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HomeMy WebLinkAbout18-559 TaroliPHONE: 717 - 783 -1610 TOLL FREE: 1- 800- 932 -0936 STATE ETHICS COMMISSION FINANCE BUILDING 613 NORTH STREET, ROOM 309 HARRISBURG, PA 17120 -0400 ADVICE OF COUNSEL October 31, 2018 To the Requester: Mr. Garry S. Taroli, Esquire Rosenn Jenkins & Greenwald LLP Dear Mr. Taroli: FACSIMILE: 717-787-0806 WEBSITE; www.othics.pa.gov 18 -559 This responds to your letter dated August 22, 2018, and your email received August 24, 2018, b which you requested an advisory from the Pennsylvania State Ethics Commission {Commission "). Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 7a.77S. 1101 et se-9., would impose prohibitions or restrictions u on a Member and Chair of to Board of the Luzerne County Redevelopment Authority ( "Authority "), who in a private capacity is an equitable owner of a company, with re and to an ofFer b the company to purchase an 80 -acre parcel of property owned by the Authority. y Facts: As Solicitor for the Authority, you have been authorized by Carol Keup TWs-.-Keup "), who is a Member and Chair of the Board of the Authority, to request an advisory from the Commission on her behalf. You have submitted facts, the material portion of which may be fairly summarized as follows. The Authority owns an 80 -acre parcel of property known as "Ashley Yards" (the "Property ") that was formerly a railroad yard and roundhouse. The Proppert y is the subject of a Pennsylvania Department of Environmental Protection ( "DEP") Consent Decree with regard to the cleanup of contamination at the Property. You state that although the Property is serviced by rail lines and is therefore attractive for commercial uses, the Property has largely sat idle while it has been owned by the Authority. The Property is currently listed on the "Penn's Northeast" publicly available website where commercially developable properties are advertised for sale. In a private capacity, Ms. Keup is an equitable owner of a company named "Ashley Complex, LLC' (the "Company "). Ms. Keup recently made the Authority Board aware of the Company's interest in purchasing the Property, and she forwarded a letter of intent (the "Letter of Intent ") to the Authority with regard to the proposed acquisition of the Property. Pursuant to the Letter of Intent, the Company offered to purchase the Property at a certain price and assume, with DEP approval, the obligations pertaining to the cleanup of the Property. The Authority had previously received an appraisal that, Taroli, 18 -559 Octo er 31, 2018 Page 2 without considering the costs to clean up the Property, had determined the value of the Property to be more than twice the purchase price offered by the Company. Upon receipt of the Letter of Intent, the Board commissioned a second appraisal to determine the value of the Property where the buyer would be responsible for the costs to clean up the Property. After the second appraisal valued the Property at approximately $90,000 more than the purchase price offered byy the Company pursuant to the Letter of Intent, the Company indicated a willingness to increase its purchase price to the new appraised value. You state that Ms. Keup has not participated in any Board discussions or votes related to the proposed transaction between the Company and the Authority. You further state that Ms. Keup has not attended executive sessions of the Board while the Company's proposed purchase of the Property was discussed. Based upon the above submitted facts, the question that is presented is whether the Ethics Act would impose prohibitions or restrictions upon Ms. Keup with regard to the Company's offer to purchase the Property from the Authority. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of e Ethics Art, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. As a Member and Chair of the Authority Board, Ms. Keup is a public official subject to the provisions of the Ethics Act. Sections 1103(a) and 11030) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 0) Voting conflict.- -Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has Taroli, 18-559 fiber 31, 2018 Page 3 abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), 0). The following terms related to Section 1103(a) are defined in the Ethics Act as follows: § 1102. Definitions "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. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." An corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. 65 Pa.C.S. § 1102. Subject to the statutory exclusions to the Ethics Act's definition of the term "conflict" or "conflict of interest," 65 Pa.C.S. § 1102, a public official/public employee is prohibited from using the authority of public office /employment or confidential information received by holding such a public position for the private pecuniary 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. The use of authority of office is not limited merely to voting, but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. Taroli, 18 -559 0—c-to-6er 31, 2018 Page 4 In each instance of a conflict of interest, a public official/public employee would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 11030) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 11030) of the Ethics Act would have to be satisfied in the event of a voting conflict. Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows: § 1103. Restricted activities (f) Contract. - -No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). The term "contract" is defined in the Ethics Act as follows: § 1102. Definitions "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1102. Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official/public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an open and ublic process" be observed as to the contract with the governmental body. Section 1103(f) of the Ethics Act also provides that the public official/public employee Taroli, 18 -559 �6er 31, 2018 Page 5 may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. In ap Iying the above provisions of the Ethics Act to the instant matter, you are advised as follows. The Company is a business with which Ms. Keup is associated in her capacity as an owner. An agreement or arrangement whereby the Company would purchase the Propert y from the Authority would constitute a "contract" as that term is defined in the Ethics Act. Ms. Keup would have a conflict of interest under Section 1103(a) of the Ethics Act as to discussion(s), vote(s), or other action(s) of the Authority Board pertaining to the Company's offer to purchase the Property from the Authority. In each instance of a conflict of interest, Ms. Keup would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 110310) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 11030) of the Ethics Act would have to be satisfied in the event of a voting conflict. As for Section 1103(f) of the Ethics Act, based upon the submitted facts, a contract between the Company and the Authority for the purchase of the Property would be valued in excess of $500.00. Therefore, the restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed as to any contract between the Company and the Authority for the ppurchase of the Property. (See, Kistler v. State Ethics Commission, 610 Pa. 516 A. , 22 3d 223 (2011), regarding the requirements or an open and public process. ") The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is any potential applicability of the Urban Redevelopment Law, 35 P.S. § 1701 et seq., which provides in part: § 1708. Interest of members or employes No member or employe of an Authority shall acquire any interest, direct or indirect, in any redevelopment protect or in any property included or planned to be included in any redevelopment area, or in any area which he may have reason to believe may be certified to be a redevelopment area, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or services to be furnished or used by an Authority, or in any contract with a redeveloper or prospective redeveloper relating, directly or indirectly, to any redevelopment project. The acquisition of any such interest in a redevelopment project or in any such property or contract shall constitute misconduct in office. If any member or employe of an Authority shall already own or control any interest, direct or indirect, in any property later included or planned to be included in any redevelopment project under the jurisdiction of the Authority, or has any such interest in any contract for material or services to be furnished or used in connection with any redevelopment protect, he shall disclose the same in writing to the Authority and to the Department of Community Affairs and the local governing body, and such disclosure shall be entered in Taroii, 18 -559 fiber 31, 2018 Page 6 writing upon the minute books of the Authority. Failure to make such disclosure shall constitute misconduct in office. 35 P.S. § 1708. It is recommended that Ms. Keup obtain legal advice regarding any potential applicability of the Urban Redevelopment Law with respect to the Company's proposed purchase of the Property from the Authority. Conclusion: As a Member and Chair of the Board of the Luzerne County Redevelopment Authority ("Authority"), Carol Keup ( "Ms. Keup ") is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et sec. Based upon the submitted facts that: (1) the Authority owns an 80 -acre parcel oT-property, known as "Ashley Yards" (the "Property ") that was formerly a railroad yard and roundhouse; (2) the Property is the subject of a Pennsylvania Department of Environmental Protection ( "DEP ") Consent Decree with regard to the cleanup of contamination at the Property; (3) although the Property is serviced by rail lines and is therefore attractive for commercial uses, the Property has largely sat idle while it has been owned by the Authority; (4) the Property is currently listed on the "Penn's Northeast" publicly available website where commercially developable properties are .advertised for sale; (5) in a private capacity, Ms. Keup is an equitable owner of a company named "Ashley Complex, LLC" (the "Company "); (6) Ms. Keup recently made the Authority Board aware of the Company's interest in purchasing the Property, and she forwarded a letter of intent (the "Letter of Intent ") to the Authority with regard to the proposed acquisition of the Property; (7) pursuant to the Letter of Intent, the Company offered to purchase the Property at a certain price and assume, with DEP approval, the obligations pertaining to the cleanup of the Property; (8) the Authority had previously received an appraisal that, without considering the costs to clean up the ropert ,had determined the value of the Property to be more than twice the purchase price offered by the Company; (9) upon receipt of the Letter of Intent, the Board commissioned a second appraisal to determine the value of the Property where the buyer would be responsible for the costs to clean up the Property; (10) after the second appraisal valued the Property at approximately $90,000 more than the purchase price offered by the Company pursuant to the Letter of Intent, the Company indicated a willingness to increase its purchase price to the new appraised value; (11) Ms. Keup has not participated in any Board discussions or votes related to the proposed transaction between the Company and the Authority; and (12) Ms. Keup has not attended executive sessions of the Board while the Company's proposed purchase of the Property was discussed, you are advised as follows. The Company is a business with which Ms. Keup is associated in her capacity as an owner. An agreement or arrangement whereby the Company would purchase the Propert y from the Authority would constitute a "contract" as that term is defined in the Ethics Act. Ms. Keup would have a conflict of interest under Section 1103(a) of the Ethics Act as to discussion(s), vote(s), or other action(s) of the Authority Board pertaining to the Company's offer to purchase the Property from the Authority. In each instance of a conflict of interest, Ms. Keup would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 11030) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 11030) of the Ethics Act would have to be satisfied in the event of a voting conflict. As for Section 1103(f) of the Ethics Act, based upon the submitted facts, a contract between the Company and the Authority for the purchase of the Property would be valued in excess of $500.00. Therefore, the restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed as to any contract between the Company and the Authority for the purchase of the Property. Taroii, 18 -559 Uc o6er 31, 2018 Page 7 Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Specificallyy not addressed herein is any potential applicability of the Urban Redevelopment Law, 35 P.S. § 1701 et seq. It is recommended that Ms. Keup obtain legal advice regarding any potential applicability of the Urban Redevelopment Law with respect to the Company's proposed purchase of the Property from the Authority. Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writingg and must be actual! received at the Commission within thirty (30) days of the date AdO e pursuant to 51 Pa. Code § if3.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717- 787 - 0806). Failure to Me such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, t Robin M. Hittie Chief Counsel