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HomeMy WebLinkAbout83-612 McClureMailing Address STATE ETHICS COMMISSION P.O. BOX 1 179 HARRISBURG, PA 17108 TELEPHONE: (717) 783 -1610 November 21, 1983 ADVICE OF COUNSEL Wattsburg Area School District c/o Christine Hall McClure, Esquire McClure, Dart, Miller, Kelleher, & White 501 Marine Bank Building Erie, PA 16501 RE: Wattsburg Area School District, Sports Corporation Dear Mrs. McClure: 83 -612 This responds to your letter of October 11, 1983, in which you, as Solicitor of the Wattsburg Area School District, requested advice from the State Ethics Commission. Issue: You ask whether the election of a certain individual will require the termination of a contract currently enforced between the Board of Education and the Wattsburg Area Sports Corporation. Facts: You state that the Wattsburg Area School District, hereinafter the District, currently has a contract with the Wattsburg Area Sports Corporation, hereinafter the Corporation. This contract, a copy of which was attached to your request and which is incorporated herein by reference, provides that the Corporation will sponsor athletic teams to insure that the students of the District can participate in interscholastic athletics despite the fact that these programs are no longer sponsored by the District. It should be noted that the Corporation is a non - profit corporation and is separate and distinct from the District. Under the terms of the contract, the Corporation sponsors the athletic teams, hires the coaches, sets the coaches' salaries, and assumes other responsibilities for providing and promoting sporting events. The Board of Education of the District, particularly the Athletic Committee, is responsible for insuring that the programs conducted by the Corporation conform to the rules, regulations, and policies of the Pennsylvania Interscholastic Athletic Association as well as the requirements of the School District. The Contract further provides that the District shall control all matters pertaining to the athletic relations in which School participates including but not limited State Ethics ti'onimission • 308 Finance Building • Harrisburg, Pennsylvania Wattsburg Area School District November 21, 1983 Page 2 to the right to sanction all contests in which the school participates and the right to exclude any contestant or coach therefrom. Additionally, while the coaches associated with the programs the corporation may promote are subject to approval of the administration of the district and the Board of Education of the District, these coaches are to be considered employees of the Corporation and not of the District and their salaries are set by the Corporation. Further, you indicate that the President of the Corporation, Walter F. Miller, Jr. is presently a candidate for the position of Director on the Board . of Education of the District. Mr. Miller also served last school year as a wrestling coach with the Corporation and is founder and President of the Corporation. Assuming that Mr. Miller is elected and becomes a member of the Board of Education you question whether, under the terms of the Ethics Act, the Board of Education of the District would be required to terminate the contract with the Corporation. Further, you ask whether this situation in general would present a conflict or an appearance of a conflict under the Ethics Act. Discussion: As solicitor for the School District you are empowered to seek advice upon direction of the District and the Directors thereof and on their behalf as to the duties and obligations of the members of the School District and the Board of Education thereof under the Ethics Act. However, upon the facts as outlined above, it is clear that Mr. Miller is neither at present a public employee or public official about whose conduct you may inquire. Consequently, we will be unable to respond to the general question of whether the service of Mr. Miller as President of the Corporation and as a potential member of the Board of Education presents a conflict or the appearance of a conflict vis -a -vis the conduct of Mr. Miller himself. However, we can state and respond to your question of whether the Board of Education of the District would be required to terminate a contract with the Corporation under the facts you present above. Specifically, the Ethics Act states as follows in Section 3(c): (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). Wattsburg Area School District November 21, 1983 Page 3 As this section indicates, a contract that is made which might violate this provision of the Ethics Act is voidable and those consequences would have serious implications on the operations of the School District if the provisions of Section 3(c) are appicable and are not met in any particular situation. The basic question here, however, is whether the provisions of Section 3(c) of the Ethics Act are applicable at all. Primarily, provisions of Section 3(c) of the Ethics Act are applicable to a situation where the following facts exist: (1) A public official or a business in which the official is a director or officer, owner or holder of stock exceeding 5 percent of the equity at fair market value of the business seeks (2) to contract with the governmental body with which he is associated and sets up the requirement that (3) any such contract may be awarded only after an open and public process. In analyzing the requirements of Section 3(c) under the facts that you present it is clear, that if elected, Mr. Miller would be a "public official" as that term is defined in the Ethics Act and that he serves in one of the positions, that is officer, of the Corporation. However, in order to determine that Section 3(c) of the Ethics Act is applicable, Mr. Miller would have to stand in this relationship vis -a -vis a "business" as that term is defined in the Ethics Act. The term "business" is defined in the Ethics Act as follows: "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. As set forth in this definition the term "business" refers to a business organized for profit and because the Corporation is not organized for profit it cannot be considered a "business ". Therefore, it is questionable whether the provisions of Section 3(c) would be applicable if the District and the Corporation were to contract or continue a contract after Mr. Miller begins to serve as a Director in the District. Accordingly, because the Corporation is not a "business" and even though Mr. Miller is a director in the Corporation, the provisions of Section 3(c) of the Ethics Act would not preclude the contract that already exists, require its termination, or impose any restrictions upon any re- negotiation or renewal thereof. The District is free to continue, renegotiate, renew, or terminate that contract without reference to or restriction under Section 3(c) of the Ethics Act. Wattsburg Area School District November 21, 1983 Page 4 It should be noted that even if Section 3(c) of the Ethics Act were applicable, the contract in question would not be prohibited. This contract would have to be awarded after reasonable and prudent competitors had been provided with an opportunity to offer their services or provide a proposal in response to the needs of the District. Following such a process, the District could award a contract to the corporation and would run no risk under the Ethics Act in doing so if Section 3(c) were applicable. See Howard, 79 -044. Also, the Commission has, even where Section 3(c) is applicable, not required the termination of a contract between a political subdivision and a public official /employee serving the subdivision, where the contract pre -dated the official's /employee's entry into service with the subidivision. Coon, 79 -016. We do note that with regard to other provisions of the Ethics Act that specifically regulate or relate to the conduct of Mr. Miller, we have received a request from Mr. Miller and will be providing him with advice as to what his duties and obligations are vis -a -vis the contracting process between the District and the Corporation. We will provide you with a copy of that advice. Conclusion: The District would not violate Section 3(c) of the Ethics Act if the contract referenced above between the District and the Corporation were continued, renewed, or renegotiated. The District is under no obligation under the Ethics Act to terminate this contract under the facts described above. 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 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, .44(2- Sandra S. C ristianson General Counsel