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HomeMy WebLinkAbout85-602 MurphyRepresentative Thomas J. Murphy House of Representatives 3935 Murrysville Avenue Pittsburgh, PA 15214 Dear Representative Murphy: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 December 10, 1985 ADVICE OF COUNSEL 85 -602 RE: State Legislator, Member, Board of Directors, Private Corporation, State Funding This responds to your letter of Novemher 7, 1985, wherein you requested the advice of the State Ethics Commission. Issue: Whether there is any conflict of interests when a state legislator serves as a non - compensated member of a board of directors for a corporation which he assisted in obtaining state financial aid. Facts: You have requested the advice of the State Ethics Commission and have set forth the following factual information in support of that request. The Armour Meat Processing Plant, originally located in Pittshurgh, Pennsylvania, closed operations approximately two years ago. That husiness employed 350 individuals. When the plant ceased operations, the employees began to pursue various concepts in order to have the plant re- opened. One of the proposals for this plan was to organize an employee ownership option. Approximately one year ago you hecame involved with the individuals involved in this project through your constituents who formerly worked at the plant. Since your association with this group, you have been instrumental in assisting them in obtaining assistance from hoth city and county governments. The financial assistance ohtained was utilized to conduct a feasibility study regarding an employee takeover of the closed plant. In addition to the local funds obtained, you were able to assist these individuals in securing state financial aid through the Economic Revitalization Program. You indicate that as a result, the feasibility study has heen initiated and the group is currently waiting for the results of that study. You indicate that the group has formerly organized into a corporate entity known as the Pittshurgh Provision and Packing Corporation. You now have advised that the group has asked you to become a member of the hoard of directors for this organization. You question whether there would he any perceived conflict of interests in light of the fact that you assisted this group in obtaining funds from the state and from local and county governments. You indicate that, as a memher of the hoard of directors, you would agree to forego any remuneration. Representative Thomas J. Murphy December 10, 1985 Page 2 Discussion: Initially it should he noted that the State Ethics Commission may only answer your requests within the purview of the State Ethics Act. The Commission will not address your question under any other code of conduct. Generally, as a member of the Pennsylvania House of Representatives, you are a public employee as that term is defined in the State Ethics Act. 65 P.S. .5402. Goebel, 80 -045. As such, your conduct must conform to the requirements of the Act. Generally, the State Ethics Act places no outright prohibition upon a public official's supplementary association with a business organization. See Mellow, 84- 525, Jack, 84 -617. The Ethics Act does 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). Within this provision of law, a public official may not utilize his public position or confidential information obtained therein in order to ohtain any financial gain for a business with which he is associated. A Business with which one is associated is defined in the Act as follows: 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. Clearly, as a director in the Pittsburgh Provision and Packing Corporation you would be associated with that organization as set forth in the Act. Thus, as a public official you could not utilize your position or any confidential information obtained in that position in order to obtain any financial gain for that company. It is noted that the state financial aid available to assist employees attempting to assume the ownership of a business entity is controlled by the Employee - Ownership Assistance Program Act, 73 P.S. 096.1. The award and distribution of funds through this program is controlled by the Pennsylvania Department of Commerce. Those funds became available through the Pennsylvania Economic Revitalization Act, 73 P.S. 092.1, which was enacted by the Pennsylvania General Assembly after approval Representative Thomas J. Murphy December 10, 1985 Page 3 by a voter referendum on April 10, 1984. In this respect, your governmental body, i.e. the House of Representatives, is not involved directly in awarding any funds to this or similarly situated groups. It, thus, appears as though there would be no prohibition upon your group's seeking this state assistance, and your simultaneous association with the group. You are advised, however, that should some matter pertaining to this group come before the House of Representatives, you must abstain from participation in such matter. Similarly, you should not employ your position as a State Representative in order to obtain any favorable advantage for this group when applying for state funds. You may assist them in obtaining any available public information or counseling them in relation to their application process. However, you should abstain from attempting to exert any influence or control over that process. In this way you would not be perceived as using your public position to obtain a financial gain for that entity. The above precautions would also be in line with Section 403(d) of the Ethics Act which allows the Commission to address other areas of possible conflict. Such conflicts generally arise when public officials attempt to serve one or more interests that are adverse, see Alfano, 80 -007; Allen, 79 -024. The purpose and intent of the Ethics Act as set forth in Section 1 of the Act reiterates this concept in delineating the intent of the Act as insuring the public that the financial interests of their officials do not conflict with the public trust. While you clearly have no direct financial interests in the Pittsburgh Provision and Packing Company, because you will not be receiving compensation from that entity, a conflict could be perceived in the event that you, as a public official, attempted to obtain some benefit for this corporation. Thus, the above cautions should be observed. In addition to the foregoing, the Commission has reviewed similar types of situations where a public official is associated with an entity that seeks to obtain governmental grant funds. The Commission has reviewed such cases under Section 3(c) of the State Ethics Act which generally requires that contracts in excess of $500 between a governmental body and a business in which a public official is a director, officer, owner or holder of stock exceeding 5% of the equity value be awarded through an open and public process. Initially, it should be noted that this provision of law has been interpreted by the Commission to be applicable only in those situations where the entity with which the public official is an officer or director, attempts to obtain such grant funds from the body with which the public official is associated. In the current situation, the funds would be available from the Pennsylania Department of Commerce rather than from the General Assembly and therefore, this provision would not be applicable. See Bryan, 80 -014; Lynch, 79 -047. Representative Thomas J. Murphy !lecemher 10, 1485 Page 4 Finally, the Commission has previously ruled that when seeking grant funds from the government, a business with which the public official is assoicated, could participate in the rehabilitation or grant program so long as that public official has played no role in establishing the criteria under which the progam at issue was to operate particularly with reference to the structure or administration of the program; played no role in establishing or implementing the criteria by which selections for program participation are to he or were made; played no role in the process of selecting and reviewing applicants or awarding grants or funds; used no confidential information acquired during the holding of public office or public employment to apply for or obtain such funds or grants. See Toohey, 83 -003; Balaban, 83 -004 and Coploff, 83 -005. From the information ava lable to the Commission, it appears as though you would not fall into the categories as listed above and therefore, there would he no prohibition upon this group receiving the state funds while you are associated with the group. There also appears to be no per se prohibition on your service to this group. Conclusion: The State Ethics Act places no per se prohibition upon a member of the General Assembly in serving as an uncompensated member of a board of directors of a corporation that has obtained state assistance for an employee- ownership takeover. As a public official you should be aware of the provisions of the State Ethics Act and previous rulings of the Commission as set forth above and you should act in accordance therewith. 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 he made, in writing, to the Commission within 15 days of service of this Advice pursuant to 51 Pa. Code 2.12. JJC /rdp Si nc ohn J. C. ino General ,ounsel 07'