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HomeMy WebLinkAbout87-548 SabatineSTATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108-1470 TELEPHONE (717) 783 -1610 April 27, 1987 ADVICE OF COUNSEL Mr. Nicholas R. Sabatine, III, Esquire 87 -548 16 South Broadway Wind Gap, PA 18091 Re: Borough Councilmember, Investment of Borough Funds, Interest in Investment Company Dear Mr. Sabatine: This responds to your letter of March 26, 1987, wherein you requested the advice of the State Ethics Commission. Issue: Whether the State Ethics Act presents any prohibitions upon a member of Borough Council receiving a commission as a result of the investment of certain borough funds. Facts: You currently serve as the solicitor to the borough of Roseto in Northhampton County, Pennsylvania. You advise that a member of the borough council is also an employee of a local investment company. Roseto borough is currently considering investing certain borough pension fund monies. You have requested the advice of the Commission regarding whether the State Ethics Act would prohbit the receipt of commissions by a member of borough council regarding the investment of these funds which are through an investment company which employs the councilmember. Discussion: As a member of the borough council, the individual involved in the instant situation is clearly a public official as that term is defined in the State Ethics Act. 65 P.S. §402; Davis, 84 -012; Domalakas, 85 -010. As 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 offical or employee serves, the Ethics Act generally does not totally prohibit a public official or employee or a member of his immediate family from engaging in business activities or otherwise contracting with the governmental body on which the official serves. Specifically, the Ethics Act does provide as follows: Mr. Nicholas R. Sabatine, III, Esquire April 27, 1987 Page 2 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). If in the instant situation, the borough councilmember involved is in fact the owner of greater than 5% of the equity at fair market value of the business that would be contracting with the borough for the investment of the pension funds, the above provision of law would apply. In this respect, the above provision would require that the open and public process be utilized. This would require: (1) prior public notice of the employement 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. In addition to the foregoing, the Ethics Act furthers 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). Mr. Nicholas R. Sabatine, III, Esquire April 27, 1987 Page 3 The Ethics 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. 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 for the investment of the pension fund. 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 decisions by borough council as to what contract should be accepted and awarded or where borough funds should be invested. In addition to the foregoing it should be noted, that Section 3(a) of the Ethics Act, as cited above, would also prohibit a public official from receiving through his public position any financial gain that is not part of the compensation provided by law. Thus, if by law a public official is not entitled to receive certain compensation, benefits or financial gain, then his receipt of this item, through his public office, could be a violation of the State Ethics Act. See Domalakas, 85 -010; Kalinyak, 86 -535. 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 were 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: 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. Mr. Nicholas R. Sabatine, III, Esquire April 27, 1987 Page 4 The above provision of law clearly appears to indicate that an elected or appointed offical of a borough may not be interested either directly or indirectly in any borough expenditure in excess of $1,000 in any 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, could be receiving a financial gain other than the compensation provided for by law and which is therefore not in accordance with the State Ethics Act. Thus, it is advised that this provision of the borough code be considered if the borough councilmember in question submits a bid to the borough or if his company does so. See, Allen, 86 -518. In the instant situation, you have provided no information relating the amount of expenditures which the borough will be involved in each year. As such, no determination will be made under this particular provision of the law. However, you, as solicitor, should consider the above provision of law and it is suggested that you act in accordance therewith. Conclusion: The State Ethics Act presents no per se prohibitions of an absolute nature on a public official contracting with his governmental body, as a public official, a borough councilmember must observe the provisions of the State Ethics Act as outlined above. As such, an individual must comply with the open and public process requirements if applicable, and may not participate in any matter relating to the award of a contract to a business with which he is associated. Similarly, provisions of the specific codes mentioned in the above outlined advice should be reviewed and the applicability of such determined in relation to the instant situation. 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. cerely, ohn ontino Acti General Counsel