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HomeMy WebLinkAbout86-597 KulikJoseph M. Kulik, Esquire Kennedy Township Office 121 Lorish Road McKees Rocks, PA 15136 Dear Mr. Kulik: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 September 2, 1986 ADVICE OF COUNSEL Re: Municipal Official, Partnership, Municipal Solicitor 86 - 597 This responds to your letter of August 11, 1986, wherein you requested the advice of the State Ethics Commission. Issue: Whether the law partner of a municipal.official may be appointed as the municipal solicitor. Facts: You have requested the advice of the State Ethics Commission on behalf of yourself and your law partner. You advise that you currently serve as a municipal official as a member of the governing body of a municipality. You further advise that you are a practicing attorney in the Commonwealth of Pennsylvania and currently are engaged in the practice of law in partnership with another individual. Your law partner is seeking the position of municipal solicitor for the municipal body on which you serve. You have advised that, in relation to this particular situation, an arrangement will be transacted whereby all of the fees to the municipal solicitor will be placed into a segregated bank account. All of the work for the municipality will he performed by your partner and, as a result, you will receive no funds whatsoever from the municipal body on which you serve and you will perform no work as a private attorney for that governing authority. You have advised that, in all other respects, the partnership will remain intact and that you will share, on a partnership basis, in all other fees generated by the partnership. You have requested the advice of the State Ethics Commission as to whether there would be any prohibitions upon you as a public official in the instant situation. Specifically, you have asked if you may vote for the selection of a solicitor and, if so, may you vote for the selection of your law partner. Joseph M. Kulik, Esquire September 2, 1986 Page 2 Discussion: It is noted, at the outset, that generally the State Ethics Commission may not regulate the conduct of attorneys or the practice of law. Pennsylvania Public Utility Commission Bar Association v. Thornburgh, 62 Pa. Commw. Ct. 88, 434 A.2d 1327, (1981); Affirmed 498 Pa. 589, 458 A.2d 613, (1982). Additionally, part -time municipal solicitors are not public employees within the purview of the State Ethics Act. Ballou v. State Ethics Commission, 56 Pa. Commw. Ct. 240, 424 A.2d 983, (1983). As a municipal official, however, you are a public official as that term is defined in the State Ethics Act and your conduct must conform to the requirements thereof. 65 P.S. §402; Blaney, 84 -003. The State Ethics Commission has addressed issues similar to the one presented herein on several occasions. See, Cantor, 82 -004; Fields, 82 -006; Mohan, 85 -587. In Fields, the Commission specifically set forth various guidelines in relation to a municipal officer's duties when his partner serves or hopes to serve as the municipal solicitor. The Commission indicated that the sections of the State Ethics Act applicable in such a situation are 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). 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). Joseph M. Kulik, Esquire September 2, 1986 Page 3 Section 1. Purpose. The Legislature hereby declares that public office is a public trust and that any effort to realize personal financial gain through public office other than compensation provided by law is a violation of that trust. In order to strengthen the faith and confidence of the people of the State in their government, the Legislature further declares that the people have a right to be assured that the financial interests of holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. Because public confidence in government can best be sustained by assuring the people of the impartiality and honesty of public officials, this act shall be liberally construed to promote complete disclosure. 65 P.S. 401. Generally, the Commission has determined that law partners, serving as a municipal officer and solicitor respectively, would not constitute a per se conflict of interest in violation of the State Ethics Act. The Commission did rule that in order to abide by both the intent and spirit of the State Ethics Act, as set forth in Section 1 thereof, the municipal official must abstain from the municipal body's review and decisions regarding the appointment or reappointment of its solicitor as well as in relation to actions pertaining to litigation activities which would increase fee payments to the solicitor. In addition to requiring such abstention from voting on this matter, the Ethics Act would not preclude the acceptance of the position by the law partner. Under the restrictions of Section 3(a), of course, the municipal officer could not use his office or any confidential information obtained therefrom to obtain a financial gain other than the compensation provided for by law for himself, a member of his immediate family or a business with which he is associated. The State Ethics Act provides that business with which one is associated is defined 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. The Act further defines the term business as follows: Joseph M. Kulik, Esquire September 2, 1986 Page 4 Section 2. Definitions. "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. In relation to the instant situation, you have advised that you will be receiving no funds from the partnership distribution agreement that have been obtained from the municipal government with which you are associated. In this respect, all of the funds will be received and paid to your law partner. The fact, however, that you will be receiving no funds from this particular arrangement does not negate the fact that you are "associated with" this particular attorney and that the law of partnership generally is a business with which you are associated. As such, even though you receive no funds directly or indirectly from the municipality on which you serve, the provisions of the State Ethics Act, would still appear to be applicable in the instant situation. As such, you must abstain from participating in any matter relating to the municipal government's selection of a solicitor and in relation to any matters regarding litigation which would increase fee payments to the solicitor, once selected, if it is your partner. In addition to the foregoing, the State Ethics Commission has further determined that the provisions of Section 3(c) of the State Ethics Act would be applicable in the instant situation. Generally, Section 3(c) provides 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, if the award of the solicitorship to your partner would result in his obtaining $500 or more, the open and public process should be followed. The Commission has determined that, in holding the open and public process provisions of Section 3(c) of the State Ethics Joseph M. Kulik, Esquire September 2, 1986 Page 5 Act, applicable to personal service contracts such as that between the municipality and its solicitor, such was done with the realization that these contracts may have to be handled differently from the usual requirements of the municipal code. Typically, municipal codes exempt the personal or professional service contracts from bidding requirements. See, Borough Codes, 53 P.S. §46402(d)(5); City Codes, 53 P.S. §12671, (First Class), 53 P.S. §23308.1 (Second Class), 53 P.S. §36901(d)(5) (Third Class); Incorporated Towns, 53 P.S. §53202(d)(5); and Township Codes, 53 P.S. §56802(d) (First Class), 53 P.S. §65802(e)(5) (Second Class). However, the purposes for these exemptions has generally been to free the municipality from mandatory acceptance of the lowest bidder. Commonwealth v. Tice, 272 Pa. 447, (1922). The purpose of this exception, from the bidding requirement, is manifestly different from the purposes of the Ethics Act in general and Section 3(c) of the Ehtics Act in particular. Cantor, 82 -004. The purpose of the Ethics Act, as expressed in Section 1 of the State Ethics Act, is to strengthen the faith of the public in their government. Section 3(c), in this case, requires and open and public process in the award of contracts by a municipality to its own public officials or employees, their wives, etc. It is obvious that adhearance to the open and public process of Section 3(c), if applied to personal professional contracts as well as to contracts for goods, will help alleviate the fear that insiders, public officials and employees, their spouses and businesses, are favored in such employment. Given the fact that the legislature clearly demonstrated an ability to write exceptions for personal professional service contracts and other codes did not do so in the State Ethics' Act, but we must conclude that the application of Section 3(c) to such contracts was intended by the legislature. Applying Section 3(c) to such contracts effects the clear language of the Ethics Act as well as implementing its purpose. In this interpretation and application, we do not imply or find a requirement in Section 3(c) that the formal bid process, with the legal advertisement, etc., is required. Nor do we find that the municipality, in such circumstances, will be obligated after the open and public process is met to award the contract to the lowest bidder. Compare American Totalisator Company v. Seligman, 27 Pa. Commw. Ct. 639, (1976). As stated previously by this Commission, a reasonablness test is to be applied in determining whether an open and public process requirements of Section 3(c) have been met. Howard, 79 -044. Thus, before any public employee, official, his immediate family or business as described in Section 3(c) is awarded, a personal /professional contract by the municipality he /she serves, there must be; (1) prior public notice of the contract and possibility; (2) sufficient time for a reasonable and prudent competitor to be able to prepare and submit a proposal /application; (3) public disclosure of all proposals /applications considered; and (4) public disclosure of the contract awarded or offered /accepted. Joseph M. Kulik, Esquire September 2, 1986 Page 6 Conclusion: The State Ethics Act presents no absolute prohibition upon a municipal official's partner serving as the municipal solicitor. The municipal officer must abstain, however, from participating in the municipal body's decisions regarding the appointment or reappointment of the solicitor and regarding matters pertaining to decisions which would increase fee payments to the solicitor. This is so, even in light of the fact that the municipal officer will receive no fees directly from the municipal governments agreement with its solicitor. The fact that the municipal officer is associated with this particular business entity, requires adherence to the provisions of the State Ethics Act. In additon to the foregoing, if you, as the municipal officer, stand in the relation to the business as outlined above in Section 3(c) of the State Ethics Act, any contract in excess of $500 between the municipal body and the solicitor must be awarded after an open and public process. 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. Si Jolfn Co o Ge - al Counsel