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HomeMy WebLinkAbout85-605 SmithKevin Hopkins Smith, Esquire Raer & Smith 400 South Main Street Phoenixville, PA 19460 -3899 Re: Borough Councilman, Partnership, Borough Solicitor, Representation before Borough Officials Dear Mr. Smith: Issues: Madmg Address State E t h i c s Commission 308 Finance Building P. 0. Box 11470 Harrisburg, Pa. 17108 -•1470 December 18, 1985 ADVICE OF COUNSEL 85 -605 This advice responds to your letters of November 19, 1985 and Novemher 25, 1985, wherein you requested the advice of the State Ethics Commission. A. Whether you or a memher of the law firm in which you are a partner may represent clients before the borough council, or other borough officials such as the borough zoning officer, when you serve as a borough councilmember. R. Whether any restrictions are imposed under the State Ethics Act where you serve as a horough councilman and a member of the law firm in which you are a partner is being considered for appointment as the borough solicitor. Facts: In two separate letters to the State Ethics Commission you have requested the advice of the Commission. In your letter of November 19, 1985, you have specifically requested the Commissions' advice regarding the following issues: 1. Whether a councilmen /attorney's law associate may serve in the capacity of borough solicitor. 2. May a councilmen /attorney vote on the appointment of his law associate as solicitor or participate in any way in the appointment process. 3. What abstention requirements are placed upon the councilmen /attorney in relation to matters pertaining to the increase of fee payments to the solicitor. State Ethics Commission • 308 Finance Building • Harrisburg, Pennsylvania Kevin Hopkins Smith, Esquire December 18, 1985 Page 2 4. The applicability of State Ethics Act 5403(c) to the councilmen /attorney's partnership interests in a non - incorporated law partnership. In addition to the foregoing, you have asked various other questions by way of a letter dated November 25, 1985. Generally, these questions relate to issues regarding the permissible scope of your representation, or your law firm's representation, of clients before the borough, borough employees, or in relation to matters that to some extent involve the borough. You have indicated that you have recently been elected to a four year term as a member of the borough council of Phoenixville, Chester County, Pennsylvania. You will take office on January 6, 1986. You have further advised that a member of the law firm in which you are a partner, Baer R Smith, is being considered for appointment as the borough solicitor. As a result, you have asked a number of questions regarding the permissible scope of your activities as a member of the borough council. Discussion: At the outset, it must be noted that generally the State Ethics Commission may not regulate or govern the conduct of attorneys insofar as that conduct constitutes the practice of law. See Pennsylvania Public Utility Commission Bar Association v. Thornhurgh, 62 Pa. Commw. 88, 434 A.2d 1327 (1981) affirmed 498 Pa. 589, 458 A.2d 613, (1982). Additionally, part -time municipal solicitors are not public employees within the purview of the State Ethics Act. See Rallou v. State Ethics Commission, 496 Pa. 127, 436 A.2d 186, (1981). As a result, in reference to all of the questions presented in your letter of November 25, 1985, this Commission would not have jurisdiction to advised you as to the permissible scope of your representation of clients in the private practice of law. Similarly, this Commission may not address the issue of the permissible scope of representation by your law firm regardless of whether it is appointed as the solicitor. We note that you have requested advice from the Pennsylvania Bar Association, Committee on Legal Ethics. This association may better address the issues you have raised in your letter of November 25, 1985. In reference to your letter of November 19, 1985, the State Ethics Commission is empowered to address all questions regarding the duties and responsibilities of a public official as defined in the State Ethics Act. 65 P.S. 5402. As a member of borough council you clearly will be a public official as that term is defined in the Act and your conduct therefore, as a councilmen, must conform to the requirements of the Act. Kilmer, 79 -073; Davis, 84 -012. As you note in your letter of November 19, 1985, you have previously reviewed prior advices of this Commission regarding the questions posed. See Mohan, 85 -587. We will, however, specifically reiterate the applicabilty of the State Ethics Act to your situation and in reponse to your specific questions. Kevin Ilopki ns Smith, Esquire December 18, 1q85 Page 3 Initially, the State Ethics Act presents no per se prohibition upon a borough councilmen's, law firm from serving as the borough solicitor. Cantor, 82 -004. 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). Clearly, within this provision of law, a public official may not use their public position, or any confidential information obtained therein, in order to obtain a financial gain for themselves or for a business with which they are associated. Business with which one is associated is also defined' in the State Ethics Act and provides 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. In addition to the foregoing, the tens business is also defined in the State Ethics Act. That definition would include: Section 2. Definitions. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. 65 P.S. 402. From the foregoing definitional provisions of the State Ethics Act it is clear that the term business with which one is associated includes a partnership, or any other legal entity organized for profit in which the public official is an officer, owner, employee, or holder of stock. A law partnership, thus, would be included in this definitional concept and a partner in such entity must be considered an owner thereof. As a result, you would be prohibited as a public official from using your public position to Kevin Hopkins Smith, Esquire December 18, 1985 Page 4 obtain any financial gain for that particular entity. Prior opinions of this Commission have clearly established that a borough councilmen who is also an attorney may not vote or otherwise participate to any degree in the appointment process of the borough solicitor, when that councilmen's firm is being considered for said appointment. See Fields, 82 -006. In addition to the foregoing, you have questioned the extent of this ahstention requirement and have asked whether you would be required to abstain from all matters pertaining to decisions which would increase fee payments to the solicitor. The Commission in its conclusion in Fields, supra, noted specifically that abstention by a borough councilmen would be required on all matters pertaining to decisions which would increase fee payments to the solicitor. As such, this advice must follow prior Commission opinions as they have been issued. The above requirement regarding abstention in matters that may increase fees to the borough solicitor, who is a member of your law firm, is specifically supported by the intent and purpose of the Ethics Act which is set forth in Section 1 of the law. That Section provides as follows: Section 1. Purpose. The Legislature hereby declares that public office is a public trust and that any effort to realize personal financial gain through public office other than compensation provided by law is a violation of that trust. In order to strengthen the faith and confidence of the people of the State in their government, the Legislature further declares that the people have a right to be assured that the financial interests of holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. Because public confidence in government can best be sustained by assuring the people of the impartiality and honesty of public officials, this act shall be liberally construed to promote complete disclosure. 65 P.S. 401. There is no doubt that if you were to participate as a member of borough council, in a matter that results in the payment of public funds to a law firm in which you are a partner, your financial interest would clearly be in conflict with the public trust. As a partner in the firm, you stand to gain financially from all business that is secured by the partnership including that business which is a direct result of borough council activities. As such, and pursuant to Section 1 of the Act and the Commission's authority to address other areas of possible conflict, 65 P.S. , 5403(d), you must abstain from all matters pertaining to decisions which would result in the payment of fees to your law firm. Kevi n Hopkins Smith, Esquire December 12, 1985 Page 5 In reference to Section 3(c) of the State Ethics Act, the Act provides as fol lows : Section 3. Restricted activities. (c) No puhlic official or puhlic 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 5500 or more with a governmental body unless the contract has been awarded through an open and public process, including prior puhlic notice and subsequent public disclosure of all proposals considered and contracts awarded. Any contract made in violation of this subsection shall he 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). You have questioned the applicability of this section of the law to a non - incorporated law partnership. As can be clearly seen from the above provision of law, Section 3(c) applies to any business in which the person or member of the persons immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair market value of the business. As noted previously in this advice, the term business is specifically defined in the State Ethics Act, and includes an unincorporated partnership. Thus, Section 3(c) of the Act would be applicable if you stand in one of the enumerated relationships to that partnership. In holding the "open and public" provisions of Section 3(c) of the Ethics Act applicable to personal services contracts such as that between the municipality and its solicitor, we realize that these contracts under the circumstances described in Section 3(c) may have to be handled differently from the usual requirements of the municipal code. Typically, municipal codes exempt "personal" or "professional" services for their "bidding" requirements. See Borough Code at 53 P.S. 46402(d)(5); City Codes, 53 P.S. 12671 (1st Class). 53 P.S. 23308.1 (2nd Class), and 53 P.S. 36901(d)(5) (3rd Class); Incorporated Township, 53 P.S. 65802(e)(5) (2nd Class). However, the purpose for these exceptions has generally been to free the municipality form mandatory acceptance of the lowest "bidder." Commonwealth v. Tice, 272 Pa. 447 (1922) . The purpose of this exception from 'bias ng" requirements is manifestly different from the purpose of the Ethics Act in general and Section 3(c) of the Ethics Act in particular. See, Cantor, 82 -004. The purpose of the Ethics Act, as expressed in Section 1 of the Ethics Act, is to strengthen the faith of the public in their government. Section 3(c), in this case, requires an open and public process in the award of contracts by a municipality to its own pubic employee /officials, their wives, Kevin Hopkins Smith, Esquire December 18, 1985 Page 6 etc. It is obvious that adherence to the open and public process of Section 3(c), if applied to personal /professional contracts, as well as to contracts for goods, will help alleviate the fear that "insiders" (pubic employees /officials, their wives and businesses) are "favored" in such employment. Given the fact that the Legislature clearly demonstrated an ability to write exceptions for personal /professional services contracts in other codes and did not do so in the Ethics Act, we must conclude that application of Section 3(c) to such contracts was intended by the Legislature. This is so especially in light of the fact that Section 1 of the Act expressly indicates that it is to be liberally construed so as to promote complete di scl osure. Applying Section 3(c) to such contracts effects the clear language of the Ethics Act as well as implementing its purose. In this interpretation and application we do not imply or find a requirement in Section.3(c) that the municipality would be obligated, after the open /public process, to award the contract to the lowest "kidder." Compare American Totalisator Co. - v. Seligman, 2.7 Pa. Commw. 639 (1976). As stated previously by this Commission, a "reasonableness" test is to be applied in determining whether the open /public requirements of Section 3(c) have been met. Howard, 79 -044. Thus, before a public employee /official, his immediate family or business as described in Section 3(c) is awarded, a personal /professional contract by the municipality he /she serves, there must be: (1) prior public notice of the contract possibility; (2) sufficient time for a reasonable and prudent competitor to be able to prepare and submit a proposal /application; (3) public disclosure of all proposals /applications considered; and (4) public disclosure of the contract awarded or offered /accepted. Conclusion: Generally, the State Ethics Commission may not address questions regarding the permissible scope of your representation of clients before governmental bodies as such, would constitute the private practice of law. Generally, as a borough councilperson you would be a public official subject to the terms of the State Ethics Act. While the Act places no per se prohibition upon the simultaneous service by members of a law firm serving as borough councilmen and solicitor, respectively, the Act would require that the borough councilmen abstain from all matters that would financially benefit his partnership. It is also advised that Section 3(c) of the State Ethics Act should be observed as set forth above. Kevin Hopki ns Smith, Esquire December 18, 1985 Page 7 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 w i l l 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 /sfb Sincerely, ohn J. C••• no Gener. ounsel