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HomeMy WebLinkAbout86-535 KalinyakThomas M. Kalinyak, Esquire Alma Hall - 442 Main Street Johnstown, PA 15901 STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL April 4, 1986 86 - 535 Re: Borough Councilmember, Contracting Dear Mr. Kalinyak: This responds to your letter of March 5, 1986, wherein you requested the advice of the State Ethics Commission. Issue: Whether the State Ethics Act places any restrictions upon a horough councilmember acting as the compensated insurance broker for the sale of insurance to the borough. Facts: As Solicitor of Westmont Borough, you have heen authorized to seek the advice or opinion of the Commission in relation to the above stated issue. You advise that a member of the horough council is a licensed insurance agent in the Commonwealth of Pennsylvania. This councilmember is the owner of an insurance firm that is contemplating the submission of bids to the horough to solicit public liahility and workmen's compensation insurance. You advise that the borough has solicited, through bidding procedures, the submission ofgbidshregardingtthisett and normal regarding type of insurance. You advise that generally when such bids are submitted, the opening of the hids and the award of the contract for the purchase of the insurance is done at a public meeting. You advise that in these situations the councilmember, who has been involved, abstains from the voting on whether the bid should be accepted or rejected. You now request the advice of the State Ethics Commission as to whether the State Ethics Act presents any prohibitions upon the above activity. Discussion: As a member of horough council, the individual involved in the instant situation, is clearly a public official within the definition of that term as set forth in the State Ethics Act. 65 P.S. $402; Davis, 84 -012. As Thomas M. Kalinyak, Esquire April 4, 1986 Page 2 such, this individual's conduct must conform to the requirements of the State Ethics Act. 65 P.S. §401 et. seq. While the Ethics Act contains various restrictions regarding contracts between the business with which a public official or a public employee is associated and the governmental body on which the public official or employee serves, the Ethics Act generally does not totally prohibit a public official or employee or a member of his immediate from engaging in business activities or contracting with the governmental body on which the official serves. The Ethics Act does provide as follows: Section 3. Restricted activities. (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). In the instant situation, it appears as though the borough councilman involved is in fact the owner of greater than 5% of the equity at fair market value of the business that is seeking to contract with the borough. This individual serves as a borough councilmember and, therefore, the provisions of Section 3(c) of the State Ethics Act would be applicable. See Howard, 79 -044. Generally, the provisions of Section 3(c) above would require that the open and public process be utilized in such a situation. This would require: 1. Prior public notice of the employment or contracting possibility; 2. Sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; 3. Public disclosure of all applications or proposals considered; 4. Public disclosure of the contract awarded or offered and accepted. See Cantor, 82 -004; Fields, 82 -006. Thomas M. Kalinyak, Esquire April 4, 1986 Page 3 Thus, as can be seen above, the Ethics Act would generally place no prohibition upon a public official from entering into a contract with his own governmental body. The qualifications under the Ethics Act would require that the above process be employed. In addition to the foregoing, the Ethics Act also provides as follows: Section 3. Restricted activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain • other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. 403(a). The Ethics Act further defines business with which one is associated as follows: Section 2. Definitions. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or holder of stock. 65 P.S. 402. Within this provision of law, it is clear that the borough councilmember is associated with the business that is seeking to contract with the borough. As such, this borough councilmember may not use, to any extent, his public position in order to obtain a financial benefit for that entity. As such, the borough councilmember may not participate, to any extent, in the solicitation of proposals, the discussions and review of such proposals by borough council and the final decision by borough council as to what contract should be accepted and awarded. In addition to the foregoing, it should be noted that Section 3(a) of the State Ethics act, cited above, would generally prohibit a public official from receiving through his public position any financial gain that is not part of the compensation provided for by law. Thus, if by law a public official is not entitled to receive certain compensation, benefits or financial gains, then his receipt of this item, through his public position, could be a violation of the State Ethics Act. See Domalakes, 85 -010. In this respect, the State Ethics Commission generally does not have the jurisdiction to address or interpret the provisions of other municipal codes. However, there are situations when other codes must be reviewed in order to determine if the provisions of the State Ethics Act are implicated. In the instant situation, the Borough Code provides as follows: Thomas M. Kal i nyak, Esquire April 4, 1986 Page 4 PENALTY FOR PERSONAL INTEREST IN CONTRACTS OR PURCHASES. Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand ($1,000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. 53 P.S. §46404. The above provision of law clearly appears to indicate an elected or appointed official of a borough may not be interested either directly or indirectly i n any borough expenditure i n excess of $1,000 i n a single calendar year. If the above provision of law would prohibit, based upon the facts of this situation, a borough official from receiving that type of compensation or benefit, then within the Ethics Act, an official who receives a financial gain knowingly in violation of that provision of the Code may also be receiving a financial gain other than the compensation provided for by law and which is, therefore, not in accord with the State Ethics Act. Thus, it is advised that this provision of the Borough Code must be considered if the borough councilmember, in question, submits his bids to the borough. See Allen, 86 -518; Fountaine, 86 -522. In the instant situation, no information has been provided relating to how much of the premiums will be expended by the borough in each year. As such, we cannot determine if the anticipated activity would be in violation of Section 3(a). The provisions of the Borough Code, however, must be considered as noted above. In respect to your letter of request, we have noted that you referenced to Order No. 9, Myers, which was issued by the Commission in 1979. That order generally provided that there was no violation of the Ethics Act where a borough councilmember had contracted with his borough. In that particular situation, the Commission's decision was based upon previously cited Section 3(c) of the State Ethics Act and was also based upon the fact that the borough councilmember involved in that particular situation had entered into a contract with the borough prior to his term on borough council. Upon the assumption of office by that councilmember, he had instructed council to obtain another insurance carrier. As such, that particular situation does not appear to be factually relevant to the instant matter. Thomas M. Kalinyak, Esquire April 4, 1986 Page 5 In the event that within the provisions of the Borough Code and Section 3(a) of the State Ethics Act no prohibition would be encountered in this situation, then the only requirements that would be imposed upon as borough councilmember under the State Ethics Act are the requirements set forth in Section 3(c) of the State Ethics Act as previously noted. C. Conclusion: Generally, the State Ethics Act places no per se prohibition upon a borough councilmember's contracting with the borough council in which he serves. Within Section 3(c) of the State Ethics Act, any contract in this respect must be awarded through an open and public process and the borough councilmember must abstain from all participation in said matter. In addition, Section 3(a) of the State Ethics Act would prohibit an official from knowingly receiving any financial gain or compensation to which he is not entitled. As such, the Borough Code must be consulted in order to determine i f, i n fact, this individual would be receiving any financial gain in the instant situation to which he was not entitled. In the event that the code does place such a prohibition upon borough councilmembers, then his receipt of compensation, to which he is not entitled, may be a violation of Section 3(a) of the State 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 requester 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. JJC /sfd onti io ral Counsel