HomeMy WebLinkAbout87-654 ArnerJames I. Arner, Esquire
721 Wood Street
P.O. Box 328
Clarion, PA 16214
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PA 17120
TELEPHONE: (717) 783 -1610
December 24, 1987
ADVICE OF COUNSEL
87 - 654
Re: Conflict of Interest, School Director, Contracting with District
Dear Mr. Arner:
This responds to your letter of December 10, 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 officer and stockholder is one of
the members of the school board.
Facts: In your letter you state that you represent James P. Gourley, who has
recently been elected as a member of the board of the Redbank Valley School
District, hereinafter School District, in Clarion County, Pennsylvania. You
further state that Mr. Gourley is an officer and stockholder in Gourley
Packing Company, Inc., a corporation which has sold food products to the
School District in the past and seeks to do business with the School District
in the future. You further state that if Gourley Packing Company, Inc.,
complies with the provision of Section 3(c) of the Ethics Act, you inquiry as
to whether this company can do business with the School District. After
asserting your view that Section 3(c) of the Ethics Act would allow a school
board member to contract with the School District, you also cite Section 12 of
the Ethics Act for the proposition that its provisions would control over any
other inconsistent statute. You conclude by requesting advice as to whether
Gourley Packing Company, Inc., may contract with the School District provided
the requirements of Section 3(c) are followed.
Discussion: Initially, it should be noted that a member of aschool board is
a "public official" as that term is defined in the State Ethics Act. 65 P.S.
§402. As such, his conduct must conform to the requirements of that law.
Weaver, 85 -014; Jersey Shore Area School District v. Ritner, 81 Pa. Gomm. Ct.
30, 472 A.2d 1183, (1984).
Jaynes I. Arner, Esquire
December 24, 1987
Page 2
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.
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 member of his immediate family 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 di rector, officer, owner, employee or holder
of stock. 65 P.S. 402.
Under this provision, the Ethics Commission has determined that the use
of office by a public official to obtain a gain or benefit for himself which
is not provided for in law constitutes a "financial gain other than
compensation provided for by law." These determinations have been appealed to
the Commonwealth Court of Pennsylvania which has affirmed the orders of the
Commission. See McCutcheon v. State Ethics Commission, 77 Pa. Commw. 529
(1983). See also Yocabet v. State Ethics Commission, Pa. Commw. , 531
A.2d 536 (1987). Of course, under this provision, a school director may not
use his public position to secure any financial gain for himself or for the
business which he is associated. See Domalakes, 85 -010.
In this respect, the Commission has determined if a particular statutory
enactment prohibits an official's 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. The
Commission has been called upon, on various occasions, to determine whether a
James I. Arner, Esquire
December 24, 1987
Page 3
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 provision 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, Mr. Gourley is an officer and
stockholder in the company which seeks to contract with the school district.
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,
Mr. Gourley is 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, his business, Gourley Packing Company,
Inc., 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 his 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.
Regarding your assertion that Section 12 of the Ethics Act would control
over any inconsistent provisions of the Public School Code, the Ethics
Commission has determined that Section 3(c) of the Ethics Act only provides a
procedure for contracting if said contracting is otherwise authorized in law.
See Weaver, supra. Thus, Section 12 of the Ethics Act is not applicable in
this situation because there is not a conflict between the Ethics Act and the
Public School Code. See 1 Pa. C.S.A. §1933.
James I. Arner, Esquire
December 24, 1987
Page 4
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
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 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;
James I. Arner, Esquire
December 24, 1987
Page 5
(4) public disclosure of the contract awarded and offered and accepted.
See, Cantor, 82 -004.
Thus, in the event that contracting would be allowed, the above process
must be employed. Lastly, it must be noted that the propriety of the proposed
course of conduct has only been addressed under the Ethics Act.
Conclusion: As a school board member, James P. Gourley is 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 an officer and stockholder 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 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.
Lastly, the propriety of the proposed conduct has only been addressed
under the Ethics Act.
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 w i l l 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,
Vincent J. Dopko,
General Counsel