Loading...
HomeMy WebLinkAbout86-593 NovakAllen Paul Novak, Esquire 22 North 3rd Avenue Coatesville, PA 19320 Re: City Councilmember Purchasing City Bonds Dear Mr. Novak: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108-1470 TELEPHONE (717) 783 -1610 August 14, 1986 ADVICE OF COUNSEL 86 -593 This responds to your letter of July 28, 1986, wherein you requested the advice of the State Ethics Commission. Issue: Whether a member of city council may purchase general obligation bonds issued by the city. Facts: As Solicitor for the City of Coatesville, you have requested the advice of the. State Ethics Commission in relation to an issue that has recently developed. You advise that the City Council of Coatesville has adopted ordinances which approved the issuance of general obligation bonds for the City of Coatesville. The purpose of the bond issuance is to finance the Department of Environmental Resources mandated improvements to the city's sewer plant and facilities. You have been asked, by one of the members of the city council, if it would he permissible for him to purchase some of the bonds which will be sold as part of the bond issuance. You advised that this councilmember has been approached independently by his investment broker in relation to this situation. The city council voted for and approved the issuance of the bonds in relation to this project. As solicitor for the City of Coatesville you have, therefore, requested the advice of the State Ethics Commission as to whether there would be any prohibitions under the State Ethics Act regarding this contemplated purchase of bonds. Discussion: As a member of a city council, the individual involved in this situation is a public official as that term is defined in the State Ethics Act. 65 P.S. §402. As such, his conduct must conform to the requirements of the law. See Boyle, 80 -020. Alien Paul Novak, Esquire August 14, 1986 Page 2 Generally, the State Ethics Act 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). Within the above provision of law, it is clear that a public official may not use his position in order to obtain a financial gain for himself or for a business with which he is associated other than the compensation that is provided for by law. In relation to the question that you have asked, the Commission has, on several occasions, issued opinions and advices which indicate that the Ethics Act generally would place no prohibition upon a public official's or employee's purchase of bonds or stock that somehow related to the entity on which they serve. For example, the Commission has ruled that a member of the Pennsylvania Milk Marketing Board may purchase stock available to the general public, in corporations that are involved in dairy products. Sciotto, 81 -560. Similarly, the Commission also indicated that a member of the General Assembly would not be prohibited from purchasing Pennsylvania Housing Finance Agency Bonds. Bodack, 81 -564. See also, Sacks, 86 -581 (Pennsylvania Department of Public Welfare attorney may invest in a limited partnership that is involved in the construction of a personal care boarding home.) While the Ethics Act will place no per se prohibitions on an investment of the type as set forth in your letter, it is clear that the Act would prohibit the in question city councilman from using his public position or any confidential information obtained through his position in order to benefit himself. Thus, if through his city council position this individual has access to information which could somehow result in a financial gain being acquired through the purchase or sale of the stock, then said individual may not use that information for any purpose whatsoever. Additionally, depending upon the type of situation that could develop, this individual should be cautious in actions that he takes, if any, in relation to council's handling of the bond issuance. For example, if the bond issuance is being handled by a sewer authority and the council has no influence or control, then there would appear to be no restrictions on this councilman's purchase of those bonds. However, if this councilmember must actively participate in daily actions which relate to the issuance of the bond and the pay -back of the bond then, in certain situations, he may be prohibited as a public official from participating in that particular activity. In this respect, if a situation should develop wherein a conflict of interest question arises, the further advice of this Commission should be received. We assume, also for the purpose of this advice, that the bond issuance will be handled in the normal course of Alien Paul Novak, Esquire August 14, 1986 Page 3 business and that the sale of bonds will be made to the public generally through investment brokers. Thus, there would be no prohibition under the State Ethics Act of this particular city councilmember making a purchase over the public market of the bonds after they are issued. Finally, you are reminded that all public officials must report income received in excess of $500 in any given year. Thus, if the purchase of the bonds will result in receipt of income in excess of that amount, such must be reported on the annual Statement of Financial Interests which is required under the State Ethics Act. Conclusion: The State Ethics Act would present no per se prohibition upon a member of city council purchasing, over the public market through an investment brokerage firm, bonds that are issued by the governmental body on which he serve. A public official, however, may not use any confidential information obtained from his public position to either purchase or sell bonds in an effort to realize a financial gain. Similarly, if this public official is called upon to act in a matter that involves the bond issuance or pay -back, then depending upon the situation, the further advice of this Commission may be necessary. 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. Since Gene Counsel