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HomeMy WebLinkAbout83-605 Sestina• H. Donald Sestina, Commissioner Cameron County Office of the County Commissioners East 5th Street Emporium, Pennsylvania 15834 Dear Mr. Sestina: Mailing Address: STATE ETHICS COMMISSION P.O. BOX 1 179 HARRISBURG, PA 17108 TELEPHONE: (717) 783 -1610 October 21, 1983 ADVICE OF COUNSEL $3 -605 RE: Insurance Company, Ex- Officio Membership - Regional Commission This responds to your letter of October 5, 1983, in which you requested Advice from the State Ethics Commission. Issue: You ask whether you may or under what circumstances you may participate in providing insurance to the North Central Pennsylvania Regional Planning and Development Commission on which you serve. Facts: You are currently a County Commissioner in Cameron County. You have decided not to run for re- election and, therefore, your term of office will expire on the first Monday in January, 1984. However, at present, by virtue of your post as a County Commissioner, you are assigned to sit on the Executive Board of the North Central Pennsylvania Regional Planning and Development Commission, hereinafter, North Central. You are not paid as a member of the North Central Board. You are also the sole owner of an insurance agency referred to as Sestina Agency. North Central, by reason of its involvement in economic development, has solicited insurance quotations from multi - tenant industrial complex. If this contract of insurance is awarded, it will be a contract between North Central and the insurance company and no contract will exist between the County and the insurance company with respect to this coverage. North Central first solicited insurance quotations through newspaper advertisements and subsequently solicited quotations by submitting letters with specifications identical to the newspaper advertisement to area insurance agencies. These specifications were based upon an appraisal performed by an in -house appraiser of an agency representing Travelers Insurance Company. However, these specifications, based upon this in -house appraisal, did not constitute an industrial appraisal. The agency of which you are sole owner, the H. Donald Sestina Insurance Agency, hereinafter Sestina Agency or Sestina, State Ethics Commission • 308 Finance Building • Harrisburg, Pennsylvania H. Donald Sestina, Commissioner October 21, 1983 Page 2 representing the Erie Insurance Group, answered the invitation for bids or solicitation for proposals. Sestina in its proposal used an Erie Insurance Group Customer Services Engineer to perform an appraisal of the industrial complex. This appraisal resulted in insurable values higher than those stated in the original invitation to bid. This insurance appraisal was an industrial appraisal and your agency submitted its proposal representing the Erie Insurance Group using the insurable values stated in the Erie Insurance Group's engineering appraisal survey. Four agencies responded to the invitations to bid and two of these requested industrial appraisals before establishing insurable values so as to present a quotation and the third requested an industrial appraisal before evaluating insurable values as well. Essentially, your agency was the only agency to present a proposal which included and was based upon an industrial appraisal. As a result of the lack of quotations or the inability of the agencies (other than yours) to provide quotations as a result of the lack -of an industrial appraisal, North Central decided to accept the appraisal performed by the Erie Insurance Group Customer Service Engineer. You took no part in the decision of North Central to accept this appraisal or to utilize this appraisal as the basis upon which to solicit quotations. North Central, without your participation, then asked the competing insurance companies to re- submit proposals based upon the industrial appraisal and the insurable values contained therein. The Executive Board of North Central determined, upon having the companies re- submit proposals as outlined above, that for the value received, the proposal of Sestina was the most acceptable. The Executive Board accepted this proposal. The minutes of the Executive Board of North Central show that you have abstained from voting both in the solicitation process and in the final award decision. Questions were presented to the solicitor of North Central for his review and opinion as to whether the procedures outlined above represented any problems in particular under the State Ethics Act. Because of these questions and the need to secure coverage, Sestina issued, without cost to North Central, a binder to provide coverage until these questions could be resolved. Subsequently, this request for advice was presented. Discussion: The question to be answered is whether the contract between North Central and Sestina Agency is appropriate or under what circumstances it may be awarded under the Ethics Act. In reviewing this question we must first determine whether you are a "public official" as a result of your ex- officio membership on North Central and whether you are "associated with" North Central as a result of this ex- officio membership. These questions are important because Section 3(c) of the Ethics Act requires that: H. Donald Sestina, Commissioner October 21, 1983 Page 3 (c) No public official or public 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 $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. Any contract made in violation of this subsection shall be 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) Obviously, as the sole owner of the Sestina Agency, you are "associated" with this business as that term is defined in the Ethics Act or in the provisions of Section 3(c) of the Act and a business in which you are the "owner." See definition "Business with which he is associated ", 65 P.S. 402. Section 3(c) of the Ethics Act has been found by the Commission to regulate the conduct of a public official and a business such as Sestina vis -a -vis a governmental body with which he is "associated." See Bryan, 80 -014 and Lynch, 79 -047. However, it is not clear whether as an un -paid appointed member — North Central, you are a "public official" vis -a -vis North Central as that term is defined in the Ethics Act. See definitions "public official ", 65 P.S. 402. Essentially, the definition of "public official" excludes a person who is appointed and not compensated. The Commission has concluded that a person who serves as a member of an organization by virtue of his public office must be deemed to be "associated with" the entity or board on which he serves as an ex- officio member. See Seltzer, 80 -057. You are to be considered to be "associated with" North Central, therefore, and thus, notwithstanding the fact that you are unpaid while serving as an ex- officio member of North Central, Section 3(c) would apply to Sestina - North Central contract. The requirements of Section 3(c) of the Ethics Act must be met before any contract can be made between Sestina and North Central and the "open and public process" limitation of Section 3(c) requires that: 1. prior public notice must be given of the contract possibility; 2. sufficient time must be allowed for a reasonable and prudent competitor to be able to prepare and submit a proposal; 3. public disclosure of all proposals received and considered must be made; and 4. public disclosure of the contract awarded and the offer accepted must be made. See Howard, 79 -044 and Fields, 82 -006. H. Donald Sestina, Commissioner October 21, 1983 Rage 4 In the situation outlined above which you have described by your letter and phone call of October 20, 1983, the request for proposals and the subsequent re- submission of quotations following acceptance by North Central of the industrial appraisal is sufficient to comply with the requirements of Section 3(c) of the Ethics Act. We assume, of course, that this is coupled with the public disclosure of the bids received and the contract awarded. I should note that the Solicitor's opinion which you have provided to us refers to Section 3(h)(1) of the Ethics Act. We will address the applicability of this Section of the Ethics Act after quoting it as follows: (h)(1) Any individual who holds an appointive office in any political subdivision shall not have an interest in any contract or construction in which that political subdivision shall enter or have an interest. 65 P.S. 403(h)(1). While Section 3(h)(1) would seem to indicate that any individual who holds an appointive office in any political subdivision shall not have any contract with the political subdivision that he serves, there is some question as to whether or not this Section as opposed to Section 3(c) as'outlined above would govern this situation because you arE sitting as an ex- officio member of North Central and not merely as an appointed member thereof. In such as case, it would appear that Section 3(c) of the Ethics Act would be the most applicable to the situation described and allow the contract to be made between North Central and Sestina Agency so long as the open and public process (in this case the solicitation for quotations or proposals process ) has been observed, and the other requirements of Section 3(c), as outlined above, have been met. Even if Section 3(h)(1) were the more specific and more applicable provision to the situation described, this Commission has held that questions arising under Section 3(h)(1) should be addressed insofar as possible in light of the safe - guards contained in Section 3(c) of the Ethics Act. This Commission in its opinion in Nanovic, 80 -041 found that it was reasonable to address the restrictions of Section 3(h)(1) by using the power contained in Section 3(d) to establish a parallel between the provisions of Section 3(c) and Section 3(h)(1) and to impose those safe - guards contained in Section 3(c) to a case where an appointed member might seek to contract with the body on which he is appointed or the municipality that has appointed him. In Nanovic, the Commission concluded that if the restrictions contained in Section 3(c) of the Ethics Act were met, even an appointed member who might not otherwise be a "public official" could enter into contracts with the municipality that he served or by analogy in your case, the entity on which he serves as an ex- officio member. Thus, in the present case, under the precedent set forth in Nanovic, even if Section 3(h)(1) were to be read to be applicable to this situation the contract could be made between the Sestina Agency and North Central so long as the requirements of Section 3(c) of the Ethics Act were met. H. Donald Sestina, Commissioner October 21, 1983 Page 5 Finally, it should be noted that the Ethics Act would require you as a member of the North Central Board, to abstain from participation in discussions and votes leading up to the contract between North Central and Sestina Agency. See Section 3(a) of the Ethics Act and Section 1 of the Ethics Act. From the facts as you set forth, you have properly abstained to date and should continue to do so should any non - ministerial questions regarding this contract arise. The Commission has concluded, however, that as to routine payments of amounts due under this contract which is undertaken without your participation and in compliance with Section 3(c) of the Ethics Act, you would not necessarily be precluded from participating in the decisions of North Central regarding such payments. However, given the fact that you will be leaving your post as County Commissioner and, presumably, not remaining as an ex- officio member of North Central beyond January, 1984, the question of your ability to vote on any such payments of premiums under this contract may not arise. Finally, I note that this request neither presents any data upon which we could base a determination under Section 3(e) of the Ethics Act nor requests that we address this question. Section 3(e) of the Ethics Act provides as follows: (e) No former official or public employee shall represent a person, with or without compensation, on any matter before the governmental body with which he has been associated for one year after he leaves that body. 65 P.S. 403(e). The prohibitions against representation could, if necessary, be addressed in a further request for advice if such advice is necessary. Conclusion: Your conduct as a "public official" (County Commissioner) and as a member of the North Central Board serving as an ex- officio member thereof, must be governed by the provisions of the Ethics Act as outlined above. From the factual presentation made here, so long as the requirements of Section 3(c) of the Ethics Act have been met as they apparently have been, there is no prohibition against the contract between North Central and Sestina Agency. 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. H. Donald Sestina, Commissioner October 21, 1983 Page 6 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 be made, in writing, to the Commission within 15 days of service of this Advice pursuant to 51 Pa. Code 2.12. SSC /rdp Sincerely, S.ndra S. C ristianson General Counsel