HomeMy WebLinkAbout87-529 FranceMr. Jack H. France
Murphy & France
P.O. Box 109
308 Fallowfield Avenue
Charleroi, PA 15022
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PA 17120
TELEPHONE: (717) 783 -1610
March 30, 1987
ADVICE OF COUNSEL
87 - 529
Re: Conflict of Interest, Member Water Authority, Grant Funds, Transit
Company Doing Business With Member's Company
Dear Mr. France:
This responds to your letter of February 6, 1987, wherein you requested
the advice of the State Ethics Commission.
Issue: Whether the State Ethics Act presents any prohibitions upon the
activities of a member of a water authority when that authority member's
private company transacts business with a recipient of authority grant funds.
Facts: As solicitor for the Mid -Mon Valley Transit Authority, you have
requested the advice of the State Ethics Commission in relation to authority
member Donald Smith.
The authority is a joint organization consisting of representatives from
20 area municipalities. Each municipality appoints one member to the
authority board. The borough of Spears, one of the authority members, has
appointed Mr. Donald Smith to the authority's board. Mr. Smith is also an
employee and vice president of Guttman Oil Company. Mr. Smith, although an
officer of that company, currently does not own stock in the company. He is
not a commissioned salesman for the company. Generally, Mr. Smith is
responsible for marketing and management of the company's lubricants division.
This includes the profitability of the company which comes from a wide range
of customers that use lubricants and liquid fuels.
The municipal authority provides financial assistance to three area
transportation companies. One of these companies receiving assistance from
the authority is 88 Transit Lines, Inc. The authority's funding for
assistance to this particular company, in part, is derived from Urban Mass
Transportation Act Capital Assistance Grants. The authority further receives
an allocation from the State Lottery fund for transportation of senior
citizens. These funds are also channeled through the authority to 88 Transit
Lines, Inc.
The authority board, during its monthly meetings, is generally requested
to vote on the payment of assistance to the three area transportation
companies, including the one noted above.
Mr. Jack R. France
March 30, 1987
Page 2
You have indicated that 88 Transit Lines, Inc. has purchased
approximately $15,000 in lubricant products from the Guttman Oil, Co. Guttman
is a multi - million dollar corporation and the amount of sales to the transit
company amounts to 1/2 of 1 % -of the company's total sales. You note that Mr.
Smith receives no commission on the sale of these products to that company.
The sales to this company relate strictly to lubricants only. 88 Transit
Company is a large user of fuel, but, Guttman Oil Company at the current time
does not sell that product to 88 Transit Lines, Inc. Mr. Smith has indicated,
in a recent letter to the commission, that Guttman Oil would of course be
interested in furnishing 88 Transit Lines, Inc. with fuel, and as such, that
company is a major target account for Guttman.
You have requested the advice of the State Ethics Commission, on behalf
of Mr. Smith, in relation to the above situation and any restrictions that may
be applicable pursuant to the State Ethics Act.
Discussion: As a member of a municipal authority, Mr. Smith is a public
official as that term is defined in the State Ethics Act, 65 P.S. §402, and
the regulations of the State Ethics Commission, 51 Pa. Code §1.1, as amended
November 29, 1986, 16 Pa. Bulletin 4653. As such, his conduct must conform to
the requirements of . that law. See Dice, 85 -021.
The State Ethics Act provides a number of provisions that may be
applicable in the instant situation. Initially, the act provides in part 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).
Business with which one is associated is defined" in the law and provides:
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 of the Guttman Oil Company, Mr. Smith is associated with that
business as set forth above. Therefore, he could not use his public position
in order to obtain any benefit for that entity. Similarly, he may not use any
confidential information obtained through his public position in order to
obtain a benefit for that company. Generally, as an authority member, Mr.
Mr. Jack R. France
March 30, 1987
Page 3
Guttman is responsible for the award of funds to 88 Transit Lines, Inc.; Mr.
Smith, however, is not associated with that particular entity and, therefore,
the above provision of law would appear to place no restrictions upon his
activities.
In addition to the foregoing, however, the Ethics Act also allows this
commission to address other areas of possible conflict. 65 P.S. §403(6).. The
parameters of the types of activities encompassed by this particular provision
of the Ethics Act are generally determined through a review of intent of the
law. Generally, the Ethics Act was promulgated in order to ensure the public
that the financial interests of their officials do not conflict with the
public trust. 65 P.S. §401. Generally, a conflict of interest will develop
at any time where a public official attempts to serve one or more interests
that are adverse. See Domalakes, 85 -010. In the instant situation, as a
member of the municipal authority board, Mr. Smith is responsible for
reviewing and awarding grant funds to 88 Transit Lines, Inc. These funds are
used in part for the payment of the bill for the purchase of lubricants from
Guttman Oil. Additionally, while Guttman Oil only supplies lubricants to 88
Transit Lines, Inc., they are interested in obtaining the fuel supply contract
for that company. Mr. Smith has indicated that this is a major target account
for his company. Mr. Smith, as the individual in charge of marketing and
management would appear to be responsible for securing this contract. Thus,
on the one hand, Mr. Smith is responsible for reviewing the requests of 88
Transit Lines, Inc. and authorizing the allocation of grant funds to that
company, while on the other hand, he would be responsible for approaching that
company, as a private employee of Guttman Oil, in an attempt to secure a
contract for the provision of supplies to that company. The payment for those
supplies would in part be derived from the transit authority monies that Mr.
Smith would be awarding as a member of the board to 88 Transit Lines, Inc, Ai
such, Mr. Smith would be in a position of being required to serve the interest
of the authority, when he reviews the requests of 88 Transit Lines, Inc.,
while on the other hand he would be responsible for the interests of his
private corporation in securing larger contracts with that company. 3ecause
of the foregoing, it would seem as though a conflict of interest could
develop. We note, in this respect, that the Ethics Act would not prohibi - 1: Mr.
Smith's service on the transit authority. Generally, the Ethics Act would
only require that he abstain from participating in matters that relate to the
supplying of these grant funds to 88 Transit Lines, Inc. If the grant fund
are awarded at one time, and then subsequently paid on a monthly basis tnrough
the submission of bills, then the Ethics Act would merely require Mr. Smith's
abstention from the initial grant application review, consideration and the
decision of the board to allocate those funds to the company. If thereafter,
pursuant to a previously agreed upon grant approval, payments are made on a
monthly basis, then Mr. Smith may participate in the routine payment of those
bills as long as such are undisputed. See Stewart, 79 -070. In the event that
bills are disputed or in the event that the grant application is submitted on
a monthly basis, then Mr. Smith would be required to abstain from the award of
those funds generally to that company or in resolution of the dispute.
Mr. Jack R. France
March 30, 1987
Page 4
In addition to the foregoing, we note that the Ethics Act generally
requires 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, Mr. Smith does not stand in the relationship as set
forth above to 88 Transit Lines, Inc. Rather, he is an officer of Guttman
Oil, but Guttman Oil is not transacting business with the authority. As such,
the above provision of law would not be applicable to the current situation.
Finally, the Ethics Act provides as follows:
Section 3. Restricted activities.
(b) No person shall offer or give to a public official or
public employee or candidate for public office or a member
of his immediate family or a business with which he is
associated, and no public official or public employee or
candidate for public office shall solicit or accept,
anything of value, including a gift, loan, political
contribution, reward, or promise of future employment
based on any understanding that the vote, official action,
or judgment of the public official or public employee or
candidate for public office would be influenced thereby.
65 P.S. 403(b).
Reference to the above provision of law, is included in this advice not to
imply that there has or will be any implication thereof. Reference is made to
this provision of law merely to provide a complete response to the questions
you that you have possed.
Mr. Jack R. France
March 30, 1987
Page 5
Conclusion: While the Ethics Act would present no per se prohibition upon Mr.
Smith's simultaneous service as a member of the municipal authority and his
private employment with a company servicing the recipient of authority grant
funds, as a public official his conduct must conform to the requirements of
the State Ethics Act as indicated above. His abstention in matters, as noted
above, should be publicly recorded in the appropriate authority minutes.
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 i n any other civil or crimi nal 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
Lj
ntino
Actin. General Counsel