HomeMy WebLinkAbout86-616 StrongWilliam R. Strong, Esquire
P.O. Box 7
616 Main Street
Clarion, PA 16214
Dear Mr. Strong:
Mailing Address.
State Ethics Commission
308 Finance Building
P. 0. Box 11470
Harrisburg, Pa. 17108 -1470
October 28, 1986
ADVICE OF COUNSEL
86 -616
Re: School Director, Employee of Rusiness, Contracting District
This responds to your letter of Septemher 29, 1986, wherein you requested
the advice of the State Ethics Commission.
Issue: Whether the State Ethics Act presents any prohibitions upon a school
district's contracting with a company that employs one of the memhers of the
school hoard.
Facts: You have requested the advice of the State Ethics Commission regarding
whether the DuRois School District may purchase items from Busy Ree Builders
under the following circumstances. One of the members of the DuBois Area
School District is Norman Mowrey. Mr. Mowrey is associated with the Busy Ree
Ruilders as an employee of that corporation. You have advised that he does
not own stock nor is he a director in this husiness. He does hold the unpaid
position of corporate treasurer. You have requested the advice of the State
Ethics Commission regarding whether Mr. Mowrey's association with Rusy.Ree
Ruilders would prohibit the school district from doing husiness with the
aforementioned husiness entity.
Discussion: Initially, it should he noted that as a member of a school
district, Mr. Mowrey is a puhlic official as that term is defined in the State
Ethics Act. 65 P.S. 6402. As such, his conduct must conform to the
requirements of that law. Weaver, R5-01a; Jersey Shore Area School District
v. Ritner, 81 Pa. Commw. Ct. 30, 472 A.2d 1183, (19R4).
Generally, the State Ethics Act places no per se or ahsolute prohihition
upon a puhlic official's employment in a business that contracts with his
governmental body.
State Ethics Commission • 308 Finance Building • Harrisburg, Pennsylvania
William R. Strong, Esquire
October 28, 1986
Page 2
The Act does, however, provide 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, no public official may use his position or
any confidential information obtained therein in order to obtain a financial
gain for himself or a business with which he is associated. The Act 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.
As an officer and employee of the Busy Bee Builders Company, Mr. Mowrey
is clearly associated with that business within the above provision of law
and, therefore, may not use his position in order to obtain a financial gain
for that corporation. Generally, under Section 3(a), such would require tbat-
Mr. Mowrey not participate in any of the school district's decisions or
actions relating to purchases made from this particular entity. This would
include his abstention in deciding from where purchases should be made, what
purchases should be made, and the amount to be paid for items purchased.
Similarly, this individual should abstain from participating in the school
district's expenditures and payments to this company. The director's
abstention, in such matters, should be publicly noted and appropriately
recorded in school district records. See, Sowers, 80 -050; Welz, 86 -001.
In addition to the foregoing, this Commission has also held, in the past,
that a public official within the above provision of the State Ethics Act may
not, through his public position, receive any financial gain to which he is
not entitled. Domalakes, 85 -010. In this respect, the Commission has
determined if a particular statutory enactment prohibits an official receipt
of a particular benefit, then that official's receipt of such a prohibited
benefit, in and through his public office, would also be a use of his office
in violation of the Act. In this respect, we have been called upon, on
various occasions, to determine whether a specific benefit or financial gain
is prohibited by law. See, Allen, 86 -518. In order to determine whether a
particular benefit or gain is strictly prohibited by law, we must review the
provisions of the enabling legislation of the governmental body in question.
In the instant situation, the Public School Code provides as follows:
William R. Strong, Esquire
October 28, 1986
Page 3
No school director shall, during the term or which he was
elected or appointed, as a private person engage in any
business transaction with the school district in which he
is elected or appointed, be employed in any capacity by
the school district in which he is elected or appointed,
or receive from such school district any pay for services
rendered to the district except as provided in this act:
24. P.S. §3 -324.
The Public School Code does not appear to contain any exception to the
above provision that is applicable in the instant situation. This Commission
has, in the past, determined that where a school board members owns, operates,
or has a vested financial interest in a business entity, that entity would be
prohibited from receiving compensation for providing services or transacting
business with the school district pursuant to the above provision of law.
See, Weaver, 85 -014. Generally, in the instant situation, Mr. Mowrey is an
employee of the entity which seeks to do business with the school district.
In this respect, had Mr. Mowrey maintained no other position with the business
entity, then the above provision of law would most likely not be implicated.
In the instant situation, however, Mr. Mowrey is also a corporate officer.
Holding a position of this nature, in a particular business entity, is usually
of such a substantial nature that the individual therein must be considered to
be in a position of more than a mere employee. Because of this relationship,
it is believed that Mr. Mowrey would be in the type of position with the
business entity that would appear to implicate the above provision of law. As
such, and based upon the prior rulings of this Commission, Mr. Mowrey's
business, Busy Bee Builders, would appear to be prohibited from receiving .any-
funds from the school district for services rendered or in relation to any
other business transaction. Because that financial gain appears to be
prohibited by law, then Mr. Mowrey's receipt of this financial gain in and
through his public position, would also appear to be prohibited by Section
3(a) of the State Ethics Act. See, Fyda, No. 438 -R.
In addition to the foregoing, the State Ethics Act 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
William R. Strong, Esquire
October 28, 1986
Page 4
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 relation to the above provision of law, the State Ethics Commission
has generally determined that this provision is a procedure to be used when a
public official or employee contracts with his own governmental body in excess
of $500. Bryan, 80 -014; Lynch, 79 -047. The Commission, however, has also
determined that the above provision of law is not a general authorization for
a public official to contract with his own governmental body where such is
otherwised prohibited by law. The above provision of law clearly is intended
to be a procedure to be utilized where contracting is otherwise allowed by
law. For example, if a particular business transaction was prohibited under
Section 3(a) of the State Ethics Act, this particular provision of law would
not authorize that transaction. Additionally, if a particular municipal code
prohibits a public official from being interested in a contract, this
provision would not allow that interest. However, where contracting is
otherwise allowed or where there appears to be no expressed prohibition to
such contracting, the above particular provision of law would require that an
additional procedure be utilized when such business is transacted. This
procedure, the open and public process, must be used in all situations where a
public official is otherwise appropriately contracting with his own
governmental body in excess of $500. This open and public process 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 and;
(4) public disclosure of the contract awarded and offered and accepted.
See, Cantor, 82 -004.
Thus, i n the event that contracting would be al lowed in the instant
situation, the above process must be employed.
Conclusion: Based upon the information provided herein, the Ethics Act would
prohibit a business in which a school board member is a corporate officer and
employee from receiving any financial gain that is strictly prohibited by law.
A member of a school board, who receives such compensation for his business
entity, would be receiving a financial gain that is strictly prohibited by
law. Such would, thus, be received in and through his public office and would
not be in accord with the State Ethics Act. In the event that there had been
William R. Strong, Esquire
October 28, 1986
Page 5
no such prohibition upon the receipt of this compensation, then the Ethics
Act, generally, would not have precluded in and of itself this contracting
possibility. However, the school board member could not participate in any
actions relating to the school districts employment of this particular company
and all contracting or business transactions with such company must be
accomplished through and open and public process as set forth 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.
Sincerely,
John J. ''nt
Gen- Counsel