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HomeMy WebLinkAbout81-580 ShuffGeoffrey S. Shuff Chief Counsel Department of Commerce South Office Building Harrisburg, PA 17120 Dear Mr. Shuff: Yy ( i t P STATE E,HiCS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 June 18, 1981 ADVICE OF COUNSEL RE: Loan Applicants, Pennsylvania Minority Business Development Authority c'11-580 This responds to your communication of May 13, 1981 in which you as Chief Counsel of the Department of Commerce requested information regarding the obligations of the members of the Pennsylvania Minority Business Development Authority (hereinafter "PMBDA ") under the State Ethics Act. Issue: You requested information as to whether any of the PMBDA Board members would be in violation of the provisions of the Ethics Act by making loans to certain applicants under the factual situations described below. Facts: You informed us that certain loan applications were currently being considered by the PMBDA. The first such loan is one presented by Charlotte A. Keys, Esterline Grant, and Elizabeth Sommerville. The second loan application is presented by Cariene Jaycox. The third loan application is presented by Harold D. Atkins and Larry and Gloria Glenn. The final loan application is presented by Lee Henderson. Each of these loan applicants seek to establish a business that would be located in a shopping mall known as Bayfront Mini - Mall,. This Mini -Mall is to be developed and owned by an organization known as Bayfront N.A.T.O., Incoporated (hereinafter NATO). The Executive Director of NATO is Alex W. Thompson. Mr. Thompson is also a Board member of PMBDA. It should be noted, however, that Mr. Thompson did not participate in the dicussion of voting on these loan applications for the above - referenced loans for tenants of this shopping mall. In addition, PMBDA funds are not to be used for the construction of the mall. Geoffrey S. Shuff June 18, 1981 Page 2 However, NATO will have the tenants -loan applicants sign rental agreements. As landlord, NATO could take action that might affect the PMBDA loan arrangements. HowevE >r, NATO has indicated that they would sign a landlord waiver, resulting in the waiver of NATO's rights to the co1 a - . . err l pledged to secure the PMBDA loans. PMBDA will also Lake assignment of the tenant leases as seem i ' :y for its : »_oan. In relation to the individuals seeking the - -oans as described above it should be noted that Elizabeth Sommerville (applicant on loan number 1 above) is the mother of Daniel Sommerville. Daniel Sommerville was employed by the PMBDA. as a central regional representative. As such, he was charged with processing loan application in the central region of the State. However, the loan application number 1 above presented by Elizabeth Sommerville was reviewed by the western regional representative. Daniel Sommerville had r responsibility or jurisdiction over, nor did he review for recommendation or approval, the loan application presented by his mother, Elizabeth Sommerville. Finally, Daniel Sommerville is no longer employed by PMBDA. In relation to loans number 2 and 4 above (Cariene Jaycox and Lee Henderson, respectively) NATO will also participate in these projects and businesses by injectir:g funds of their own into their operations. Essentially, this would make NATO a co- creditor with PMBDA. However, in relation to this arrangement NATO has agreed to give PMBDA first lien priority on all assets and inventory. Finally, in relation to loan number 3 above presented by Harold Atkins and Larry and Gloria Glenn it should be noted that Gloria Glenn is the daughter of Alex Thompson, the PMBDA Board member and the Executive Director of NATO. Discussion: Initially we note that the authority of the State Ethics Commission is strictly limited by the Ethics Act, 65 P.S. 401 et seq. Accordingly, this Advice does not address the effect of the provisions of the Pennsylvania Minority Business Development Authority Act, 73 P.S. §390.12 or the State Adverse Interest Act, 71 P.S. 776.1 et seq. In addition, the discussion which follows and the conclusion do not address the managerial or policy decisions which would go into reviewing and /or approving the loan applications, given the relationships indicated above, presented to PMBDA. Geoffrey S. Shuff June 18, 1981 Page 3 The Ethics Act governs the conduct of public officials and mandates that those public officials may not take any actions which are inconsistent with the public trust that they hold. In exercising their authority and responsibilit the members of PMBDA have the power to lend money and secure notes and loans to minority business enterprises. See 73 P.S. 390.7. In fulfilling these obligations and performing these duties the holders of public office may not present even an appearance of a conflict of interest with the public trust. See Section 1 of the Ethics Act, 65 P.S. 401. In addition, no public official may use his or her public office or any confidential information received through the holding of public office to obtain financial gain for a member of his immediate family or a business with which he is associated (any business in which the individual or member of the individual's immediate family is a director, officer, owner, employee or holder of stock). See Section 3 and Section 2 of the Ethics Act, 65 P.S. 403(a) and 402, respectively. Finally, no person shall offer or give to any public official and no public official shall accept any thing of value, based on the understanding that the officials vote or judgment would be influenced thereby. See Section 3(b) �f the Ethics Act, 65 P.S. 403(b). Applying these concepts and the previous decisions of the State Ethics Commission, it is clear that Mr. Thompson as a PMBDA Board member and as Executive Director of NATO may not participate in discussions in or votes relating to the loans of those individuals who would be tenants of the Bayfront Mini -Mall. Sowers, 80 -050. The reason for Mr. Thompson's abstention should be placed on the public record. Essentially, Mr. Thompson should not participate in discussions and /or votes on any matters relating to the loans for these businesses. In addition, in order to avoid any appearance of a conflict of interest he should avoid discussing and /or voting and /or participating in any manner on loan applications presented by businesses with which he might have a financial interest as a creditor or otherwise. In relation to the loan application number 1 presented by Elizabeth Sommerville, mother of Daniel Sommerville, former employee of PMBDA, the State Ethics Act would not preclude or prohibit this type of loan application. This is especially true where this individual, Daniel Sommerville had no authority or participation in the processing of the loan application for his mother, Elizabeth Sommerville. Geoffrey S. Shufr June 18, 19G1 Page 4 Y,ii :ewise, the fact that Gloria Glenn, one of the loan app'_:i. ants on loan number 3, is Alex Thompson's daughter does not, per se, present a conflict of interest. However, as indicated above, this relationship presents an additional reason why Mr. Thompson should not participate in any manner on any decisions relating to the loan number 3 detailed above. The fact that Bayfront NATO will be participating in loans number 2 and 4 listed above by injection of sums of money, thus making them a co- creditor with PMBDA, does not per se present any problem under the State Ethics Act. This co- creditor relationship between Bayfront NATO and PMBDA is not precluded by the State Ethics Act. In relation to your ultimate question relating to whether the PMBDA Board, in general, would be in violation of the State Ethics Act by making loan applications to these individuals as detailed above, we must review the provisions of Section 1 of the Ethics Act and Section 3(a) and (b). See 65 P.S. 401, 403(a) and (b) respectively. Specifically, there is no per se violation of the Ethics Act for the Board members to review and make loans to the applicants listed above simply because Alex Thompson is the Executive Director of NATO, father of one of the applicants and is also a PMBDA Board member. However, a conflict of interest situation would arise if there was any evidence that the review by the Board members of these loan applications and approval of same was based on any misuse of confidential information or the offer of any thing of value to the Board members in order to influence their official action. Essentially, if , :he Board's review is based on the obj- ective criteria on which all loan applications must be reviewed, rather than any personal interest or friendship with Mr. Thompson there could nct even be any appearance of a conflict of interest with their official obligations. Their duties under the Ethics Act would have been met and no violation of the ;athics Act would exist. Conclusion: Mr..Thompson as PMBPA Board member, as father of one of the applicants, and as Executive Director of NATO should not participate and /or take any official action relating to the loans described above. He may not use confidential information gained through his holding of public office to obtain financial gain for a member of his immediate family or business with which he is associated in violation of Section 3(a) of the Ethics Act. However, there is no per se prohibition against the Board members themselves acting to approve the :loans to the applicants listed above simply because Alex Thompson is the Executive Director of NATO, the prospective landlord and /or co- creditor with PMBDA of I�hese appl i caolts and is also a PMBDA Board member:. Geoffrey S. Shuff June 18, 1981 Page 5 Finally, in answer to your specific question relating to Daniel Sommerville there is no violation of the Ethics Act simply because he was an employee of PMBDA and also the son of a loan applicant. This is especially true where, as discussed above, Daniel Sommerville had no official responsi- bility relating to the review recommendations of the loan application presented by his mother. 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 may be scheduled and a formal Opinion from the Commission will be issued. You should make such a request or indicate your disapproval of this Advice within the next 30 days. SSC /rdp Si.cerely, Sandra S. C istianson General Co. nsel