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HomeMy WebLinkAbout81-582 WeltyPaul Welty, Esq. Coulter Building Greensburg, PA 15604 STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 June 26, 1981 ADVICE OF COUNSEL RE: Section 3(c), School Board Members Dear Mr. Welty: 81-582 This responds to your letter of May 5, 1981, in which you, as Solicitor for a School District, requested an opinion from the Ethics Commission. Issue: You asked for advice as to whether: (1) A School Board Member who is the owner of more than 5% of the value of a business may vote on the award of a District contract to the business he is interested in, if the contract is awarded in open bidding. (2) The Ethics Act is violated by the award of the contract after an open bidding process to a company, more than 5% of which is owned by a School Board Member, if the School Board Member does not vote on the award of the contract. (3) Another Member of the School Board, who is an officer and employee of a corporation, should abstain from voting on the award, after an open bidding process, of a contract to the corporation. Facts: You informed us that one Member of a School Board owns more than 5% of a business. The business is interested in bidding on School District contracts. District contract proposals are advertised for three consecutive weeks. Bids are received, opened and awarded at a public meeting. The contract is awarded to the lowest responsible bidder. The Member has no confidential information which would provide any bidding advantage. A different Member of the same School Board is an officer and an employee of a corporation but does not own any part of the corporation. Paul Welty, Esq. June 26, 1981 Page 2 Discussion: School Board Members are certainly public officials within the meaning of the Ethics Act, 65 P.S. §401 et seq. As public officials, School Board Directors must conform their conduct to the requirements of the Act. The statute does not, however, command School Board Members to give up business interests. Rather, the Act mandates that Members avoid even the appearance of a impropriety by following certain procedures in their business dealings with the School District. Section 3(c) of the Act provides that No public official... 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 the 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. 65 P.S. §403(c) A contract valued at more than $500 must be awarded in an open and public process allowing a reasonable and prudent competitor of the public official time to prepare a competi- tive bid, Howard 79 -044. The procedure followed by the School District gives 3 weeks notice to competitors, dicloses the award of the contract and is an open and public process. There is no violation of the Act if a contract is awarded in an open and public process, even if the contract is awarded to a business in which a Member of the Board has an interest. The Commission has held that an individual interested in a contract should not vote on that contract or other matter in which he is interested. Sowers, 80 -050. The School Board Member must abstain, as he did, from voting on the award of contracts to a business in which he has an interest although the contract is awarded in an open and public process. The School Board Member should abstain from voting and participating in discussions on such contracts and should place the reason for his abstention on the public record. Paul Welty, Esq. June 26, 1981 Page 3 As to the other member of the School Board who is an officer but not an owner of a corporation, the statute is clear. Section 3(c) states that no "director, officer, owner or holder of stock..." (emphasis added) may contract with his governmental body unless the contract is awarded in an open and public process. An officer must also abstain from voting on the award of and discussions on such contracts to the corporation and should place the reason for his abstention on the public record. Conclusion: School Board Members are public officials subject to the Ethics Act. A School Board Member who owns more than 5% of the equity at fair market value of a business may contract with the School District if the contract is awarded in an open and public process and the Member abstains from discussions and /or voting on the award of the contract. The Member should place the reason for his abstention on the public record. The School Board Member should not participate in discussions on and /or vote to award a contract to his business even though the award is the result of an open and public process. A School Board Member who is an officer of a corpora- tion may not participate in discussions on and may not vote on a contract awarded to the corporation and should place the reason for his abstention on the public record. If the contract is awarded after an open and public process and the officer abstains there is no violation 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. 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. SW /rdp Sinperely, General Couplse1 andra