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In Re: Richard Kashnoski,
Respondent
STATE ETHICS COMMISSION
FINANCE BUILDING
693 NORTH STREET, ROOM 309
HARRISBURG, PA 17120 -0400
File Docket:
X -ref:
Date Decided:
Date Mailed:
FACSIMILE: 717- 787 -0806
WEBSITE: www.athics.t)a.gov
17 -041
Order No. 1738
9113118
9117118
Before: Nicholas A. Colafella, Chair
Mark R. Corrigan, Vice Chair
Roger Nick
Melanie DePalma
Monique Myatt Galloway
Michael A. Schwartz
Shelley Y. Simms
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission conducted
an investigation regarding possible violation(s) of the Public Official and Employee Ethics
Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et sec ., by the above -named Respondent. At the
commencement of its investigation, the Investigative Division served upon Respondent
written notice of the specific allegation(s). Upon completion of its investigation, the
Investigative Division issued and served upon Respondent a Findings Report identified as
an "Investigative Complaint." An Answer was not filed and a hearing was deemed waived.
The averments In the Investigative Complaint are admitted and are set forth as the
following Findings. The record is complete.
ALLEGATIONS:
That Richard Kashnoski, a public official /public employee in his capacity as a
Member of the Board of Directors and/or Treasurer of the Shamokin Area School District
( "SASD "), violated [Sections 1103(a), 1104(a), 1105(a), and 1105(b)(8)] of the State Ethics
Act (Act 93 of 1998) when he utilized the authority of his public position for the private
pecuniary benefit of himself and/or a business with which he is associated:
When through his public position he accessed and used his
influence as a Board Member with SASD Administration /staff
to arrange meetings between the SASD and Riverview Bank in
order to facilitate the moving of SASD accounts to Riverview
Bank, and when he participated in discussions and actions of
the SASD Board of Directors, to include, but not be limited to
participated in bid opening/reviews and participated in
Interviews /questioning of bidders, resulting in the awarding of
banking services to Riverview Bank all at a time when he was
an employee of Riverview Bank.
When he participated in discussions and actions of the SASD
Board of Directors, to Include, but not be limited to participating
in Board action resulting in the awarding of banking services to
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Mid Penn Bank, at a time when he was an employee of Mid
Penn Bank.
When he failed to report his employment with Miners Bank /Mid
Penn Bank as an Office, Directorship, or Employment in any
Business, upon Statement of Financial Interests forms filed for
the 2014 and 2015 calendar years; and when he failed to
include a date accompanying his signature for the 2015
Statement of Financial nteres s.
IL FINDINGS:
1. The Investigative Division of the State Ethics Commission received a signed, sworn
complaint alleging hat Richard Kashnoski ("Kashnoski ") violated provisions of the
State Ethics Act (Act 93 of 1998).
2. Upon review of the complaint, the Investigative Division initiated a preliminary
inquiry on December 7, 2017.
3. The preliminary inquiry was completed within sixty days.
a. The Commission, through the Executive Director, initiated a full investigation
on February 2, 2018.
4. On February 2, 2018, a letter was forwarded to Kashnoski, by the Investigative
Division of the State Ethics Commission, informing him that a complaint against him
was received by the Investigative Division and that a full investigation was being
commenced.
a. Said letter was forwarded by certified mail, no. 7016 3560 0001 0041 4200.
b. Said letter was returned as "unclaimed" to the State Ethics Commission on
March 2, 2018.
C. The unclaimed letter was personally served upon Kashnoski on March 6,
2018.
5. On May 23, 2018, an amended Notice of Investigation was personally served upon
Kashnoski by the Investigative Division of the State Ethics Commission informing
him that the allegations contained in the February 2, 2018, Notice of Investigation
were being amended.
6. Periodic notice letters were forwarded to Kashnoski at least every ninety days in
accordance with the provisions of the Ethics Act advising him of the general status
of the investigation.
7. The Investigative Complaint/Findings Report was mailed to the Respondent on July
23, 2018.
a. The Investigative Complaint/Findings Report was issued within 171 days of
the initiation of a full investigation.
8. Kashnoski served as a Member of the SASD Board of School Directors ("Board ")
from December 2013 through November 2017.
a. Kashnoski was appointed to serve as Board Treasurer on May 17, 2016, for
the period July 1, 2016, through June 30, 2017.
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b. Kashnoski was re- appointed Treasurer by the Board on May 17, 2017, for
the term July 1, 20'17, through June 30, 2018.
1. Kashnoski's term on the Board ended November 2017.
C. Kashnoski received compensation as Board Treasurer of $1,350.05 during
2016 and $2,596.25 during 2017.
d. Kashnoski did not receive any additional compensation from the SASD for
his service as a Member of the Board.
9. Professionally, Kashnoski has been employed by the banking industry in various
capacities, including bank branch manager and commercial loan officer.
a. During his tenure on the Board, Kashnoski was employed by Miners Bank, a
Division of Mid Penn Bank,' and Riverview Bank.
b. Both financial entities commenced business dealings with the SASD while
Kashnoski simultaneously served as a Board Member and employee of the
financial institution.
MINERS BANK AND /OR MID PENN BANK:
10. Miners Bank is a Division of Mid Penn Bank.
a. Originally founded in Millersburg, Pennsylvania, as the "Millersburg Trust
Company," Mid Penn has expanded over the years to become a full- service
financial institution with multiple divisions.
b. In 2015, Mid Penn completed its acquisition of Schuylkill County -based
Miners Bank.
1. In early 2018, Mid Penn acquired Scottdale Bank & Trust, expanding
Mid Penn's footprint into western Pennsylvania.
11. Kashnoski was employed by Miners Bank from approximately June 2010 until
March 1, 2015, as a commercial loan officer.
12. Kashnoski transitioned to employment with Mid Penn Bank on March 1, 2015, in
conjunction with Mid Penn's acquisition of Miners Bank.
a. Kashnoski was employed as a commercial loan officer for Mid Penn Bank
from March 1, 2015, until his termination effective April 5, 2017.
b. Kashnoski was notified telephonically on April 5, 2017, that his employment
with Mid Penn was terminated.
13. While employed by Miners Bank /Mid Penn Bank, Kashnoski was a salaried
employee.
a. Kashnoski did not receive any commission payments.
b. Kashnoski's salary was based on stated production goals each year, which
included new loan production, fee income, and deposit generation goals.
1 References in this document to "Miners Bank" and/or "Mid Penn Bank" are to the same business entity:
Miners Bank, a Division of Mid Penn Bank.
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c. As an employee of Miners Bank/Mid Penn Bank, Kashnoski was
compensated $64,880.19 (State Taxable Wage) during 2015; $84,852.46
(State Taxable Wage) during 2016; and $21,712.53 during 2017 (State
Taxable Wage), as evidenced from IRS W -2 Wage & Tax Statements.
14. Mid Penn Bank business records include production requirements as part of
Kashnoski's continued employment.
a. In 2015 Kashnoski had an annual loan production goal of $3,000,000.00 and
achieved $2,876,940.00 of his goal.
b. In 2016 Kashnoski's production goal was $6,000,000.00.
1. Kashnoski's production goal for 2016 was double his 2015 goal, due
to his initiating employment with Mid Penn Bank on March 1, 2015.
2. Kashnoski achieved $3,573,991.00 in actual production during 2016.
C. Kashnoski did not meet his loan production goals for either 2015 or 2016.
d. Kashnoski did not meet his fee income target for either year.
e. However, Kashnoski achieved and surpassed his deposit goals for both 2015
and 2016.
1. In 2015 Kashnoski received credit for $294,733.00 in deposits.
2. In 2016, when Miners/Mid Penn Bank acquired the SASD account,
Kashnoski brought $8,595,888.00 in deposits to the bank, well over
his $500,000.00 ggoal; of that amount, approximately $8,000,000.00
was from the SAE
RIVERVIEW BANK:
15. Riverview Bank is headquartered in Harrisburg, Pennsylvania.
a. Riverview Bank operates approximately 30 full- service branch locations in
Northumberland, Schuylkill, Berks, Dauphin, Perry, Somerset, Lycoming, and
the surrounding counties.
16. Kashnoski was employed by Riverview Bank as a commercial loan officer from April
10, 2017, until October 13, 2017.
a. Kashnoski's employment with Riverview Bank was terminated effective
October 13, 2017, due to a lack of performance.
b. Kashnoski was a salaried employee and did not receive commissions or
have a bonus structure.
1. As an employee of Riverview Bank, Kashnoski had a loan production
goal of $15 million annually.
2. As an employee of Riverview Bank, Kashnoski was compensated
$42,765.10 (State Taxable Wage) during 2017, as evidenced from
IRS W -2 Wage & Tax Statements.
17. Neither MinerslMid Penn nor Riverview Bank had business dealings with the SASD
prior to Kashnoski's employment with either bank.
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a. Neither bank maintained a physical presence within the geographical
boundaries of the SASD.
b. Prior to utilizin Miners/Mid Penn and /or Riverview Bank, the SASD utilized
the services 0Iocal financial institutions, including Susquehanna Bank and
M &T Bank.
THE FOLLOWING FINDINGS DETAIL KASHNOSKI'S PARTICIPATION IN THE
TRANSFERRING OF SASD FINANCIAL ACCOUNTS TO MINERS BANK, A DIVISION
OF MID PENN BANK.
18. In 2015, SASD financial accounts were primarily deposited with Susquehanna
Bank, a Division of BB &T Bank, and M &T Bank.
a. BB &T Bank entered into a merger agreement with Susquehanna Bank
around November 12, 2014, with completed acquisition by November 12,
2015.
19. Around September 29, 2015, Kashnoski utilized his knowledge of the banking
industry to secure the transfer of SASD financial accounts to Miners Bank, a
Division of Mid Penn Bank.
a. At the time Kashnoski initiated the transfer of SASD funds to Miners Bank,
Kashnoski was an employee of Miners Bank.
b. In September 2015 Kashnoski was failing to meet loan production
expectations at Miners/Mid Penn Bank.
C. Generating new deposit accounts such as the deposit of SASD funds was
not a responsibility of Kashnoski while employed by Miners/Mid Penn.
1. Public institution deposits /services were the responsibility of Christine
Nagorzanski ( "Nagorzanski "), Mid Penn's Vice President and
Govern ment/Non-Profit Officer.
20. During 2015 Kashnoski commented to other Board Members that the SASD was
overpaying fees and could get better interest rates from another bank.
a. No action was taken by the Board to authorize Kashnoski to pursue other
banking options for the SASD.
b. Kashnoski was not the appointed Board Treasurer in 2015.
C. Evaluation of SASD banking options was the responsibility of the Business
Manager or her designee.
d. Kashnoski was never designated by the Board to evaluate financial options
for the SASD.
21. In September of 2015 Kashnoski directed SASD Business Manager Karen
Colangelo ( "Colangelo ") to provide him with information regarding balances and
interest rates of SASD financial accounts.
a. Colangelo, as the SASD Business Manager, reports to the SASD
Superintendent and ultimately the entire Board, through the SASD's chain of
command.
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b. On September 29, 2015, Colangelo forwarded Kashnoski the information he
requested via email.
22. Kashnoski informed his fellow Mid Penn employee, Nagorzanski, that the SASD
maintained account balances of approximately $9,316,000.00, and an additional
$5,117,000.00 held in various investments.
a. The amount of $9,316,000.00 was based on SASD funds then currently on
deposit with Susquehanna and/or M &T Bank.
b. Approximate SASD funds held at each institution included:
M &T Bank
$170,000.00 Student Activities Account (cash deposit accounts)
$2,000.00 Athletic fund (cash deposit accounts)
$399,000.00 Payroll
2. Susquehanna Bank
$1,100,000.00 General Fund Account
$3,800,000.00 Payroll Account
$1,700,000.00 Capital Reserve Account
$339,000.00 Business Checking
$888,000.00 Cafeteria Fund
23. The same day Kashnoski was provided the financial information from SASD
employee Colangelo (September 29, 2015 }, Kashnoski then forwarded the
information via email to Miners /Mid Penn employee Nagorzanski.
a. Kashnoski requested Nagorzanski to draft a banking service proposal
specific to the SASD, and to contact him once she completed it, so that he
could arrange an appointment with SASD Business Manager Colangelo.
b. Kashnoski advised Nagorzanski that he sits "on the Board of Directors, so
although I am unable to vote on your proposal, but I can let the Board know
of your knowledge and experience with School Districts and Municipal
accounts."
C. At the time Kashnoski forwarded SASD financial information to Miners/Mid
Penn employee Nagorzanski, Kashnoski was an employee of Miners/Mid
Penn Bank.
24. Following Kashnoski's contact with Nagorzanski, on /about October 14, 2015, Mid
Penn Bank completed a cash management customer approval form specific to the
SASD.
a. Nagorzanski is identified as the cash management officer.
b. The proposed interest rate was .35% guaranteed with an annual review,
based on an average projected deposit balance of $9,383,285.00.
C. This rate was approved by Mid Penn Bank officials: Rory Ritrievi, CEO; Scott
Mickelwright, CLO; and Edward Williams, CFO.
25. A meeting was scheduled with Colangelo to present Mid Penn Bank's banking
service proposal to the SASD on October 15, 2015.
a. Kashnoski attended the meeting for the sole purpose of introducing
Nagorzanski to Colangelo.
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b. Kashnoski admitted to arranging the introduction with Colangelo during an
investigative interview conducted with him on May 31, 2018.
G. This meeting resulted in rates from Miners Bank being included for
discussion during the SASD Board's executive session held on October 27,
2015.
d. Discussion of banking services was not otherwise scheduled for
discussion /consideration by the Board.
26. Kashnoski attended the Board executive session held immediately prior to the
Board's October 27, 2015, regular meeting.
a. No minutes are recorded during the Board's executive session meetings.
b. "District Banking" was an agenda item for the Board's October 27, 2015,
executive session meeting.
C. "District Banking" was added as an agenda item only because of Kashnoski's
efforts to change the banking service provider to Miners/Mid Penn, his
employer.
d. Kashnoski is recorded as attending the Board's October 27th regular meeting
held directly after the conclusion of the executive session.
27. During the Board's October 27, 2015, executive session meeting, Kashnoski
explained financial rates to the Board and advised that the SASD could acquire
"better rates" elsewhere.
a. At this time, the SASD maintained its financial accounts at Susquehanna
Bank and/or M &T Bank.
b. SASD financial accounts maintained an average balance of between $7
million and $9 million, depending upon account activity.
C. At the time of the SASD's October 2015 Board meeting, Miners/Mid Penn did
not have any existing business relationship with the SASD.
28. Colangelo emailed Nagorzanski on October 28, 2015, advising her that the Board
had reviewed Miners/Mid Penn's proposal and had decided to proceed via a formal
RFP process.
29. As a result of the financial discussions that occurred during the Board's October 27,
2015, executive session meeting, District Business Manager Colangelo initiated an
RFP process for banking proposals.
a. Colangelo arranged for legal ads to be placed for banking services in The
News Item, Shamokin, Pennsylvania, on November 4, 11, and 18, 2015; and
the Daily Item, Sunbury, Pennsylvania, on November 5, 11, and 18, 2015.
b. fRFP responses were scheduled to be opened by the SASD Board on
November 23, 2015, at 2:00 p.m.
30. Page 4 of the RFP included sections on "Terms and Conditions" and "Bidder's
Ethics and Collusion." These sections read as follows:
a. Terms and Conditions:
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'Be aware that this is a request for professional services, and not a
competitive bid. The District is not required to conduct its request for
professional services in accordance with competitive bidding laws. The
terms and conditions of this proposal process are as follows:
1. Reserve the right to reject any or all proposals;
2. Waive any irregularities or information and select the best proposal in
the opinion of the District;
3. May render the bid invalid due to unauthorized modifications of bid
specification forms or terms.
b. Bidder's Ethics and Collusion:
"Conflict of Interest: Any bidder that knows of any District official having a
material direct, or indirect financial interest in such bidder's banking
institution shall be required to submit a written statement, along with the
Form of Proposal, detailing such interest. Failure to disclose a known such
financial interest shall result in the bidder's disqualification from further
consideration of award of this contract."
31. Colangelo prepared RFP documents dated November 4, 2015, seeking proposals
for SASD accounts: one to include the SASD's PA Treasury Invest Account and one
without.
a. The PA Treasury I nvest Account is a long-term investment account, intended
to generate interest income for the SASD.
b. The RFP highlighted operating revenues in excess of $27,000,000, and the
account balances as of August 31, 2015.
C. Included accounts and balances as of August 31, 2015 were:
Account
Average.. Balance
Ending Balance
Business Checking Payroll
$23,638.59
$0.00
Business Checking Payroll
$7,386.31
$13,416.15
Business Checking General Fund
$1,515,231.75
$1,169,300.53
Business Checking Cateteria
Fund
$888 770.41
$875,791.42
Business Checking
$338,814.88
$143,265.18
Capital Reserve
$1J51,231.75
$1,169,300,53
PA Treasury Invest Program
NIA
$5,040,741.7L
32. The SASD received responses to the RFP from BB &T Bank, FNB Bank, and Miners
Bank/Mid Penn Bank.
a. The Miners Bank/Mid Penn proposal was prepared by Nagorzanski, VP
Government/Non- Profit Office, 4431 N. Front Street, Suite 103, Harrisburg,
PA 17110, 717 - 599 -9800, and was dated November 23, 2015.
1. Via a November 5, 2015, email, Nagorzanski advised Kashnoski that
she received the SASD's RFP from Colangelo.
2. In a November 11, 2015, email reply from Colangelo to Nagorzanski,
Colangelo told her to include information in the conflict of interest
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section of the RFP about Rich Kashnoski (Respondent).
b. Responses from BB &T and FNB were also dated November 23, 2015.
33. Contained within the Miners Bank RFP submission is a response under the heading
"Bidder's Ethics and Collusion." Miners Bank reported that Richard Kashnoski is a
VP and Commercial Loan Officer at Miners Bank. As part of the reporting, Miners
Bank made the following representation regarding Kashnoski's involvement:
a. "Richard Kashnoski is a Vice President and Commercial Loan Officer at
Miners, a division of Mid Penn Bank, and also a member of your school
board. As we are looking to do business with you, Richard has recused
himself from meetings and discussions regarding our proposal. He has had
no role in this proposal and will not gain any material or financial benefit from
it. Should we gain your business, please be assured that our company has a
strict Conflict of Interest Policy that states: A Bank employee is prohibited
from representing the Bank in any transaction where he or she has any
material connection or substantial interest.
34. The SASD did not maintain records of the bid opening or who attended.
a. Minutes from Board meetings held on November 17, 2015, December 2,
2015, and December 22, 2015, do not include any recorded discussion on
"District Banking."
35. Kashnoski participated in the review and discussion of the [RFP responses] during
an SASD Board executive session meeting, held immediately prior to the Board's
January 19, 2016, regular meeting.
a. During the executive session, [RFP responses] received from Miners/Mid
Penn Bank, BB &T, and FNB were reviewed, analyzed, and evaluated by
Kashnoski.
b. Kashnoski recommended that the SASD accept the proposal from
Miners/Mid Penn Bank, as it was the best proposed option financially for the
SASD.
C. Kashnoski was an employee of Miners/Mid Penn Bank at the time he made
the recommendation to the SASD Board to accept the proposal from
Miners/Mid Penn Bank.
36. During the Board's January 19, 2016, regular meeting, action was taken to accept
the banking proposal from Miners Bank, a Division of Mid Penn Bank.
a. Kashnoski was present for the meeting and is recorded as having abstained
from the vote.
b. Although Kashnoski abstained from the vote, he did not remove and recuse
himself from the decision - making process, and in fact [he] took specific and
deliberate action to advance SASD approval of Miners/Mid Penn's proposal.
C. The Board voted to award the business to Miners/Mid Penn Bank based on
Kashnoski's representation that it was the best financial deal for the SASD.
The Board relied on Kashnoski's input based on his financial
background and employment in the banking industry.
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2. Kashnoski's vote was not needed in order to have the motion pass,
since he recommended to the Board to accept the proposal.
37. Minutes from the SASD Board's January 19, 2016, meeting include the following
official action of the Board to accept a banking proposal from Miners Bank, a
Division of Mid Penn Bank:
a. "it was moved by Mr. Losiewicz, seconded by Mr. Kashner to accept the
banking proposal from Miner's Bank, a division of Mid Penn for their
services, contingent upon rates being applicable in approximately 5 months
for the moval (transfer) of the PA investment funds. On roll call:
Voting yes: Mr. Getchey, Mr. Griffiths, Mr. Kashner, Mr. Losiewicz, Mr.
McElwee, Mr. Shuey, Mrs. Smoogen and Mr. Sosnoskie, Jr.
Voting No: None
Abstain: Mr. Kashnoski
b. Kashnoski filed an abstention memo with the District regarding this vote,
dated January 19, 2016.
1. Kashnoski's stated reason for the abstention was reported as "I am an
employee of Miners Bank, a Division of Mid Penn.'
38. On March 1, 2016, the SASD began transferring SASD funds maintained at
Susquehanna Bank, a Division of BB &T, to Miners Bank, a Division of Mid Penn
Bank.
a. On March 1, 2016, two checks and three wire transfers were made from
BB &T to Miners Bank.
b. Combined, these checks and transfers constituted an initial transfer of SASD
funds totaling $2,952,493.16.
C. That total was comprised of the following individual amounts:
1. $525,000.00 to General Fund, facsimile signatures of Board Members
McElwee and Kasher via check no. 7998.
2. $775,000.00 to Cafeteria Fund, facsimile signatures of Board
Members McElwee and Kasher via check no. 1249.
3. Transfer $1,600,000.00 to Capital Reserve.
4. Transfer $18,310.16 to Cafeteria Fund.
5. Transfer $34,183.00 to AK Settlement (student activity fund).
d. Additional SASD funds were direct deposited into the newly- created Mid
Penn /Miners accounts from local, state and federal sources.
39. As a result of Miners/Mid Penn Bank acquiring. the SASD account(s), Kashnoski
received a calendar year 20'16 deposit credit of approximately $8,000,000.00
towards his production goals for Mid Penn Bank.
a. As an employee, Kashnoski's deposit goal at Miners/Mid Penn Bank for 2016
was $500,000.00.
b. The SASD account transfers fulfilled Kashnoski's deposit goal for the year,
Kashnoski, 17 -041
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based on the SASD transaction alone.
40. In addition to maintaining SASD operating accounts, Mid Penn Bank offered the
SASD investment options as well.
a. Mid Penn was interested in providing investment services for SASD
employees, in an effort to expand their profits.
b. SASD employees have the option of investing with the company(ies) of their
choice.
C. The SASD does not provide time /location for firms to meet with staff.
d. The SASD utilizes TSA Consulting Group to assist with investment firms for
SASD employees to consider.
41. TSA Consulting Group, Inc. specializes in providing administrative, consulting, and
IRS compliance services for the retirement programs of public education employers.
a. TSA Consulting Group is the firm which the SASD uses for 403(b)
contributions.
b. These are directly withdrawn as payroll deduction as per employee
approval /request.
42. TSA Consulting Group maintains a list of approved providers with phone numbers
for SASD empfoyees. The list of authorized investment providers included:
a. ASPire Financial Services; Kades- Margolis Corp.; Lincoln Investment
Planning, LLC; North American Company for Life; and Security Benefit
Group.
b. Mid Penn Bank was not an SASD - approved provider of 403(b) employee
contributions.
43. Following his actions to secure Miners/Mid Penn Bank as the SASD depository,
during the Board's December 7, 2016, meeting, Kashnoski participated in
unanimous Board action to authorize Mid Penn Bank to serve as an "additional
authorized investment provider to the Shamokin Area School District TSA
system... contingent upon meeting the requirements, the plan document and IRS
guidelines."
a. Kashnoski was a Miners/Mid Penn Bank employee at the time the SASD
Board took action to approve Miners/Mid Penn as an additional authorized
investment provider.
44. Minutes from the SASD Board's December 7, 2016, meeting detail the action of the
SASD Board as follows:
a. "It was moved by McElwee, seconded by Mr. Losiewicz to approve to add
Mid Penn bank as an additional authorized investment provider to the
Shamokin Area School District TSA system. This is contingent upon meeting
the requirements, the plan document and IRS guidelines. On roll call:
Voting yes: Mr. Getchey, Mr. Griffiths, Mr. Kashner, Mr. Kashnoski, Mr.
Losiewicz, Mr. McElwee, Mr. Shuey, Mrs. Smoogen and Mr.
Sosnoskie, Jr.
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Voting No: None
45. Kashnoski did not receive any compensation or credit towards production goals at
Mid Penn Bank as a result of approving Mid Penn as an approved investment entity.
a. Although approved by the Board, Mid Penn Bank was ultimately not included
on the approved investment list.
46. Miners /Mid Penn Bank was a business with which Kashnoski was associated in
2016.
a. Miners/Mid Penn Bank realized a private pecuniary benefit of no less than
$199,000.00 as a result of Kashnoski's use of office to secure the transfer of
the SASD account to Miners/Mid Penn Bank, valued at $12 million.
Mid Penn Bank confirmed to the State Ethics Commission that it
realized a financial gain of between $199,000.00 and $432,000.00
annually from SASD accounts depending on investment yields.
b. As an employee of Miners Bank/Mid Penn Bank, Kashnoski was
compensated $64,880.19 (State Taxable Wage) during 2015; $84,852.46
State Taxable Wage) during 2016; and $2 , 12.53 during 2017 (State
Taxable Wage), as evidenced from IRS W -2 Wage & Tax Statements.
THE FOLLOWING FINDINGS RELATE TO ACTIONS THAT KASHNOSKI TOOK TO
TRANSFER SASD FINANCIAL ACCOUNTS TO RIVERVIEW BANK.
47. Around January 2017 Riverview Bank began an internal initiative to generate more
municipal business for its bank branches.
a. Branch Managers were required to contact local municipal entities located
within their service area in an effort to solicit new business.
b. Michelle Lewandowski ( "Lewandowski "), Regional Vice President /Loan
Officer for Riverview Bank, had supervisory responsibility over efforts to
obtain new municipal accounts in the geographical region which included the
SASD.
48. On January 31, 2017, Stephen Suchanick ( "Suchanick "), the Assistant Manager of
Riverview Bank's Trevorton Office, emailed SASD Business Manager Colangelo,
requesting a meeting with Colangelo to discuss what financial options Riverview
Bank could offer SASD.
a. Suchanick initiated contact with SASD in furtherance of Riverview Bank's
effort to obtain new municipal accounts.
b. Suchanick wrote that Riverview Bank was offering free business checking
with no fees.
49. The SASD was not seeking banking service proposals in January 2017.
a. The SASD does not routinely change banking institutions, based on the
amount of time and effort required at the administrative level to do so.
b. The SASD had only recently (within a year of Suchanick's January 2017
email) transferred banking accounts to Miners/Mid Penn Bank.
C. SASD was generally satisfied with Miners/Mid Penn Bank.
Kashnoski, 17 -041
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50. Colangelo replied to this email on February 1, 2017, advising Suchanick that "Last
year, we advertised for proposals from banks regarding services. Since then, we
have moved our funds to Miner's Bank with the exception of some funds kept locally
due to the need of petty cash for events and daily cash deposits in cafeteria. Is
there a minimum required amount that must be in the accountto qualifyfor no fees?
a. Suchanick replied on February 1, 2017, advising Colangelo that they have
two business checking accounts. "One that is not interest bearing and only
need to keep a $400.00 average daily balance in it and if you have more or
less then (than) 40 debits out of the account. We also have one that is an
interest bearing account which would require a $1,000.00 average daily
balance to avoid the service fee and also as long as there is $1,000.00
average daily balance then it starts earning interest."
b. Colangelo did not present Suchanick's proposal to the SASD Board for
consideration.
C. Between February 1, 2017, and April 4, 2017, neither Suchanick nor any
other employee /representative of Riverview Bank followed up with
Colangelo /SASD.
51. Richard Kashnoski's employment with Miners /Mid Penn Bank was terminated on
April 5, 2017.
a. At the time of his termination, Kashnoski was not subject to a non -- compete
agreement with Miners /Mid Penn Bank.
52. On April 5, 2017, at 12:30 p.m., Kashnoski contacted Brett Fulk, President of
Riverview Bank, via email seeking employment.
a. Riverview Bank was not actively seeking applicants for employment at that
time.
b. Kashnoski contacted Fulk the same day he was terminated by Miners /Mid
Penn Bank.
Fulk was familiar with Kashnoski on a professional level and had
previously discussed employing him in /around 2013 or 2014.
2. Fulk also had prior business dealings with Kashnoski concerning a
commercial loan account at Miners Bank.
53. In an April 5, 2017, email to Fulk, Kashnoski informed Fulk that he was no longer
with Mid Penn Bank and has "a list of clients that I know will come with me. Can you
give me a call please as I'm looking for a lending job and would love nothing more
then [than] to take their book of business elsewhere."
a. As of April 2017, the SASD financial accounts were maintained at Miners /Mid
Penn Bank.
54. On April 5, 2017, at 3:18 p.m., Riverview Bank employee Suchanick emailed SASD
employee Colangelo a second time for the specific purpose of soliciting SASD
business.
a. In this email, Suchanick indicated that Riverview Bank was offering "no -fee
checking with a fixed interest rate from .75% to 1.00% or higher depending
what the balance amounts are you would bring us. We can guarantee that
Kashnoski, 17 -041
Page 14
for 1 -2 years. If you [are] interested please let me know."
b. April 5, 2017, was the same day that Richard Kashnoski's employment with
MinerslMid Penn Bank was terminated.
C. This email was sent less than three hours after Kashnoski emailed Brett
Fulk, indicating that he no longer was employed by Mid Penn Bank, and
offered to bring Mid Penn Bank clients to Riverview Bank.
This was Suchanick's only follow -up to his February 1, 2017, email to
Colangelo previously soliciting SASD for business.
55. Kashnoski began employment with Riverview Bank as a commercial lender on April
10, 2017.
a. Kashnoski was employed on a salaried basis, with specific loan production
requirements.
b. Kashnoski was assigned office space at Riverview Bank's Woodglen
Corporate Center Office, located at 2638 Woodglen Road, Pottsville,
Pennsylvania, and the Bank's Trevorton Branch location, 450 West
Shamokin Street, Trevorton, Pennsylvania.
C. Suchanick's email was sent to Colangelo five days prior to Kashnoski
officially starting employment at Riverview Bank.
56. During Kashnoski's first week of employment with Riverview Bank, he discussed
potential Riverview Bank clients with Lewandowski.
a. This discussion included information on SASD's most recent dealings with
Mid Penn Bank.
b. Kashnoski disclosed to Lewandowski that Mid Penn Bank did not adjust
interest rates paid to the District upward, as economic conditions improved.
While an employee of Miners/Mid Penn Bank, Kashnoski did not
address the issue of Miners/Mid Penn not increasing the interest rate
being paid to the SASD.
C. Kashnoski offered to arrange an introduction for Lewandowski with SASD
Business Manager Colangelo.
d. Prior to Kashnoski's employment with Riverview Bank, Lewandowski and her
subordinate, Suchanick, were unable to secure a meeting with Colangelo or
any other SASD official.
57. Kashnoski and Lewandowski both worked out of Riverview Bank's Woodglen
Corporate Center Office location.
a. Kashnoski worked for Riverview Bank's commercial division, while
Lewandowski worked for Riverview Bank's retail division.
b. Kashnoski also had an office at Riverview Bank's Trevorton Branch location,
which is where Suchanick was employed as the Assistant Branch Manager
under Lewandowski's direct supervision.
58. During Kashnoski's first week of employment with Riverview Bank (the week of April
10, 2017), he introduced Riverview Bank employee Lewandowski to SASD
Kashnoski, 17 -041
age
Business Manager Colangelo for the specific purpose of advancing Riverview
Bank's attempt to secure the SASD as a client.
a. Following the introduction, Lewandowski sent an email to Colangelo on April
17, 2017.
b. In her email, Lewandowski wrote: "...it was a pleasure meeting you last
week. As promised I've attached a copy of Riverview Bank's proposal for
banking services and our current fee schedule for tomorrow's school board
meeting."
C. In addition to serving as a Member of the SASD Board, Kashnoski was the
SASD Board Treasurer at this time.
d. Kashnoski was able to secure a meeting between Colangelo and
Lewandowski due to his position as an SASD Board Member.
59. Kashnoski participated in an SASD Board executive session meeting held
immediately prior to the Board's April 18, 2017, regular meeting.
a. During the executive session meeting, Kashnoski informed the Board
Members present that Riverview Bank was offering the SASD better rates
than it was receiving from Miners/Mid Penn Bank.
b. Kashnoski recommended that the SASD transfer its financial accounts to
Riverview Bank.
C. The SASD was satisfied with the service it was receiving from Miners/Mid
Penn Bank and had no desire to change financial institutions less than a year
after moving to Miners/Mid Penn.
d. Kashnoski's recommendation occurred absent any comparative bids, quotes,
or proposals being available from any institution other than Riverview Bank.
e. At the time of his statement to the Board, Kashnoski had been an employee
of Riverview Bank for eight days.
60. During the Board's April 18, 2017, meeting, action was taken to approve banking
services with Riverview Bank based on Kashnoski's recommendation.
a. Kashnoski is recorded as abstaining from this vote.
b. Even though he abstained from the SASD Board vote, Kashnoski utilized the
authority of his office to initiate Board action to benefit himself and/or a
business with which he was associated, namely Riverview Bank.
C. Absent Kashnoski's recommendation, the SASD Board would not have taken
action to transfer SASD monies to Riverview Bank.
61. Minutes from the Board's April 18, 2017, meeting include the following action to
approve transferring SASD funds to Riverview Bank:
a. "It was moved by Mr. Losiewicz, seconded by Mr. Shuey to approve banking
service with Riverview Bank, based upon the best interest of the District. On
roll call:
Voting yes: Mr. Griffiths, Mr. Kashner, Mr. Losiewicz, Mr. Shuey and Mr.
Sosnoskie, Jr.
Kashnoski, 17 -041
agP eeTU__
Voting No: None
Abstain: Mr. Kashnoski
Absent: Mr. Getchey, Mr. Mcliwee and Mrs. Smoogen
b. Minutes did not indicate the amount of SASD funds to be transferred to
Riverview Bank as a result of the motion.
Depending on account activity, SASD accounts ranged between $7
million and $9 million.
62. As a Member of the SASD Board, Kashnoski took an active role to ensure
Riverview Bank secure[d] the SASD financial accounts.
a. Kashnoski provided suggestions to other Riverview Bank employees as to
how to structure the Bank's proposal before presenting it to the SASD.
b. Kashnoski also informed his superiors at Riverview Bank that as a Member
of the SASD Board, he was working to get Riverview's proposal approved.
C. Kashnoski conveyed that he was influential with the SASD Board and would
persuade the SASD Board to approve the proposal.
63. Kashnoski participated in the following email exchange between Riverview Bank
employees and upper management on April 18, 2017, and April 19, 2017, regarding
the SASD accounts. Excerpts from those email exchanges read, in part, as follows:
a. April 18, 2017, at 9:39 a.m.
From: Richard Kashnoski
To: Brett Fulk
Brett,
Just to keep you in the loop, Mid Penn sent me a cease and desist
letter Saturday and said I was not allowed to contact their clients. I spoke
with HR and Chris Zampogna (Security) who sent the letter to clarify that I do
not have a non-com pette. They told me it was a standard form they had to
send because l was in the branch last week to close out my accounts. Just
wanted you to know. Keep your fingers crossed for news on Shamokin
tonight. I will let you and Michelle know as soon as I do."
b. April 18, 2017, at 7:53 p.m.
From: Richard Kashnoski
To: Brett Fulk, Michelle Lewandowski, Doug Klinger
Congrats on being awarded the School District's account unanimously and
taking an $11 million relationship from Mid Penn Banklll
C. April 18, 2017, at 8:07 p.m.
From: Michelle Lewandowski
To: Richard Kashnoski
That is great newslll Now the work beginsll
d. April 18, 2017, at 8 :10 p.m.
From: Richard Kashnoski
To: Michelle Lewandowski
CC: Brett Fulk, Doug Klinger, Ginger Kunkle, Steven Suchanick
1 of course abstained and that is documented.
Kashnoski, 17 -041
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e. April 18, 2017, at 9:55 p.m.
From: Brett Fulk
To: Richard Kashnoski
Absolutely outstanding Congratulations to all involved, but Z(a) a special
thank you to Kash, without whom this would not have been possible...Il...
April 19, 2017, at 8:11 a.m.
From: Richard Kashnoski
To: Brett Fulk
I appreciate but a huge thank you to Michelle and Steve. Without them
contacting the District would not have had the flexibility of obtaining the
accounts. They were prospecting before I started which allowed things to be
"smoother" than normal.
64. Kashnoski's email at 7:53 p.m. notifying Riverview Bank personnel of the SASD
Board's decision to move SASD funds to Riverview Bank occurred three minutes
after the recorded end date of the April 18, 2017, SASD Board meeting.
a. Notification of the SASD Board's decision to move SASD funds to Riverview
Bank normally would be the responsibility of the SASD Business Manager,
not a School Board Member (Kashnoski).
65. Riverview Bank President Brett Fulk credited Kashnoski for the successful transfer
of SASD accounts to Riverview, based on Kashnoski introducing I_ewandowski to
SASD Business Manager Colangelo, which ultimately brought the matter before the
SASD Board.
a. Absent Kashnoski making the introduction, Riverview's proposal would not
have been brought to the Board's attention.
66. SASD Superintendent James Zack ( "Zack ") was absent from the Board's April 18,
2017, meeting.
a. Upon learning of the Board action to transfer accounts to Riverview Bank,
Zack directed the Business Manager to initiate an RFP process.
b. The RFP process was initiated due to concerns about a conflict of interest
when the Board transferred its financial assets to a bank which employed a
current Board Member (Kashnoski).
C. An RFP process was initiated despite the fact that a decision to transfer
SASD accounts to Kashnoski's employer, Riverview Bank, had already
occurred.
67. SASD Business Manager Colangelo initiated an RFP process at the
Superintendent's direction.
a. Colangelo arranged for legal ads to be placed seeking banking services in:
The News Item, Shamokin, Pennsylvania, on April 28, 2017, May 4, 2017,
and May 11, 2017; and the Daily Item, Sunbury, Pennsylvania, on April 29,
2017, May 4, 2017, and May 11, 2017.
b. Responses to the RFPs were scheduled to be opened on May 18, 2017, at
2:15 p.m.
Kashnoski, 17 -041
Page 18
68. The SASD's RFP was dated April 26, 2017, and included information specifically
addressing conflict of interests, and contained SASD account balances as of March
31, 2017.
a. Page four of the SASD's RFP document included the same language as the
2015 RFP document on terms and conditions and bidder's ethics and
collusion. These read as follows:
Terms and Conditions:
"Be aware that this is a request for professional services, and not a
competitive bid. The District is not required to conduct its request for
professional services in accordance with competitive bidding laws. The
terms and conditions of this proposal process are as follows:
1. Reserve the right to reject any or all proposals;
2. Waive any irregularities or information and select the best proposal in
the opinion of the District;
3. May render the bid invalid due to unauthorized modifications of bid
specification forms or terms.
Bidder's Ethics and Collusion:
"Conflict of Interest: Any bidder that knows of any District official having a
material direct, or indirect financial interest in such bidder's banking
institution shall be required to submit a written statement, along with the
Form of Proposal, detailing such interest. Failure to disclose a known such
financial interest shall result in the bidder's disqualification from further
consideration of award of this contract."
b. District financial accounts as of March 31, 2017:
Account
Average Balance
Ending Balance
General Fund
Subsidy
$6,345,456.55
$5,742,731.91
General Fund
$1,098,277.62
$995282.67
Payroll
$.126,749.60
$29,738.99
AK Settlement
$29,339,99
$28,778.01
Capital Reserve
$1,837417.74
$1923700.53
My School Bucks
$13,91535
$18,657.19
69. Kashnoski provided information and directions to Riverview Bank personnel as to
how to structure the Bank's response to the RFP, and dealings with the SASD,
through email exchanges between April 24, 2017, and May 18, 2017.
a. In the exchanges, Kashnoski offers directions to Bank President Brett Fulk
on possible rates and offers to take action to "sway things in our favor."
b. Kashnoski's actions occurred after the Board's April 18, 2017, meeting, but
prior to the deadline to submit responses to the SASD RFP.
70. Riverview Bank internal email exchanges between April 24, 2017, and May 18,
2017, include dialogue on the Bank's RFP response and Kashnoski's ability to
affect the outcome at the Board level. Those emails are in part:
Kashnoski, 17 -041
Page
a. April 24, 2017, at 7:56 p.m.
From: Richard Kashnoski
To: Brett Fulk
B rett,
Just received a call that Mid Penn was notified that we were transferring our
relationship. They called back to the District less than 10 minutes after an
offer of 1 % for two years. I have a feeling they are going to do the same for
(redacted) as well since from what I heard we embarrassed them at the
meeting as they were not prepared. Can you call me when you have a
second please [telephone number redacted]. I want to put this to rest but I'm
going to have to abstain again. We have an executive session tomorrow so
if we were going to strike we need to strike fast. The other issue is that on
May 17 my term is up for election so I have to proceed cautiously."
b. May 2, 2017, at 9:50 a.m.
From: Richard Kashnoski
To: Brett Fulk
CC: Kirk Fox
I think a good plan of attack for Shamokin is to do two separate bids. One
bid is guaranteed for a year and one bid guaranteed for two years. I also
think that adding language that we internally review the relationship bi-
monthly to ensure they are getting the best rate would help us out as my
finance committee will be asking specific questions that I am goingg to preT�
Michelle on. Not sure if either of you can make Shamokin's meeting at 2,
then the opening of the bads [bids] at 2:15 but I think that would go along
way that someone of both of your titles cared enough to come to the
process. They will most likely send three people: Mark Ketch, Keith Kirby,
and Chris Nagorzanski. Chris is extremely knowledgeable of government
banking accounts and is a viable threat. However, so is the person that
chairs the finance committee for Shamokin and will be asking the questions
since I cannot vote. I can help to sway things in our favor.
C. May 3, 2017, at 1:40 p.m.
From: Brett Fulk
To: Richard Kashnoski
I think we will keep the bid in place we already offered as offered. We can't
keep altering our offer, which is the same position 1 am taking with (redacted)
as it puts us in a difficult spot with other existing, loyal school district
relationships. If Mid Penn wants to pay up and the District sees fit to stay
there for 5 basis points, so be it.
d. May 12, 2017, at 10:54 a.m.
From: Richard Kashnoski
To: Brett Fulk, Michelle Lewandowski, Ginger Kunkle
Re: Shamokin
Just of done speaking with Business Manager. There are total of 6 banks
who nave asked for information to send an RFP in: 1. Riverview, 2. Mid
Penn, 3. FNB in Shamokin Market Street, 4. West Milton Bank, 5, Swineford
Bank, 6. M &T. The plan is as follows and Michelle should be getting an
email to correspond the information. The bid is due by 2 p.m. bid opening at
2:15 p.m., question and answer at 5 p.m. School Board will meet then at 6
p.m. in executive session. Public session at 7:30 p.m. and we will vote on
who is awarded RFP. I hope this give you al some insight. If anyone has
questions feel free to call me.
Kashnoski, 17 -041
agp T-
e. May 12, 2017, at 12:56 p.m.
From: Michelle Lewandowski
To: Richard Kashnoski
I received an email confirming the 5:00 meeting on the 181h
May 12, 2017, at 12:59 p.m.
From: Richard Kashnoski
To: Michelle Lewandowski
I will be at them all. I hope they send a rep to Q &A. They will wish they
didn'tll
g. May 17, 2017, at 4:49 p.m.
From: Brett Fulk
To: Michelle Lewandowski
Re: Revised Shamokin Bid
Attached is the revised Shamokin School District Bid. Again, 1 do not want
Rich to know about our offer until they open the bids. I suspect that the
variable rate will be attractive to them.
h. May 18, 2017, at 11:05 a.m.
From: Richard Kashnoski
To: Douglas Klinger
I submitted two credits for (redacted). I included biographies of each facility
and its usage. I am off to Shamokin to meet with the finance committee to
get prepared for today so we can land this $11 million. If you call I may not
have reception and I will check my phone throughout the day. Thank you as
always and I hope you had a great tjme off.
71. The SASD held the scheduled RFP bid opening at 2:00 p.m. on May 18, 2017.
a. SASD officials attending were Business Manager Colangelo and Board
Members Richard Kashnoski and Ronald McElwee.
b. Kashnoski purported himself to be the Chair of the Finance Committee
reviewing the [RFP responses].
C. Kashnoski held the position of Board Treasurer at that time.
d. Colangelo, as Business Mana er, did not have the ability to vote on awarding
[the successful RFP responsel.
72. The SASD received RFP responses from: Riverview Bank; Miners Bank, a Division
of Mid Penn Bank; Fulton Bank; West Milton State Bank; Susquehanna Community
Financial, Inc.; and First National Bank.
a. SASD financial accounts were primarily with Miners/Mid Penn Bank at the
time.
b. With the exception of First National Bank, each of the other four banks had
at least one representative present for the bid opening.
1. Keith Kirby was present on behalf of Miners/Mid Penn Bank.
Kashnoski, 17 -041
ag_£1—
2. Lewandowsky, Kirk Fox, and Brett Fulk attended representing
Riverview Bank.
73. On page 11 of Riverview Bank's RFP [response] is a reported conflict of interest
disclosure under the heading "Bidders Ethics and Collusion." This disclosure
relates to Richard Kashnoski.
a. Riverview Bank reports /discloses "Conflict of Interest, Shamokin School
Board Treasurer, Richard A. Kashnoski, is a full -time employee of Riverview
Bank. Mr. Kashnoski will not be involved in the establishment or
maintenance of the proposed School District accounts. He was not involved
in the determination of the proposed rate nor will he be involved in any rate
adjustments going forward. This is the only conflict of interest that Riverview
Bank is aware of.
b. Riverview Bank employee Lewandowski, Regional Vice President is the point
of contact on the X.
74. Kashnoski participated in the review and discussion by the SASD Finance
Committee of all of the five [RFP responses] received by the SASD on May 18,
2017.
a. Kashnoski questioned the rate offered by Miners/Mid Penn Bank and
whether it would be made retroactive to November 2016.
b. Kashnoski did not disclose that he was recently terminated by Miners/Mid
Penn Bank and is /was a current employee of Riverview Bank during the RFP
bid opening.
C. Kashnoski did not disclose that he provided his employer with information in
an effort to secure banking business for Riverview.
75. Business Manager Colangelo compiled an RFP summary for banking services for
Board review dated May 18, 2017.
a. The RFP summary examined the five [RFP responses] received, along with
the committee's recommendation to the Board to award accounts to
Riverview Bank.
b. Kashnoski participated in the review and recommendation.
76. Included with the RFP summary was analysis for the Board to consider, along with
the recommendation to select Riverview Bank. Excerpts read as follows:
a. "Upon overall review of the proposals, two banks stood out. Riverview and
Miners Bank. Upon closer analysis of the rate, Riverview is locking in a rate
of 1.00% with a monthly review such that the rate will not drop below 1.00%
for 24 months. The 1.00% rate is guaranteed for 24 months and may
increase during that time period. Mid - Penn's rate of 1.20% is not locked in
and there is the possibility of it declining. In addition, it is only a yearly
review. The committee is recommending Riverview Bank."
b. Although drafted by Colangelo, the RFP summary reflected the discussion
and decision of the committee, including Kashnoski, to accept the proposal
of Riverview Bank — Kashnoski's employer.
77. Kashnoski participated in a Board executive session held prior to the Board's May
18, 2017, regular meeting.
Kashnoski, 17 -041
Page 22
a. During the executive session, Kashnoski explained to the Board the
advantages of accepting Riverview Bank's RFP proposal over the one
submitted by Miners /Mid Penn Bank.
b. This explanation was in addition to the written recommendation of Riverview
Bank provided to the Board by the RFP Finance Committee, which
Kashnoski chaired.
78. The agenda for the Board's May 18, 2017, regular meeting included motion
numbers 7.24, Rescind Banking Service and 7.27, Accept Proposal for Banking
Service.
a. Kashnoski is recorded as abstaining from Board actions taken on each of
these motions, based on his reported employment with Riverview Bank.
b. Although Kashnoski abstained from voting, he was an active participant in
the SASD Board's discussion and review and ultimately recommended]
Riverview Bank, which benefited his employer.
79. Minutes from the Board's May 18, 2017, meeting include the following Board actions
rescinding the April 18, 2017, motion awarding financial services to Riverview Bank
and re- awarding it to Riverview after the RFP process:
a. "It was moved by Mr. Griffiths, seconded by Mr. McElwee to rescind the
motion made April 18, 2017, to approve banking service with Riverview
Bank. On roll call:"
Voting yes: Mr. Getchey, Mr. Griffiths, Mr. Kashner, Mr. Losiewicz, Mr.
McElwee, Mr. Shuey, Mrs. Smoogen and Mr. Sosnoskie, Jr.
Voting No: None
Abstain: Mr. Kashnoski
b. "It was moved by Mr. McElwee, seconded by Mrs. Smoogen to accept
proposal from Riverview Bank to perform Nanking services for Shamokin
Area School District, pending review by solicitor. On roll call:"
Voting yes: Mr. Getchey, Mr. Griffiths, Mr. Kashner, Mr. Losiewicz, Mr.
McElwee, Mr. Shuey, Mrs. Smoogen and Mr. Sosnoskie, Jr.
Voting No: None
Abstain: Mr. Kashnoski
80. Minutes from the Board's May 18, 2017, meeting were approved without any
change during the Board's June 20, 2017, meeting.
a. Kashnoski was present at this meeting and voted in favor of the approval.
81. SASD funds maintained at Miners Bank /Mid Penn Bank were transferred to
Riverview Bank starting July 12, 2017.
a. Five checks totaling an initial transfer of $6,465,444.29 were issued to
Riverview Bank on July 12, 2017.
b. A facsimile signature of Kashnoski was present on all five checks.
1. Check numbers 3597, 3598, and 1177 include the facsimile signature
of Board Member Jeffrey Kashner in addition to Kashnoski's.
Kashnoski, 17 -041
agp e_2T_
2. Check numbers 109 and 137 include the facsimile signature of Board
Member Robert Getchey in addition to Kashnoski's.
C. These checks were issued in the following amounts:
Ch# 3597 in the amount of $3,250,000.00 to General Fund Subsidy
Ch# 3598 in the amount of $500,000.00 to General Fund
Ch# 1177 in the amount of $950,000.00 to Cafe Fund
Ch# 137 in the amount of $1,750,000.00 to Capital Reserve
Ch# 109 in the amount of $15,444.29 to AK Settlement
d. Additional funds were transferred to Riverview Bank through changes in
direct deposit routing from local, state, and federal funding sources.
82. According to Riverview Bank President Brett Fulk, Riverview Bank realized a
minimum net profit of 2.85% on deposits received from the SASD.
a. Riverview Bank received initial deposits from the SASD totaling
$6,465,444.29 on July 12, 2017, as detailed above.
b. Riverview Bank realized a pecuniary benefit of at least $184,265.16 annually
from the initial SASD deposits, based on 2.85% of $6,465,444.29, or
$15,355.43 per month.
83. Kashnoski's employment at Riverview Bank was terminated on October 13, 2017,
within three months of SASD funds being transferred to Riverview Bank.
a. During Kashnoski's employment with Riverview Bank, Riverview Bank
earned a minimum net pecuniary gain of $46,066.29 from the receipt,
deposit, and reinvestment of SASD funds.
Minimum net pecuniary gain of $46,066.29 [is] based on three months
profit, at a rate of $15,355.43 per month.
b. As an employee of Riverview Bank, Kashnoski was compensated
$42,765.10 (State Taxable Wage) during 2017, as evidenced from IRS W -2
Wage & Tax Statements.
THE FOLLOWING FINDINGS RELATE TO KASHNOSKI'S STATEMENT OF FINANCIAL
INTERESTS FORMS FILED FOR THE 2014 AND 2015 CALENDAR YEARS.
84. Kashnoski, as a Member of the SASD Board, was annually required to file a
Statement of Financial Interests ( "SFI ") form by May 1st reporting financial interests
for the prior calendar year.
85. The SASD is annually provided with blank SFI forms for completion by SASD
officials, including Board Members.
a. Blank SFI forms are distributed to the Board Members for completion by
SASD staff each January.
86. SFIs on file with the SASD include the following filings by Kashnoski as of January
26, 20'18:
a. Calendar Year: 2016
Dated: 03/06/17 on form SEC -1 REV. 01117
Position: School Director /Candidate
Occupation: Banking
Kashnoski, 17 -041
agF' e
Real Estate Interests: 1709 W. Pine Street, Coal Township, PA 17866....
Creditors: Miners Bank, a Division of Mid Penn Bank, 4.25
Directllndirect Income: Miners Bank, a Division of Mid Penn Bank
Office, Directorship, or Employment in any Business: Miners Bank, a Division
of Mid Penn Bank, VP
All Other Financial Interests: None
b. Calendar Year: 2015
Dated: Undated on form SEC -1 REV. 01116
Position: School Director
Occupation: VP Commercial Lending
Real Estate Interests: 1709 W. Pine Street, Coal Township, PA 17866....
Creditors: None
Direct/indirect Income: Mid Penn Bank
Office, Directorship or Employment in any Business: None
All Other Financial Interests: None
Note. Kashnoski failed to report his employment with Mid Penn Bank in Box
# 13, or date this filing.
C. Calendar Year: 2014
Dated: 02/17/15 on form SEC -1 REV. 01114
Position: School Director
Occupation: VP Commercial Lending
Real Estate Interests: None
Creditors: Miners Bank, 3.75%
Direct/indirect Income: Miners Bank
Office, Directorship, or Employment in any Business: None
All Other Financial Interests: None
Note: Kashnoski failed to report his employment with Mid Penn Bank in Box
# 13 on this filing.
d. Calendar Year: 2013
Dated: 04/30/14 on form SEC -1 REV. 01114
Position: School Board
Occupation: Banking
Real Estate Interests: None
Creditors: Miners Bank, 4.25 %% [sic]
Directllndirect Income: Miners Bank
Office, Directorship, or Employment in any Business: Miners Bank, VP
All Other Financial Interests: None
87. Kashnoski failed to report his employment with Miners/Mid Penn Bank in Box No. 13
of his filings for the 2014 and 2015 calendar years.
a. At the time Kashnoski failed to report his interest in Miners/Mid Penn Bank,
SASD funds were being transferred to Miners /Mid Penn Bank.
Kashnoski's failure to disclose his employment concealed his
relationship with Miners/Mid Penn Bank.
2. Kashnoski also failed to date his filing intended for the 2015 calendar
year.
88. [On May 21, 2018,] Kashnoski filed [with the State Ethics Commission] amended
SFIs for the 2014 and 2015 calendar years to correct filing deficiencies on these
forms regarding his employment with Mid Penn Bank and his failure to date his
Kashnoski, 17 -041
age
previous filing for the 2015 calendar year....
a. Kashnoski also filed an SFI for the 2017 calendar year on May 21, 2018,
twenty (20) days after the May 1, 2018, filing deadline.
89. Kashnoski`s May 21, 2018, filings reported the following financial interests:
a. Calendar Year: 2017
Dated: 05/31/18 on form SEC -1 REV. 01117
Position: School Director
Occupation: Banking
Real Estate Interests: 1709 W. Pine Street, Coal Township, PA 17866....
Creditors: Miners Bank, 2.25%
Direct /Indirect Income: Mid Penn Bank; Riverview Bank
Office, Directorship, or Employment in any Business: Miners Bank, VP
All Other Financial Interests: None
b. Calendar Year: 2015
Dated: 03/06/17 (error intended date 05131118) on form SEC -1 REV. 01117
Position: School Director
Occupation: VP Commercial Lending
Real Estate Interests: 1709 W. Pine Street, Coal Township, PA 17866....
Creditors: None
Direct/Indirect Income: Mid Penn Bank
Office, Directorship, or Employment in any Business: Miners Bank, VP
All Other Financial Interests: None
C. Calendar Year: 2014
Dated: 05/31/18 on form SEC -1 REV. 01117
Position: School Director
Occupation: VP Commercial Lending
Real Estate Interests: None
Creditors: Miners Bank, 3.75%
Directllndirect Income: Miners Bank
Office, Directorship, or Employment in any Business: Miners Bank, employee
All Other Financial Interests: None
90. As a Member of the SASD Board, Kashnoski utilized the authority of his office to
rarticipate in the process of directing [that] SASD financial account[s] be transferred
o Miners Bank, a Division of Mid Penn Bank, resulting in a pecuniary benefit to a
business with which Richard Kashnoski was associated of no less than
$199,000.00.
91. Kashnoski's use[s] of office to obtain business for Miners /Mid Penn Bank, as
detailed above, include, but are not limited to:
a. Coordinating the meeting between Nagorzanski of Miners/Mid Penn and
SASD Business Manager Colangelo, for the sole purpose of soliciting
business for Miners/Mid- Penn Bank.
b. Obtaining SASD financial information to assist Naggorzanski in preparation of
submitting a banking proposal specific to the SASD, prior to any RFP
process.
C. Influencing SASD Board Members that the SASD could acquire better rates
by switching to Miners /Mid Penn Bank.
d. Reviewing banking [RFP responses] and advising the SASD Board to select
Kashnoski, 17 -041
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Miners /Mid Penn Bank over two other competing businesses.
e. Participating in Board discussions on banking proposals during Board
executive sessions.
92. As a Member of the SASD Board, Kashnoski utilized the authority of his office to
participate in the process of directing [that] SASD financial account[(s)] be
transferred to Riverview Bank, resulting in a pecuniary benefit to a business with
which Kashnoski was associated of no less than $28,787.49.
a. Financial gain total [is] limited to the period of time of Kashnoski's
employment that SASD funds were on deposit with Riverview Bank (July 12,
2017, to October 13, 2017).
93. Kashnoski's use[s] of office to obtain business for Riverview Bank, as detailed
above, include, but are not limited to:
a. Introducing Lewandowski of Riverview Bank to SASD Business Manager
Colangelo (during Kashnoski's first week of employment with Riverview
Bank) for the sole purpose of soliciting business for Riverview Bank.
b. Recommending to SASD Board Members that the Board award banking
services to Riverview Bank, absent any RFP process, during an executive
session held prior to the Board's April 18, 2017, regular meeting.
C. Participating in internal email exchanges with other Riverview Bank
personnel as to tactics to employ to ensure Riverview Bank acquired the
SASD financial accounts; and Kashnoski revealing his ability to influence the
Board.
d. Chairing and participating in the May 18, 2017, RFP bid opening, resulting in
a written recommendation that Riverview Bank's proposal be accepted over
Miners/Mid Penn's.
1. This participation included reviewing all [RFP responses] submitted
and asking questions of a Mid Penn representative on [Mid Penn's]
RFP.
e. Recommending to the Board to accept Riverview Bank's RFP proposal
during an executive session held prior to the Board's May 18, 20'17, regular
meeting.
94. At the time Kashnoski was engaging in a use of office to secure the transfer of
SASD financial accounts to businesses with which he was associated (Miners/Mid
Penn Bank and/or Riverview Bank), Kashnoski received compensation from the
SASD totaling $3,946.30 for his service as the SASD Board Treasurer.
a. Kashnoski received $1,350.05 in Treasurer's compensation during 2016.
b. Kashnoski received $2,596.25 in Treasurer's compensation during 2017.
95. Kashnoski, a public official /public employee in his capacity as [an SASD Board
Member and/or Treasurer, enggaged in a conflict of interests, resulting in a
pecuniary benefit to himsel and/or a business with which he is /was associated in
violation of the State Ethics Act, as follows:
Salary
Miners/ Mid Penn Bank 2015
$64,880.19
Sala
Miners) Mid Penn Bank 2016
$84,852.46
Kashnoski, 17 -041
agTre 7—
Salary Miners/ Mid Penn Bank 2017
$21,712.53
Pecuniary Gain Miners/ Mid Penn Bank from Transfer of SASD financial accounts
$199,000.00
SASD Treasurer Compensation 2016
$1,350.05
Salary Riverview Bank
$42,765.10
Pecuniary Gain Riverview Bank from Transfer of SASD financial accounts
$46,066.29
SASD Treasurer Compensation 2017
$2,596.25
Total
$463,222.87
Ill. DISCUSSION:
As a Member of the Shamokin Area School District ( "SASD ") Board of School
Directors ( "Board ") from December 2013 through November 2017, and as Board Treasurer
for the period July 1, 2016, through November 2017, Respondent Richard Kashnoski, also
referred to herein as "Respondent," "Respondent Kashnoski," and "Kashnoski," was a
public official subject to the provisions of the Public Official and Employee Ethics Act
( "Ethics Act "), 65 Pa.C.S. § 1101 et seq.
The allegations are that Kashnoski violated Sections 1103(a), 1104(a), 1105(a) and
1105(b)(8) of the Ethics Act when he utilized the authority of his public position for the
private pecuniary benefit of himself and/or a business with which he is associated:
When through his public position, he accessed and used his
influence as a Board Member with SASD Administration /staff to
arrange meetings between the SASD and Riverview Bank in
order to facilitate the moving of SASD accounts to Riverview
Bank, and when he participated in discussions and actions of
the SASD Board, including but not limited to participating in bid
opening /reviews and participating in interviewslquestioning of
bidders, resulting in the awarding of banking services to
Riverview Bank all at a time when he was an employee of
Riverview Bank.
When he participated in discussions and actions of the SASD
Board, including but not limited to participating in Board action
resulting in the awarding of banking services to Mid Penn Bank,
at a time when he was an employee of Mid Penn Bank.
When he failed to report his employment with Miners Bank /Mid
Penn Bank as an "Office, Directorship, or Employment in any
Business," upon Statement of Financial Interests ( "SFI ") forms
filed for the 2014 and 2015 calendar years; and when he failed
to include a date accompanying his signature for the 2015 SFI.
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from engaging in conduct that constitutes a conflict of interest:
§ 1103. Restricted activities
(a) Conflict of interest. --No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
65 Pa.C.S. § 1103(a).
The term "conflict of interest" is defined in the Ethics Act as follows:
§ 1102. Definitions
Kashnoski, 17 -041
Page 28
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate family
or a business with which he or a member of his immediate
family is associated. The term does not include an action
having a de minimis economic impact or which affects to the
same degree a class consisting of the general public or a
subclass consisting of an industry, occupation or other group
which includes the public official or public employee, a member
of his immediate family or a business with which he or a
member of his immediate family is associated.
65 Pa.C.S. § 1102.
Section 1103(a) of the Ethics Act prohibits a public official /public employee from
using the authority of public office /employment or confidential information received by
holding such a public position for the private ecuniary benefit of the public official /public
employee himself, any member of his immediate family, or a business with which he or a
member of his immediate family is associated.
Section 1104(a) of the Ethics Act provides that each public official /public employee
must file an SFI for the preceding calendar year, each year that he holds the position and
the year after he leaves it.
Section 1105(a) of the Ethics Act provides that the SFI shall be filed on the form
prescribed by this Commission; that all information requested on the form shall be provided
to the best of the knowledge, information and belief of the filer; and that the form shall be
signed under oath or equivalent affirmation.
Section 1105(b) of the Ethics Act and its subsections detail the financial disclosure
that a person required to file the SFI form must provide.
Section 1105(b)(8) of the Ethics Act requires the filer to disclose on the SFI any
office, directorship or employment in any business entity.
We shall now summarize the facts pertaining to this case. Given Respondent's
failure to file an Answer to the Investigative Complaint, the facts as averred by the
Investigative Complaint are deemed admitted by Respondent. 65 Pa.C.S. § 1108(e); 51
Pa. Code § 21.5(k)(1).
Respondent Kashnoski served as a Member of the SASD Board from December
2013 through November 2017. Respondent served as Board Treasurer for the period July
1, 2016, through November 2017.
In a private capacity, Respondent was employed as a commercial loan officer for
Miners Bank from approximately June 2010 until March 1, 2015. Respondent transitioned
to employment with Mid Penn Bank on March 1, 2015, in conjunction with Mid Penn's
acquisition of Miners Bank. Respondent was employed as a commercial loan officer for
Mid Penn Bank from March 1, 2015, until his termination effective April 5, 2017. As an
employee of Miners Bank /Mid Penn Bank, Respondent was compensated on a salary
basis with no commissions and was given specific goals for new loan production, fee
income, and deposit generation.
Respondent was employed by Riverview Bank as a commercial loan officer from
April 10, 2017, until October 13, 2017. At Riverview Bank, Respondent was employed on a
Kashnoski, 17 -041
agp -�J-
salary basis with no commissions and was given a specific loan production goal.
Respondent's employment with Riverview Bank was terminated effective October 13,
2017, due to a lack of performance.
Neither Miners Bank/Mid Penn Bank nor Riverview Bank had business dealings with
the SASD prior to Respondent's employment with either bank. In 2015 SASD financial
accounts were primarily deposited with Susquehanna Bank, a Division of BB &T Bank, and
M &T Bank.
Respondent's Actions to Get SASD Funds Deposited with Miners /Mid Penn Bank:
In September 2015 Respondent was failing to meet loan production expectations at
Miners /Mid Penn Bank. Commencing as early as September 2015, Respondent used the
authority of his public office to secure the transfer of SASD financial accounts to
MinerslMid Penn Bank.
Evaluation of SASD banking options was the responsibility of SASD Business
Manager Karen Colangelo ( "Colangelo') or her designee, not Respondent. Nevertheless,
without any Board action authorizing Respondent to pursue other banking options for the
SASD, in September 2015 Respondent directed Colangelo to provide him with information
regarding balances and interest rates of SASD financial accounts. On September 29,
2015, Respondent forwarded the information Colangelo provided him to Miners/Mid Penn
Bank Vice President and Government/Non-Profit Officer Christine Nagorzanski
( "Nagorzanski "). Nagorzanski was the individual at Miners/Mid Penn Bank who was
responsible for public institution deposits /services, Respondent informed Nagorzanski that
the SASD maintained account balances of approximately $9,316,000.00, and an additional
$5,117,000.00 held in various investments.
Respondent asked Nagorzanski to draft a banking service proposal specific to the
SASD, and to contact him once she completed it, so that he could arrange an appointment
with Colangelo. Respondent advised Nagorzanski that although he was a Board Member
and could not vote on the proposal, he could let the Board know of Nagorzanski's
knowledge and experience with school districts and municipal accounts.
On or about October 14, 2015, Mid Penn Bank completed a cash management
customer approval form specific to the SASD. A meeting was scheduled with Colangelo to
present Mid Penn Bank's banking service proposal for the SASD on October 15, 2015.
Respondent attended the meeting for the sole purpose of introducing Nagorzanski to
Colangelo. This meeting resulted in rates from Miners Bank being included for discussion
during the SASD Board's executive session held October 27, 2015. "District Banking" was
added as an agenda item for the Board's October 27, 2015, executive session meeting
because of Respondent's efforts to change the banking service provider to MinerslMid
Penn Bank. Discussion of banking services was not otherwise scheduled for
discussion /consideration by the Board.
During the Board's October 27, 2015, executive session meeting, Respondent
explained financial rates to the Board and advised that the SASD could acquire "better
rates" elsewhere. As a result of the financial discussions that occurred during the Board's
October 27, 2015, executive session meeting, Colangelo initiated an RFP process for
banking proposals for SASD accounts. The RFP required disclosure of conflicts of
interests as set for
at Fact Finding 30 b. RFP responses were scheduled to be opened
by the SASD Board on November 23, 2015, at 2:00 p.m.
The SASD received RFP responses from three banks including Miners Bank /Mid
Penn Bank. The Miners Bank /Mid Penn Bank proposal, which was prepared by
Nagorzanski, made the following representation regarding Respondent's involvement:
Richard Kashnoski is a Vice President and Commercial Loan
Kashnoski, 17 -041
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Officer at Miners, a division of Mid Penn Bank, and also a
member of your school board. As we are looking to do
business with you, Richard has recused himself from meetings
and discussions regarding our proposal. He has had no role in
this proposal and will not gain any material or financial benefit
from it. Should we gain your business, please be assured that
our company has a strict Conflict of Interest Policy that states:
A Bank employee is prohibited from representing the Bank in
any transaction where he or she has any material connection
or substantial interest.
Fact Finding 33 a.
Respondent participated in the review and discussion of the RFP responses during
an SASD Board executive session meeting held immediately prior to the Board's January
19, 2016, regular meeting. During the executive session, the RFP responses received
from MinerslMid Penn Bank and the other two bidders were reviewed, analyzed, and
evaluated by Respondent. Respondent recommended that the SASD accept the proposal
from Miners/Mid Penn Bank as the best proposed option financially for the SASD.
During the Board's January 19, 2016, regular meeting, the Board voted to accept
the banking proposal from Miners Bank, a Division of Mid Penn Bank. Respondent was
present for the meeting and is recorded as having abstained from the vote. Although
Respondent abstained from the vote, he had already taken specific and deliberate action to
advance SASD approval of Miners/Mid Penn's proposal. The Board voted to award the
business to Miners/Mid Penn Bank based on Respondent's representation that it was the
best financial deal for the SASD. The Board relied on Respondent's input based on his
financial background and employment in the banking industry. Respondent's vote was not
needed in order to have the motion pass, since he recommended to the Board to accept
the proposal. Respondent filed an abstention memo with the SASD regarding the
aforesaid vote, stating: "I am an employee of Miners Bank, a Division of Mid Penn.'
On March 1, 2016, the SASD began transferring SASD funds to Miners Bank, a
Division of Mid Penn Bank. Additional SASD funds were direct deposited into the newly -
created Miners/Mid Penn accounts from local, state and federal sources. As a result of
Miners/Mid Penn Bank acquiring the SASD account(s) , Respondent received a calendar
year 2016 deposit credit of approximately $8,000,000.00, which was in excess of his
$500,000.00 deposit goal for 2016. As an employee of Miners Bank /Mid Penn Bank,
Respondent was compensated $64,880.19 during 2015, $84,852.46 during 2016, and
$21,712.53 during 2017.
As a Member of the SASD Board, Respondent used the authority of his office to
participate in the process of directing that SASD financial accounts be transferred to a
business with which he was associated, specifically, Miners Bank, a Division of Mid Penn
Bank, resulting in a pecuniary benefit to that business of no less than $199,000.00.
Respondent's uses of office to obtain SASD business for Miners/Mid Penn Bank included:
(1) coordinating the meeting between Nagorzanski and Colangelo, for the sole purpose of
soliciting business for Miners/Mid Penn Bank; (2) obtaining SASD financial information to
assist Nagorzanski in preparation of submitting a banking proposal specific to the SASD,
prior to any RFP process; (3) influencing SASD Board Members that the SASD could
acquire better rates by switching to Miners/Mid Penn Bank; (4 reviewing banking RFP
responses and advising the SASD Board to select Miners/Mid Penn Bank over two other
competing businesses; and (5) participating in Board discussions on banking proposals
during Board executive sessions.2
2 In addition to his actions to secure Miners/Mid Penn Bank as the SASD depository, during the Board's
December 7, 2016, meeting, Respondent participated in unanimous Board action to authorize Mid Penn Bank
to serve as an additional authorized investment entity. See, Fact Findings 40 -45 a. Respondent did not
receive any compensation or credit towards production goaFs at Mid Penn Bank as a result of approving Mid
Kashnoski, 17 -041
ag_e 3_—
Respondent's Actions to Get SASD Funds Deposited with Riverview Bank:
Around January 2017 Riverview Bank began an internal initiative to generate more
municipal business for its bank branches. Michelle Lewandowski ( "Lewandowski "),
Regional Vice President/Loan Officer for Riverview Bank, had supervisory responsibility
over efforts to obtain new municipal accounts in the region which included the SASD.
On January 31, 2017, Stephen Suchanick ( "Suchanick "), Assistant Manager of
Riverview Bank's Trevorton Office, emailed Colangelo requesting a meeting with Colangelo
to discuss what financial options Riverview Bank could offer SASD. The SASD was not
seeking banking service proposals in January 2017. The SASD was generally satisfied
with Miners /Mid Penn Bank. Colangelo exchanged emails with Suchanick but did not
present Suchanick's proposal to the SASD Boar consideration.
Respondent's employment with Miners/Mid Penn Bank was terminated on April 5,
2017. At the time of his termination, Respondent was not subject to a non- compete
agreement with Miners/Mid Penn Bank.
On April 5, 2017, Respondent contacted Brett Fulk (Fulk "), President of Riverview
Bank, seeking employment. Respondent informed Fulk that he was no longer with Mid
Penn Bank and had a list of clients that he knew would come with him. Less than three
hours later, Suchanick emailed Colangelo a second time for the specific purpose of
soliciting SASD business.
Respondent was employed by Riverview Bank as a commercial loan officer from
April 10, 2017, until October 13, 2017. Respondent had a loan production goal of $15
million annually.
During Respondent's first week of employment with Riverview Bank, he discussed
potential Riverview Bank clients with Lewandowski. This discussion included information
on SASD's most recent dealings with Mid Penn Bank. Respondent disclosed to
Lewandowski that Mid Penn Bank did not adjust interest rates paid to the SASD upward,
as economic conditions improved. Respondent offered to arrange an introduction for
Lewandowski with Colangelo. Prior to Respondent's employment with Riverview Bank,
Lewandowski and Suchanick had been unable to secure a meeting with Colangelo or any
other SASD official.
As a Member of the SASD Board, Respondent took an active role to ensure
Riverview Bank secured the SASD financial accounts. During Respondent's first week of
e!SD loyment with Riverview Bank (the week of April 10, 2017), he introduced Lewandowski
to olangelo for the specific purpose of advancing Riverview Bank's attempt to secure the
S as a client. Respondent was able to secure a meeting between Lewandowski and
Colangelo due to his position as an SASD Board Member.
Respondent provided suggestions to other Riverview Bank employees as to how to
structure the Bank's proposal before presenting it to the SASD. Respondent also informed
his superiors at Riverview Bank that as a Member of the SASD Board, he was working to
get Riverview's proposal approved. Respondent conveyed that he was influential with the
SASD Board and would persuade the SASD Board to approve the proposal.
Respondent participated in an SASD Board executive session meeting held
immediately prior to the Board's April 18, 2017, regular meeting. During the executive
session meeting, Respondent informed the Board Members present that Riverview Bank
was offering the SASD better rates than it was receiving from Miners/Mid Penn Bank.
Penn as an approved investment entity, and although approved by the Board, Mid Penn Bank was ultimately
not included on the approved investment list.
Kashnoski, 17 -041
aglrTZ-
Respondent recommended that the SASD transfer its financial accounts to Riverview
Bank. Respondent's recommendation occurred absent any comparative bids, quotes, or
proposals being available from any institution other than Riverview Bank. At the time of his
statement to the Board, Respondent had been employed by Riverview Bank for eight days.
During the Board's April 18, 2017, meeting, action was taken to approve banking
services with Riverview Bank based on Respondent's recommendation. Respondent is
recorded as abstaining from this vote. Even though he abstained from the SASD Board
vote, Respondent utilized the authority of his office to initiate Board action to benefit
himself and/or Riverview Bank, which at that time was a business with which he was
associated. Absent Respondent's recommendation, the SASD Board would not have
taken action to transfer SASD monies to Riverview Bank.
On April 18, 2017, and April 19, 2017, Respondent participated in the email
exchange detailed at Fact Findings 63 -63 f between Riverview Bank employees and upper
management regarding the SASD accounts. Fulk credited Respondent for the successful
transfer of SASD accounts to Riverview Bank based on Respondent introducing
Lewandowski to Colangelo, which ultimately brought the matter before the SASD Board.
Absent Respondent making the introduction, Riverview Bank's proposal would not have
been brought to the Board's attention.
Upon learning of the Board action to transfer accounts to Riverview Bank, SASD
Superintendent .fames Zack - -who had been absent from the Board's April 18, 2017,
meeting -- directed Colangelo to initiate an RFP process. The RFP process was initiated
due to concerns about a conflict of interest involving Respondent's employment with
Riverview Bank. An RFP process was initiated despite the fact that a decision to transfer
SASD accounts to Riverview Bank had already occurred. The SASD's RFP was dated April
26, 2017, and required disclosure of conflicts of interests as set forth at Fact Finding 68 a.
Responses to the RFPs were scheduled to be opened on May 18, 2017.
Respondent provided information and directions to Riverview Bank personnel as to
how to structure the Bank's response to the RFP, and dealings with the SASD, through
email exchanges between April 24, 2017, and May 18, 2017. These emails included
dialogue on the Bank's RFP response and Respondent's ability to affect the outcome at
the Board level. These emails are set forth at Fact Findings 70 a -h.
The SASD held the scheduled RFP
SASD officials attending were Colangelo,
McElwee. Respondent purported himself
reviewing the RFP responses.
bid opening at 2:00 p.m. on May 18, 2017.
Respondent, and Board Member Ronald
to be the Chair of the Finance Committee
The SASD received RFP responses from various banks including Riverview Bank
and Miners Bank, a Division of Mid Penn Bank. Riverview Bank's RFP response included
the following disclosure under the heading "Bidder's Ethics and Collusion':
Conflict of Interest, Shamokin School Board Treasurer,
Richard A. Kashnoski, is a full -time employee of Riverview
Bank. Mr. Kashnoski will not be involved in the establishment
or maintenance of the proposed School District accounts. He
was not involved in the determination of the proposed rate nor
will he be involved in any rate adjustments going forward. This
is the only conflict of interest that Riverview Bank is aware of.
Fact Finding 73 a.
Respondent participated in the review and discussion by the SASD Finance
Committee of all of the RFP responses received by the SASD on May 18, 2017.
Respondent questioned the rate offered by Miners /Mid Penn Bank and whether it would be
Kashnoski, 17 -041
Page
made retroactive to November 2016. Respondent did not disclose that he was recent]
terminated b Miners /Mid Penn Bank and was a current employee of Riverview Bank
during the RFP bid opening. Respondent did not disclose that he provided his employer
with information in an effort to secure banking business for Riverview.
Colangelo compiled an RFP summary for banking services for Board review dated
May 18, 2017. The RFP summary examined the RFP responses received, along with the
committee's recommendation to the Board to award accounts to Riverview Bank. Although
drafted by Colangelo, the RFP summary reflected the discussion and decision of the
committee, including Respondent, to accept the proposal of Riverview Bank. The RFP
summary included the following:
Upon overall review of the proposals, two banks stood out.
Riverview and Miners Bank. Upon closer analysis of the rate,
Riverview is locking in a rate of 1.00% with a monthly review
such that the rate will not drop below 1.00% for 24 months.
The 1.00% rate is guaranteed for 24 months and may increase
during that time period. Mid-- Penn's rate of 1.20% is not locked
in and there is the possibility of it declining. In addition, it is
only a yearly review. The committee is recommending
Riverview Bank.
Fact Findina 76 a
Respondent participated in a Board executive session held prior to the Board's May
18, 2017, regular meeting. During the executive session, Respondent explained to the
Board the advantages of accepting Riverview Bank's RFP proposal over the one submitted
by Miners/Mid Penn Bank. This explanation was in addition to the written recommendation
of Riverview Bank provided to the Board by the RFP Finance Committee, which
Respondent chaired.
During the Board's May 18, 2017, regular meeting, Respondent abstained from
Board votes to: (1 ) rescind the rior motion made April 18, 2017, to approve banking
service with Riverview Bank; and (2) to accept the RFP proposal from Riverview Bank to
perform banking services for SASD, pending review by the Solicitor. Although Respondent
abstained from voting, he was an active participant in the SASD Board's discussion and
review, and he recommended Riverview Bank, which benefited his employer.
SASD funds maintained at Miners Bank/Mid Penn Bank were transferred to
Riverview Bank starting July 12, 2017. Five checks totaling an initial transfer of
$6,465,444.29 were issued to Riverview Bank on July 12, 2017. Respondent's facsimile
signature was present on all five of these checks as one of the authorized signatories for
the SASD. Additional funds were transferred to Riverview Bank through changes in direct
deposit routing from local, state, and federal funding sources. According to Fulk, Riverview
Bank realized a minimum net profit of 2.85% on deposits received from the SASD.
Respondent's employment at Riverview Bank was terminated on October 13, 2017.
As an employee of Riverview Bank, Respondent was compensated $42,765.10 during
2017. During Respondent's employment with Riverview Bank, Riverview Bank earned a
minimum net pecuniary gain of $46,066.29 from the receipt, deposit, and reinvestment of
SASD funds. Fact Finding 83 a.
As a Member of the SASD Board, Respondent utilized the authority of his office to
participate in the process of directing that SASD financial accounts be transferred to
Riverview Bank, a business with which Respondent was associated. Respondent's uses of
office to obtain SASD business for Riverview Bank included: (1) introducing Lewandowski
to Colangelo for the sole purpose of soliciting business for Riverview Bank; (2)
recommending to SASD Board Members that the Board award banking services to
Kashnoski, 17 -041
age
Riverview Bank, absent any RFP process, during a Board executive session held April 18,
2017; (3) chairing and participating in the May 18, 2017, RFP bid opening -- including
reviewing all RFP responses and questioning the Miners /Mid Penn Bank representative
regarding that bank's RFP response -- resulting in a written recommendation that Riverview
Bank's proposal be accepted over Miners/Mid Penn's; and (4) recommending to the Board
to accept Riverview Bank's RFP proposal during an executive session held prior to the
Board's May 18, 2017, regular meeting.
As noted above, as an employee of Riverview Bank, Respondent was compensated
$42,765.10 during 2017.
Respondent's SFIs:
As for Respondent's SFIs, Respondent failed to report his employment with Miners
Bank /Mid Penn Bank in Box number 13 of his SFIs for calendar years 2014 and 2015.
Respondent also failed to date his SFl filing intended for the 2015 calendar year.
On May 21, 2018, Respondent filed with this Commission amended SFIs for the
2014 and 2015 calendar years to correct the aforesaid filing deficiencies.
We must now determine, based upon the record, whether the actions of
Respondent violated the Ethics Act. As we apply the facts to the allegations, due process
requires that we not depart from the allegations. Pennsy v. Department of State, 594 A.2d
845 (Pa. Cmwlth. 1991). A violation of the Ethics Act must be based upon clear and
convincing proof. 65 Pa.C.S. § 1108(g). "Clear and convincing proof is evidence that is so
clear, direct, weighty, and convincing that it enables the trier of fact to come to a clear
conviction, without hesitance, of the truth of the precise facts at issue." G.L. v. State Ethics
Commission, 17 A.3d 445 (Pa. Cmwlth. 2011), alloc. den., 613 Pa. 648, 32 A.3d 1279
20 }. iting In Re: Adoption of Charles E.D.M.
1998 , 550 Pa. 595, 601, 708 A.2d 88, 91
Based upon the Fact Findings as deemed admitted by Respondent Kashnoski, it is
clear that Respondent violated Section 1103(a) of the Ethics Act both when he acted in
furtherance of securing SASD accounts for Miners/Mid Penn Bank and when he acted in
furtherance of securing SASD accounts for Riverview Bank. Respondent's motivation was
to secure SASD accounts for whichever bank employed him at the time, and when
Miners/Mid Penn Bank terminated his employment, Respondentwas determined to secure
the transfer of SASD banking business from Miners/Mid Penn Bank to his new employer,
Riverview Bank.
In 2015 -2016, as a Member of the SASD Board, Respondent used the authority of
his office to participate in the process of directing that SASD financial accounts be
transferred to the bank that employed him at that time, specifically, Miners Bank, a Division
of Mid Penn Bank, resulting in a private pecuniary benefit to that business of no less than
$199,000.00. Respondents uses of office to obtain business for Miners/Mid Penn Bank
included: (1) coordinating the meeting between Nagorzanski and Colangelo, for the sole
purpose of soliciting business for Miners /Mid Penn Bank; (2) obtaining SASD financial
information to assist Nagorzanski in preparation of submitting a banking proposal specific
to the SASD, prior to any RFP process; (3) influencing SASD Board Members that the
SASD could acquire better rates by switching to Miners/Mid Penn Bank; (4 ) reviewing
banking RFP responses and advising the SASD Board to select Miners/Mid Penn Banc
over two other competing businesses; and (5) participating in Board discussions on
banking proposals during Board executive sessions.
Based upon the Fact Findings as deemed admitted by Respondent, we hold that
Respondent Kashnoski violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a),
when he participated in discussions and actions of the SASD Board, including but not
limited to participating in Board action resulting in the awarding of banking services to Mid
Kashnoski, 17 -041
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Penn Bank, at a time when he was an employee of Mid Penn Bank. Cf., Gallen, Order No.
1198.
Respondent's employment with Miners/Mid Penn Bank was terminated on April 5,
2017. At the time of his termination, Respondent was not subject to a non - compete
agreement with Miners/Mid Penn Bank. Respondent immediately contacted Fulk seeking
employment with Riverview Bank. Respondent informed Fulk that he was no longer with
Mid Penn Bank and had a list of clients that he knew would come with him.
Respondent was employed by Riverview Bank as a commercial loan officer from
April 10, 2017, until October 13, 2017. As a Member of the SASD Board, Respondent took
an active role to ensure Riverview Bank secured the SASD financial accounts. During
Respondent's first week of employment with Riverview Bank (the week of April 10, 2017),
he introduced Lewandowski to Colangelo for the s ecific purpose of advancing Riverview
Bank's attempt to secure the SASD as a client. Prior to Respondent's employment with
Riverview Bank, Lewandowski and Suchanick had been unable to secure a meeting with
Colangelo or any other SASD official. Respondent was able to secure a meeting between
Lewandowski and Colangelo due to his position as an SASD Board Member.
Respondent's uses of office to obtain SASD business for Riverview Bank included:
(1) introducing Lewandowski to Colangelo for the sole purpose of soliciting business for
Riverview Bank; (2) recommending to SASD Board Members that the Board award banking
services to Riverview Bank, absent any RFP process, during a Board executive session
held April 18, 2017; (3) chairing and participating in the May 18, 2017, RFP bid opening- -
including reviewing all RFP responses and questioning the Miners/Mid Penn Bank
representative regarding that bank's RFP response -- resulting rn a written recommendation
that Riverview Bank's proposal be accepted over MinerslMid Penn's; and (4)
recommending to the Board to accept Riverview Bank's RFP proposal during an executive
session held prior to the Board's May 18, 2017, regular meeting. Respondent's efforts to
secure the SASD banking business for Riverview Bank were successful, and during
Respondent's employment with Riverview Bank, Riverview Bank earned a minimum net
private pecuniary gain of $46,066.29 from the receipt, deposit, and reinvestment of SASD
funds. Fact Finding 83 a.
We hold that Respondent Kashnoski violated Section 1103(a) of the Ethics Act, 65
Pa.C.S. § 1103(a), when through his public position, he accessed and used his influence
as a Board Member with SASD Administration /staff to arrange meetings between the
SASD and Riverview Bank in order to facilitate the moving of SASD accounts to Riverview
Bank, and when he participated in discussions and actions of the SASD Board, including
but not limited to participating in bid opening /reviews and participating in
interviews /questioning of bidders, resulting in the awarding of banking services to Riverview
Bank all at a time when he was an employee of Riverview Bank. Cf., Gallen, supra.
We recognize that in addition to the aforesaid $199,000.00 private pecuniary benefit
realized by Miners/Mid Penn Bank, and the aforesaid $46,066.29 private pecuniary benefit
realized by Riverview Bank, there may have been additional private pecuniary benefits
received b Respondent himself. However, we need look no further than the private
pecuniary benefits Respondent obtained for the banks that employed Respondent to
conclude that Respondent violated Section 1103(a) of the Ethics Act.
As for the allegations involving Respondent's SFIs, we hold that Respondent
Kashnoski violated Sections 1105(a) and 1105(b)(8) of the Ethics Act, 65 Pa.C.S. §§
1105(a) and 1105�b,) 8), when he failed to report his employment with Miners Bank/ Mid
Penn Bank as an `Office, Directorship, or Employment in any Business" upon SFI forms
filed for the 2014 and 2015 calendar years and failed to include a date accompanying his
signature for the 2015 calendar year SFI.
We further hold that Respondent did not violate Section 1104(a) of the Ethics Act,
Kashnoski, 17 -041
age ,39—
65 Pa.C.S. § 1104(a), with regard to his SFIs for calendar years 2014 and 2015 as there is
no basis in the Fact Findings to conclude that such forms were not timely filed.
Section 1107(13) of the Ethics Act empowers this Commission to order restitution in
instances where a public official /public employee has obtained a financial gain in violation
of the Ethics Act: "Any order resulting from a finding that a public official or public
employee has obtained a financial gain in violation of this chapter may require the
restitution plus interest of that gain to the appropriate governmental body." 65 Pa.C.S. §
1107(13). The Investigative Division is seeking an Order for restitution to the SASD in the
amount of $46,066.29, consisting of the aforesaid private pecuniary benefit that
Respondent obtained for Riverview Bank. Position Statement of the Investigative Division,
at 11.
Although we could impose restitution for the total private pecuniary benefit that
Respondent obtained in violation of Section 1103(a) the Ethics Act -- including but not
limited to the private pecuniary benefits received by both banks - -we have decided in the
exercise of our discretion to order Respondent to pay restitution to the SASD in the lesser
amount of $3,232.72, which corresponds to a conservative calculation of the interest lost
b the SASD as a result of Respondent's actions to et the SASD Board to accept the
Riverview Bank proposal rather than the Miners /Mid Penn Bank proposal. Specifically, the
.2% interest rate differential between the Miners/Mid Penn Bank and Riverview Bank
proposals as applied to the initial SASD funds transferred to Riverview Bank
($6,465,444.29) forthe three -month period Respondent continued to remain employed by
Riverview Bank (July 12, 2017, to October 13, 2017) resulted in a loss of interest by the
SASD of $3,232.72: $6,465,444.29 x.2% T 12 months x 3 months = $3,232.72.
Pursuant to Section 1107(13) of the Ethics Act, 65 Pa.C.S. § 1107(13), Respondent
Kashnoski is directed to make payment of restitution to the SASD in the amount of
$3,232.72 by certified check or money order in the amount of $3,232.72 payable to the
Shamokin Area School District and forwarded to the Pennsylvania State Ethics
Commission by no later than the thirtieth (30th) day after the mailing date of this
adjudication and Order.
Additionally, Section 1109(c) of the Ethics Act provides, in pertinent part; "Any
person who obtains financial gain from violating any provision of this chapter, in addition to
any other penalty provided by law, shall pay a sum of money equal to three times the
amount of the financial gain resulting from such violation into the State Treasury or the
treasury of the political subdivision." 65 Pa.C.S. § 1109(c).
Given Respondent's egregious conduct, the imposition of a treble penalty is also
warranted. Respondent Kashnoski is also directed to pay a treble penalty in the amount of
$9,69816 into the State Treasury of the Commonwealth of Pennsylvania, which payment
shall be made payable to the Commonwealth of Pennsylvania and forwarded to the
Pennsylvania State Ethics Commission by no later than the thirtieth (30th) day after the
mailing date of this adjudication and Order, and shall be forwarded by this Commission to
the Pennsylvania Office of the State Treasurer for deposit in the General Fund of the
Commonwealth of Pennsylvania.
Kashnoski is further directed to not accept any reimbursement, compensation or
other payment from the SASD representing a full or partial reimbursement of the aforesaid
restitution and/or treble penalty.
Noncompliance will result in the institution of an order enforcement action.
Turning to the matter of referral, given the criminal penalties associated with the
Ethics Act and the potential applicability of other laws, we shall refer this matter to the
Office of the Attorney General of the Commonwealth of Pennsylvania, the Office of the
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7a— —eT7--
Northumberland County District Attorney, and the Pennsylvania Department of Banking
and Securities for review and such action as they may deem appropriate.
IV. CONCLUSIONS OF LAW:
As a Member of the Shamokin Area School District ( "SASD217, Board of School
Directors ("Board") from December 2013 through November and as Board
Treasurer for the period .July 1, 2016, through November 2017, Respondent Richard
Kashnoski ( "Kashnoski" ) was a public official subject to the provisions of the Public
Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seg.
Kashnoski violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when
he participated in discussions and actions of the SASD Board, including but not
limited to participating in Board action resulting in the awarding of banking services
to Mid Penn Bank, at a time when he was an employee of Mid Penn Bank.
Kashnoski violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when
through his public position, he accessed and used his influence as a Board Member
with SASD Administration /staff to arrange meetings between the SASD and
Riverview Bank in order to facilitate the moving of SASD accounts to Riverview
Bank, and when he participated in discussions and actions of the SASD Board,
including but not limited to participating in bid opening /reviews and participating in
interviews /questioning of bidders, resulting in the awarding of banking services to
Riverview Bank all at a time when he was an employee of Riverview Bank.
4. Kashnoski violated Sections 1105(a) and 1105(b)(8) of the Ethics Act, 65 Pa.C.S.
R§ 1105(a) and 1105(b)(8), when he failed to report his employment with Miners
ank/Mid Penn Bank as an "Office, Directorship, or Employment in any Business"
upon Statement of Financial Interests forms filed for the 2014 and 2015 calendar
years and failed to include a date accompanying his signature for the 2015 calendar
year Statement of Financial Interests.
Kashnoski did not violate Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a),
with regard to his Statements of Financial Interests for calendar years 2014 and
2015 as there is no basis in the Fact Findings to conclude that such forms were not
timely filed.
Restitution and a treble penalty are warranted.
In Re: Richard Kashnoski, File Docket: 17 -041
Respondent Date Decided: 9113118
Date Mailed: 9117118
ORDER NO. 1738
As a Member of the Shamokin Area School District ( "SASD ") Board of School
Directors ("Board"), Richard Kashnoski ( "Kashnoski ") violated Section 1103(a) of the
Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a), when
he participated in discussions and actions of the SASD Board, including but not
limited to participating in Board action resulting in the awarding of banking services
to Mid Penn Bank, at a time when he was an employee of Mid Penn Bank.
Kashnoski violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when
through his public position, he accessed and used his influence as a Board Member
with SASD Administration /staff to arrange meetings between the SASD and
Riverview Bank in order to facilitate the moving of SASD accounts to Riverview
Bank, and when he participated in discussions and actions of the SASD Board,
including but not limited to participating in bid opening /reviews and participating in
interviewslquestioning of bidders, resulting in the awarding of banking services to
Riverview Bank all at a time when he was an employee of-Riverview Bank.
3. Kashnoski violated Sections 1105(a) and 1105(b)(8) of the Ethics Act, 65 Pa.C.S.
§§ 1105(a) and 1105(b)(8), when he failed to report his employment with Miners
Bank/Mid Penn Bank as an "Office, Directorship, or Employment in any Business"
upon Statement of Financial Interests forms filed for the 2014 and 2015 calendar
years and failed to include a date accompanying his signature for the 2015 calendar
year Statement of Financial Interests.
4. Kashnoski did not violate Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a),
with regard to his Statements of Financial Interests for calendar years 2014 and
2015 as there is no basis in the Fact Findings to conclude that such forms were not
timely filed.
5. Pursuant to Section 1107(13) of the Ethics Act, 65 Pa.C.S. § 1107(13), Kashnoski is
directed to make payment of restitution to the SASD in the amount of $3,232.72 by
certified check or money order in the amount of $3,232.72 payable to the Shamokin
Area School District and forwarded to the Pennsylvania State Ethics Commission by
no later than the thirtieth (30th) day after the mailing date of this Order.
6. Kashnoski is also directed to pay a treble penalty in the amount of $9,698.16 into
the State Treasury of the Commonwealth of Pennsylvania, which payment shall be
made payable to the Commonwealth of Pennsylvania and forwarded to the
Pennsylvania State Ethics Commission by no later than the thirtieth (30th) day after
the mailing date of this Order, and shall be forwarded by this Commission to the
Pennsylvania Office of the State Treasurer for deposit in the General Fund of the
Commonwealth of Pennsylvania.
Kashnoski is further directed to not accept any reimbursement, compensation or
other payment from the SASD representing a full or partial reimbursement of the
aforesaid restitution and /or treble penalty.
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age ge73T-
8. Non - compliance with Paragraph 5, 6, or 7 of this Order will result in the institution of
an order enforcement action.
9. This matter will be referred to the Office of the Attorney General of the
Commonwealth of Pennsylvania, the Office of the Northumberland County District
Attorney, and the Pennsylvania Department of Banking and Securities for review
and such action as they may deem appropriate.
BY THE COMMISSION,
�c o as o a e a, Chair
Commissioner Roger Nick concurs with regard to the finding of the above violations but
dissents with respect to the amount of the financial penalties imposed, as he would order
restitution in the amount of $46,066.29 as requested by the Investigative Division.