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HomeMy WebLinkAbout17-1001 SmithSTATE ETHICS COMMISSION 309 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: Nicholas A. Colafella, Chair Mark R. Corrigan, Vice Chair Roger Nick Maria Feeley Melanie DePalma DATE DECIDED: 618117 DATE MAILED: 6130117 Mark A. Smith, Esquire President & General Counsel Coalition for an Affordable Bay Solution c/o Kathleen Paradise, Secretary P.O. Box 323 Old Bethpage, NY 11804 171001 Dear Mr. Smith: This Opinion is issued in response to your advisory request letter dated May 1, 2017. I. ISSUE: For purposes of filing quarterly expense reports under Pennsylvania's lobbying disclosure law ( "Lobbying Disclosure Law "), 65 Pa.C.S. § 13A01, et sue., what would be an acceptable method for valuing shares of restricted stock paid by a principal to a lobbying firm at the beginning of a lobbying contract as a portion of compensation for lobbying to occur across quarters, and when should such compensation be reported if the principal reports lobbying expenses on an accrual basis. II. FACTUAL BASIS FOR DETERMINATION: As President and General Counsel of the Coalition for an Affordable Bay Solution ( "Coalition "), you request an advisory Opinion from this Commission on behalf of the Coalition. You have submitted facts, the material portion of which may be fairly summarized as follows. The Coalition is a registered principal in Pennsylvania. The Coalition reports lobbying expenses on an accrual basis. The Coalition entered into a contract ("the Contract ") with a lobbying firm ( "Lobbying Firm ") effective February 1, 2017. In accordance with the Contract, on February 1, 2017, the Coalition delivered to the Lobbying Firm a certain number of restricted and iegended P.O. BOX 1 1470, HARRISBURG, PA 1 71 08 -1470 - 717-783-16 10 m 1-800-932-0936 e www.ethlcs.state.pa.us Smith, 17 -1001 .Tune 30, 2017 Page 2 shares of common stock of Bion Environmental Technologies, Inc. ( "BNET ") as a portion of the Lobbying Firm's compensation for state lobbying services, specifically, direct communication, to occur across quarters. The transfer of the shares is irrevocable, and the shares may not be publicly resold by the Lobbying Firm until after August 2, 2017. You ask what would be an acceptable method for valuing the aforesaid shares of restricted stock paid by the Coalition to the Lobbying Firm at the beginning of the Contract, and when such compensation should be reported given that the Coalition reports lobbying expenses on an accrual basis. By letter dated May 11, 2017, you were notified of the date, time and location of the public meeting at which your request would be considered. III. DISCUSSION: It is initially noted that pursuant to Section 13A08(a) of the Lobbying Disclosure Law, 65 Pa.C.S. 13A08(a), in conjunction with Sections 1107(10) and 110711) of the Public Official andimployee Ethics Act ( "Ethics Act " ), 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, this Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfullly disclosed all of the material facts. As a registered principal in Pennsylvania, the Coalition is subject to the prohibitions, restrictions, and requirements imposed upon principals by the Lobbying Disclosure Law, including the requirements for quarterly expense reporting. Per the submitted facts, the Coalition reports lobbying expenses on an accrual basis. As explained in the Lobbying Disclosure Regulations, under the accrual basis method of accounting, "Income is recognized when earned and expenses when incurred. For example, payroll is recognized when the associated hours are worked regardless of when payment is made." 51 Pa. Code § 55.2(a)(3)(ii). A registrant should be consistent in the accounting method used for the two -year registration period, but if the registrant must change its accounting method, it is to internally keep a record noting the date of the change and the reason for the change. 51 Pa. Code § 55.2(6); see also, the Lobbying Disclosure Regulations Committee's Manual for Accounting and Deporting, Section IV. Because Section 13A05(b)(2.1) of the Lobbying Disclosure Law provides that "[flor purposes of filing an expense report under this subsection, a re Estrant may use any reasonable methods of estimation and allocation," 65 Pa.C.S. 13A05(b)(2.1), this Commission may not prescribe one particular method for the Coalition to use to value the aforesaid shares of restricted stock. Under the submitted facts, it would be reasonable to value the aforesaid shares based upon either of the following approaches, which are not necessarily the only approaches that could be used: (1) using the fair market value of unrestricted BNET common stock as of February 1, 20177, when the restricted stock was delivered to the Lobbying Firm, or (2) valuing each portion of the stock when the expenses for which it is considered payment are deemed to have been incurred under the accrual basis of accounting, using the market value of the unrestricted BNET common stock at such times. The expense of payment of such stock to the Lobbying Firm would be reported based upon when the corresponding lobbying expenses would be deemed to have been incurred under the terms of the Contract. The request for an advisory has only been addressed under the Lobbying Disclosure Law and, derivatively, the Ethics Act to the extent applicable. Smith 17 -1001 �u ie��0, 2017 Page 3 IV. CONCLUSION: As a registered principal in Pennsylvania, the Coalition for an Affordable Bay Solution ( "Coalition) is subject to the prohibitions, restrictions, and requirements imposed upon princepals by Pennsylvania's lobbying disclosure law ( "Lobbying Disclosure Law "), 65 Pa.C.S. § 13A01 et sec . Based upon the submitted facts that: (1 the Coalition reports lobbying expenses on an accrual basis; (2) the Coalition entered into a contract ( "the Contract) with a lobbying firm (Lobbyingg Firm) effective February 1, 2017; (3) in accordance with the Contract, on February f, 2017, the Coalition delivered to the Lobbying Firm a certain number of restricted and le ended shares of common stock of Bion Environmental Technologies, Inc. ( "BNET') as a portion of the Lobbying Firm's compensation for state lobbying services, specifically, direct communication, to occur across quarters; (4) the transfer of the shares is irrevocable; and (4) the shares may not be publicly resold by the Lobbying Firm until after August 2, 2017, you are advised as follows. For purposes of filing quarterly expense reports pursuant to the Lobbying Disclosure Law, it would be reasonable to value the aforesaid shares of restricted BNET stock based upon either of the following approaches, which are not necessarily the only approaches that could be used: (1) using the fair market value of unrestricted BNET common stock as of February 1, 2017, when the restricted stock was delivered to the Lobbying Firm; or (2) valuing each portion of the stock when the expenses for which it is considered payment are deemed to have been incurred under the accrual basis of accounting, using the market value of the unrestricted BNET common stock at such times. The expense of payment of such stock to the Lobbying Firm would be reported based upon when the corresponding lobbying expenses would be deemed to have been incurred under the terms of the Contract. Pursuant to Section 13A08(a) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A08(a), a requester who truthfully discloses all material facts in a request for an advisory and who acts to good faith based upon a written Opinion of this Commission issued to the requester shall not be held liable for a violation of the Lobbying Disclosure Law. The protection afforded for reliance upon this Opinion will remain in effect until such time as any regulation, statutory enactment, or ruling precludes further reliance upon this Opinion. This letter is a public record and will be made available as such.