracts would be advisable. Likewise, the fact that the County
would solicit quotations and proposals from insurance companies with respect
to any contract between the County and Inter - County would also insure
compliance with Section 3(c) of the Ethics Act even that section were
applicable to Inter - County as an entity not organized for profit.
Conclusion: Mrs. Holder and Mr. Hoober should observe the restrictions set
forth above as to their participation in any contracts considered or awarded
between the County and HealthGuard and /or Inter - County. The requirements of
Section 3(c) of the Ethics Act will be met where County solicits the
quotations as oultined above and when appropriate public disclosure of the
proposals considered and contracts awarded is made. Should you have any
further questions regarding specific situations not addressed herein, please
feel free to contact us again.
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 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
Sincerely,
Sandra S. C istianson
General Counsel