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HomeMy WebLinkAbout88-589 OsborneMs. Ann M. Osborne 88 -589 700 Showers Street Harrisburg, PA 17104 Re: Former Public Employee; Executive -Level State Employee; Section 3(e); Section 3(g); Director, Office of Program Management; Department of Commerce Dear Ms. Osborne: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL June 28, 1988 This responds to your letter of April 29, 1988, in which you requested advice from the State Ethics Commission. Issue: You ask whether the Ethics Act presents any restrictions upon your potential employment following your termination of service with the Department of Commerce. Facts: You state that you terminated your employment on January 8, 1988 as the Director of the Office of Program Management with the Department of Commerce, hereinafter Department. In your position as senior -level manager, you state that you were responsible for six mid -level managers and 31 staff members. You then advise that you directed the policy and programmatic activities of the following loan, grant and bond financial assistance programs which were administered by the Department: The Pennsylvania Industrial Development Authority (PIDA) The Revenue Bond and Mortgage Program (RBM); The Pennsylvania Economic Development Finance Authority (PEDFA); The Pennsylvania Capital Loan Fund (PCLF); The Site Development Program; The Business Infrastructure Development Program (BID); The Community Facilities Program; The Ms. Ann M. Osborne June 28, 1988 Page 2 Industrial Development Assistance Program (IDA); The Apparel Loan Program; The Nursing Home Loan Agency; The Employee Ownership Assistance Program; In addition you advise that you directed the activities of the Financial and Technical Assistance Division which provided credit analysis services for the Nursing Home Loan Agency and the Technical Assistance Program of the Bureau of Minority Business Development. You then state that as Director of the Office of Program Management you made no decisions regarding funding eligibility of any business applicant which decisions were accomplished by the respective boards which authorized each loan. You state that the Secretary of the Department authorized the grants and tax exempt bond eligibilities and PCLF loans. You then state that all financial assistance provided to businesses through the programs under your direction flowed through a process mandated by the Pennsylvania Constitution. After advising that each financial assistance program provided the funds to a local economic development agency or group which in turn loaned the funds to the recipient business, you state that each local agency's board had to authorize the funding to the recipient business before making application to the State. You then note that you requested an opinion from the Department's counsel who suggested that you contact the Ethics Commission for an advisory opinion. You then pose four questions under the Ethics Act. First, you ask whether the consulting business which you have established may work for clients which are economic development groups that serve as the conduits for funding through the eleven loan programs which you have directed. In this regard you state that both you and the Department's legal staff interpret the restriction of Section 3(g) of the Ethics Act to apply to only the final recipient business or corporation but not the conduit economic development groups. Secondly, you ask whether you may work as a consultant and receive reimbursement from funds received through grants and loans from economic development clients who receive grant and loan funds from other programs housed within the Department of Commerce over which you have no control or authorization. You cite certain examples of these programs such as the Community Economic Recovery Program (CERP), the Steel Valley Economic Revitalization Programs and the job training program in the Office of Regional and Community Initiatives; the Technical Assistance, the Pennsylvania Minority Business Development Authority and Appalachian Regional Commission grant in the Office of Enterprise Development; and other assistance programs in the Office of Technology Development. You also ask whether the answer to your second question under the Ethics Act would be different prior to, rather Ms. Ann M. Osborne June 28, 1988 Page 3 than after, your termination date. Thirdly, you question whether in the two year period you may invest in stock of new or existing companies which have or may receive funding through the Department. In this regard you also ask whether your being a minority shareholder in such a company would result in the company's disqualification for grants or loans received through the Department as to programs which you directed or as to any other programs within the Department which you did not direct. Lastly, you ask whether you would be barred from accepting employment from any commercial bank, investment banking firm, economic development corporation or public body which receive financial assistance, reward or gain from programs or activities over which you had supervision. You conclude your request for an advisory opinion by submitting various documentation. Your job description /specification which is incorporated herein by reference provides the following regarding your duties and responsibilities: 1. Directs and controls the delivery process of all economic development programs in the Office in accordance with EDP Strategy, Agency Management Plan and Office Management Plan. 2. Manages and administers the activities of the Division of Financial and Management Assistance, the Bureau of Bonds and Loans Programs, and the Bureau of Business Financing. 3. Holds Bureau Directors accountable for all management activities, including but not limited to budgeting, cost analysis and control, unit profitability, and resource management (includes time, personnel and operational supplies) and Division Management Plans. 4. In partnership with the Bureau Management Team, develops budget for Office of Program Management. Monitors this closely on a monthly basis. 5. Responsible for delivering finance /development program assistance to other Office Directors upon request. 6. Motivates Bureau Directors to undertake streamlining measures for individual financing programs. Assists in this effort when required. Actively promotes the mainstreaming of women and minority -owned businesses into all financing programs. Ms. Ann M. Osborne June 28, 1988 Page 4 7. Utilizing recommendations of management team, proposes changes to existing programs, in consultation with Policy Office. 8. Participates in the development of new finance program initiatives. 9. Liaisons with Legislative Liaison, Policy Office and Deputy for Development to refine on -going programs, and to develop proposals for new finance programs. 10. Conducts special projects at the request of the Executive Director of the Partnership Agency and /or the Deputies. 11. Determines that all personnel are aware of the Mission Statement and are performing according to the stated goals and objectives of the Agency and the Office. 12. Establishes organizational structure of the Office and modifies as conditions warrant. Implements policies of the EDP board with respect to the growth and expansion of Office financing initiatives. 13. Actively participates in activities of industry associations to promote the interest of the Commonwealth and the Agency. 14. Maintains contact and business relations with Bond Counsel, legislators, accountants, legal counsel, developers, economic development professionals, other professional groups and regulatory agencies. 15. Takes any reasonable action necessary to carry out the responsibilities delegated to him so long as such action does not deviate from established policies and practices as defined by the Executive Director of the Partnership Board or conflict with sound business judgement, except for specific limitations placed upon incumbent by the Executive Director or by law. As a Director for Office of Program Management, you are to be considered a "public employee" within the definition of that term as set forth in the Ethics Act and the regulations of this Commission. 65 P.S. §402; 51 Pa. Code §1.1. This conclusion is based upon your job description, which when reviewed on an objective basis, indicates clearly that you have the power to take or recommend official action of a non - ministerial nature Ms. Ann M. Osborne June 28, 1988 Page 5 with respect to contracting, procurement, planning, inspecting or other activities where the economic impact is greater than de minimus on the interests of another person. Further, since you are an employee who by virtue of your job could influence the outcome of a decision in relation to a private corporation or business and also may be an employee with discretionary powers which may affect the outcome of the Department's decision in that regard, you are to be considered an "Executive -level State employee" under the Ethics Act. 65 P.S. 5402. Therefore, in order to answer your request, it is necessary to review the provisions of Sections 3(b), (e) and (g) of the Ethics Act. Section 3(b) of the Ethics Act provides: (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 employee or candidate for public office would be influenced thereby. 65 P.S. 403(b). Under Section 3(b) of the Ethics Act cited above, which a public official or employee must observe, a public official or employee must neither offer nor accept anything of value on the understanding or with the intention that his judgment would be influenced thereby. It is assumed such a situation does not exist here. This Section is referenced not to indicate that any such activity has been or will be undertaken but in an effort to provide a complete response to your inquiry. As to Section 3(e) of the Ethics Act, upon termination of your employment, you would become a "former public employee" subject to Section 3(e), infra. Section 3(e) of the Ethics Act provides that: Ms. Ann M. Osborne June 28, 1988 Page 6 Section 3. Restricted activities. (e) No former official or public employee shall represent a person, with or without compensation, on any matter before the governmental body with which he has been associated for one year after he leaves that body. 65 P.S. §403. Initially, to answer your request it is necessary to identify the "governmental body" with which you were associated while working with the Department. Then, the scope of the prohibitions associated with the concept and term of "representation" must be reviewed. In this context, the Ethics Commission has previously ruled that the "governmental body" with which an individual may be deemed to have been associated during his tenure of public office or employment extends to those entities where he had influence, responsibility, supervision, or control. See Ewing, Opinion 79 -010. See also Kury v. Commonwealth of Pennsylvania, State Ethics Commission, 435 A.2d 940 (1981). From the description and analysis of your duties and responsibilities and based upon the facts outlined above, your jurisdiction, responsibility, influence and control appears to have been the Office of Program Management which would include the 11 financial assistance programs administered by the Department listed above, the Financial and Technical Assistance Division, the Technical Assistance Program of the Bureau of Minority Business Development and any other governmental units over which you had influence, responsibility, supervision or control; the foregoing will be collectively referred to as the Offices hereinafter. Thus, the "governmental body" with which you have been "associated" upon the termination of your employment would be the Offices. Therefore, within the first year after you would leave the Department, Section 3(e) of the Ethics Act would apply and restrict your "representation" of persons or new employers vis -a -vis Offices. The Ethics Act would not affect your ability to appear before agencies or entities other than with respect to the Offices. Likewise, there is no general limitation on the type of employment in which you may engage, following your departure from the Department. It is noted, however, that the conflicts of interest law is primarily concerned with financial conflicts and violations of the public trust. The intent of the law generally is that during the term of a person's public employment he must act consistently with the public trust and upon departure from Ms. Ann M. Osborne June 28, 1988 Page 7 the public sector, that individual should not be allowed to utilize his association with the public sector, officials or employees to secure for himself or a new employer, treatment or benefits that may be obtainable only because of his association with his former public employer. See Anderson, Opinion 83 -014; Zwikl, Opinion 85 -004. In respect to the one year representation the Ethics Commission has promulgated regulations to define "representation" as follows: Section 1.1 Definitions. Representation - -- Any act on behalf of any person including but not limited to the following activities: personal appearances, negotiating contracts, lobbying, and submitting bid or contract proposals which are signed by or contain the name of the former public official or public employee. 51 Pa. Code §1.1. The Commission, in its opinions, has also interpreted the term "representation" as used in Section 3(e) of the Ethics Act to prohibit: 1. Personal appearances before the governmental body or bodies with which you have been associated, (that is the Offices), including, but not limited to, negotiations or renegotiations on contracts with the Offices; 2. Attempts to influence the Offices; 3. Participating in any matters before the Offices over which you had supervision, direct involvement, or responsibility while employed by the Department; 4. Lobbying, that person or employer before regulations, etc. See Opinion 80 -044. is representing the interests of any the Offices in relation to legislation, Russell, Opinion 80 -048 and Seltzer, The Commission has also held that preparing and signing a proposal, document or bid, or listing your name as the person who will provide technical assistance on such proposal, document, or bid, if submitted to or reviewed by the Offices, constitutes an attempt to influence your former governmental body. See Kilareski, Opinion 80 -054. Therefore, within the first year Ms. Ann M. Osborne June 28, 1988 Page 8 after you leave the Department, you should not engage in the type of activity outlined above. The Commission, however, has stated that the inclusion of your name as an employee or consultant on a "pricing proposal," even if submitted to or reviewed by the Offices, is not prohibited as "representation." See Kotalik, Opinion 84 -007. You may, assist in the preparation of any documents presented to the Offices so long as you are not identified as the preparer. You may also counsel any person regarding that person's appearance before the Offices. Once again, however, your activity in this respect should not be revealed to the Offices. Of course, any ban under the Ethics Act would not prohibit or preclude you from making general informational inquiries of the Offices to secure information which is available to the general public. See Cutt, Opinion 79 -023. This, of course, must not be done in an effort to indirectly influence these entities or to otherwise make known to the Offices your representation of, or work for your new employer. Finally, the Commission has concluded that if you are administering an existing contract as opposed to negotiating or renegotiating a contract, your activities would not be prohibited by the Ethics Act. See Dalton, Opinion 80 -056 and Beaser, Advice 81 -538. In addition to the restrictions of Section 3(e) outlined above, Section 3(g) of the Ethics Act provides: Section 3. Restricted Activities (g) No former executive -level State employee may for a period of two years from the time that he terminates his State Employment be employed by receive compensation from, assist or act in a representative capacity for a business or corporation that he actively participates in recruiting to the Commonwealth of Pennsylvania or that he actively participated in inducing to open a new plant, facility or branch in the Commonwealth or that he actively participated in inducing to expand an existent plant or facility within the Commonwealth, provided that the above prohibition shall be invoked only when the recruitment or inducement is Ms. Ann M. Osborne June 28, 1988 Page 9 accomplished by a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. 65 P.S. S403(g). As noted above section 3(g) sets forth a specific prohibition that a former executive -level State employee for a period of two years after termination of State employment may not be employed or receive any compensation nor may act in a representative capacity for a business or corporation that the former executive -level state employee participated in recruiting. It should be further noted that the above section specifically applies to the situation where the recruitment is accomplished by a grant or loan or money or promise of a grant or loan or money from the Commonwealth to the business or corporation recruited or induced to expand. The above provision of Section 3(g) will now be applied to the four specific questions which you have posed under that section. Regarding your first inquiry as to whether you may represent clients in your consulting business which are the economic development groups that serve as the conduits for funding to recipient businesses who have made applications to the state, be advised that Section 3(g) of the Ethics Act would not preclude you from representing these economic development groups provided they have not received any grant or loan moneys as recipients. The intendment of Section 3(g) of the Ethics Act was to prohibit an executive level state employee from obtaining employment or acting as a representative for various businesses or corporations that were recruited. In this instance, you have stated that the economic development groups are not the recipient businesses but merely act as a conduit of the funds from the Department to the recipient business. Furthermore, based upon your statements, it appears that each economic development group has to authorize the funding to the recipient business before an application is made to the Department. Finally, the economic development groups are already in place and serve as the conduit for the funding; therefore, they cannot be classified as having been recruited. For the above reasons, Section 3(g) of the Ethics Act would not preclude you from representing these intermediate economic development groups provided they are not the recipients of the program loan or grant funds. As to your second inquiry concerning whether you may represent potential economic development clients that receive grant and loan funds from different offices in the Department over which you had no control or authorization, Section 3(g) of the Ethics Act would not restrict you from being employed or representing these clients since you have stated that the grants that these clients receive are processed through programs in other offices in the Department over which you have no control or authorization; the Ms. Ann M. Osborne June 28, 1988 Page 10 foregoing is expressly based upon the assumption that you did not participate in recruiting these entities to the Commonwealth as that phrase is used in Section 3(g). As to your subsidiary question of whether the answer would be different prior to your termination, this question may not be answered since it is noted that you have already terminated your employment with the Department and any activities that you may have engaged in in this regard have already occurred and can not be addressed in terms of a prospective advisory opinion. Regarding your third inquiry as to whether in a two year period you could invest in stock in a company which received or contemplates receiving funding through the Department, Section 3(g) of the Ethics Act would not preclude you from investing in these companies. Thus, although Section 3(g) of the Ethics Act would barr you from being employed or receiving compensation or representing these businesses or corporations that have been recruited or induced to expand, Section 3(g) of the Ethics Act would not barr you from investing as a stockholder in these companies. As to your two subsidiary questions of whether your being a minority shareholder would cause a disqualification as to loans or grants from programs over which you had direction or as to other programs within the Department, these questions can not be answered since they are not within the scope of the Ethics Act. Turning to your last inquiry as to whether you would be barred from accepting employment from any commercial bank, investment banking firm, economic development corporation or public body which receives financial assistance, reward or gain from programs or activities over which you had supervision, be advised that Section 3(g) of the Ethics Act would be applicable and restrict your employment for a two year period as to any business or corporation wherein the recruitment or inducement was accomplished by a grant, loan, money, promise of a grant, loan of money from the Commonwealth to the business or corporation which was recruited or induced to expand. 65 P.S. §403(g). Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Conclusion: As a Director of the Office of Program Management, you are to be considered a "public employee" as defined in the Ethics Act. Upon termination of your service with the Department, you would become a "former public employee" subject to the restrictions imposed by Section 3(e) of the Ethics Act. As such, your conduct should conform to the requirements of the Ethics Act as outlined above. Your governmental body for the Ms. Ann M. Osborne June 28, 1988 Page 11 purpose of the one year representation restriction is the Offices. Further, you are an executive -level state employee and are subject to the restrictions of Section 3(g) of the Ethics Act outlined above. Lastly, the propriety of your proposed conduct has only been addressed under the Ethics Act. Further, since you terminated your employment or service, as outlined above, you are reminded that the Ethics Act also requires you to file a Statement of Financial Interests for the year following your termination of service. 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 former 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, L Vincent J. Dopko, General Counsel