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HomeMy WebLinkAbout87-634 PerrySTATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PA 17120 TELEPHONE: (717) 783 -1610 November 30, 1987 ADVICE OF COUNSEL Mr. Wayne Perry 87 -634 3104 Trapper Drive Library, PA 15129 Re: Conflict of Interest, School Director, Contracting with District Dear Mr. Perry: This responds to your letter of October 21, 1987, in which you requested advice from the State Ethics Commission. Issue: Whether the State Ethics Act presents any prohibitions upon a school district's contracting with a company whose corporate officer is one of the members of the school board. Facts: You state that you were elected to the School Board of South Park in November, 1985, and shortly thereafter you took over the "Park News" which published information at no charge to the South Park School District, hereafter District. You further state that the District had been using the "Park News" to publish District information to the residents of the township, such as the minutes of the Board meetings, bus schedules and "Chalk Talk," a quarterly newspaper. It is further stated by you that there is currently a loss of information to the public because "Chalk Talk" has not been issued since mid 1985. You also state that the "Park News" is no longer in a financial position to donate services to the District. You then summarize by stating that the District needs to supply information to the public, the "Park News" is the most economical way to do it and contracts could be handled on a quarterly basis with no special advantage to the "Park News." You then conclude by stating that you would not be doing business with the District as a person under Section 324 of the Public School Code and ask this Commission whether a company of which you would be an officer may transact business with the District. Discussion: Initially, it should be noted that as a member of a school board, you are a "public official" as that term is defined in the State Ethics Act. 65 P.S. §402. As such, your conduct must conform to the requirements of that law. Weaver, 85 -014; Jersey Shore Area School District v. Ritner, 81 Pa. Commw. Ct. 30, 472 A.2d 1183, (1984). Generally, the State Ethics Act places no per se or absolute prohibition upon a public official's employment in a business that contracts with his governmental body. Mr. Wayne Perry November 30, 1987 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 of Perry Publications, you are clearly associated with that business within the above provision of law and, therefore, may not use that position in order to obtain a financial gain for that corporation. Generally, under Section 3(a), such would require that you not participate in any of the school district's decisions or actions relating to purchases made from this particular entity. This would include abstention in deciding from where the journalistic services should be sought, and the amount to be paid. Similarly, you should abstain from participating in the school district's expenditures and payments to this company; your 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, this Commission has been called Mr. Wayne Perry November 30, 1987 Page 3 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, the provisions of the enabling legislation of the governmental body in question must be reviewed. In the instant situation, the Public School Code provides as follows: No school director shall, during the term of 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 provisions that is applicable in the instant situation. This Commission has, in the past, determined that where a school board member 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. In the instant situation, you are a corporate officer of Perry Publications. 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, you are 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 the this Commission, your business, Perry Publications, 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 your receipt of this financial gain in and through your 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 Mr. Wayne Perry November 30, 1987 Page 4 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 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 otherwise 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. Parenthetically, 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 were 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. Mr. Wayne Perry November 30, 1987 Page 5 Thus, in the event that contracting would be allowed, the above process must be employed. Conclusion: As a school board member, you are a public official subject to the provisions of the Ethics Act. Based upon the information provided herein, the Ethics Act would prohibit a business in which a school board member is a corporate officer from receiving any financial gain that is strictly prohibited by law. A member of a school board, who received 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. Parenthetically, in the event that there had been 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 district's employment of this particular company and all contracting or business transactions with such company must be accomplished through an 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. VJD /na Sincerely, Vincent . Dopko, General Counsel