HomeMy WebLinkAbout19-547 HowellPHONE: 717-783-1610
TOLL FREE' 1-800-932-0936
To the Requester:
Mr. C.R. Howell
Dear Mr. Howell:
STATE ETHICS COMMISSION FACSIMILE: 717-787-0806
FINANCE BUILDING WEBSITE: wwkAA[q�
613 NORTH STREET, ROOM 309
HARRISBURG, PA 17120-0400
ADVICE OF COUNSEL
October 10, 2019
19-547
This responds to your letters dated September 3, 2019, and S%tember 9, 2019,
,y which you requested an advisory from the Pennsylvania State Ethics Commission
Commission").
Issue: Whether the Public Official and Employee Ethics Act ("Ethics Act"), 65
P`a.S. & 1101 et seg., would impose restrictions upon employment of a Senior
Mana emir the Investment Office of the Public School Employees' Retirement System
("PSRS") following termination of employment with PSERS.
Facts: You request an advisory from the Commission regarding the post-
empToyment restrictions of the Ethics Act. You have submitted facts that may be fairly
summarized as follows.
FromtJftn23, 2018, until August 30, 2019, you were employed as a Senior
Manager in he vestment Office of PSERS, in which capacity you served as a Senior
Manager — Commodities. You have submitted copies of your official Commonwealth
position description and an organization chart for the Investment Office of PSERS,
which documents are incorporated herein by reference.
You are interested in employment with two companies, namely Gresham
Investment Management ("Gresham") and Insight Investment Management ("Insight").
Gresham and Insight manage funds on behalf of PSERS pursuant to relationships that
existed before you commenced your employment with PSERS. You state that you did
not participate in recruiting Gresham or Insight to per -form work for PSERS and that you
did not reference either entity in any materials for presentations made to the PSERS
Board of Trustees.
Gresham has been contractually engaged with PSERS since September 30,
2007. During your employment with PSERS, management of the Gresham account
was the responsibility o individuals other than you. On October 10, 2018, and May 15,
2019, you conductewsemi-annual manager due -diligence meetings on behalf of PSERS
at Gresham offices. You state that other than communications related to the aforesaid
meetqs, you had no formal contact with Gresham throughout your employment with
PSE
Howell, 19-547
O_HET& 10, 2019
Page 2
Insight and/or a related entity named "Pareto Investment Management" ("Pareto")
have managed funds for PSERS since at least 2012. During your employment with
PSERS, management of the Insight/Pareto account was the responsibility of the Risk
Parity Team. state that did not work on the Risk Parity Team or have any contact
withPareto during your employment with PSERS.
On May 8, 2019, and August 23, 2019, you had interviews with lnjht. On
August 30, 2019, you telghoned the Chief Operating Officer of Gresham vise him
I
that you were leaving PS RS and to explore he possibility of beginning a dialogue that
could lead to formal employment negotiations. You state that in your dealings with
s
Insight and Gresham, no precise terms of employment have been discussed, no
financial negotiations have taken place, and no offers of employment have been made.
You further state that if you would become employed with either entity, your obligations
and responsibilities would be entirely unconnected with PSERS' preexisting fund
allocations, at those entities.
Based upon the above submitted facts, you ask whether the Ethics Act would
impose prohibitions or restrictions upon you with regard to accepting employment with
Insight or Gresham.
Discussion: It is initiall noted that pursuant to Sections 1107(10) and 1 107(l 1) of
the Ethics 'Act, 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 subrni#ted, the Commission does not en age in an
independent investigation of the facts, nor s it speculate as to facts thathave 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 on affords a
defense o e e truthfully disclosed all of the material ticts.
It is further initial noted that, pursuant to the same aforesaid Sections of the
Ethics Act, an opinionlaylvice may be given only as to prospective (future) conduct. To
the extent that your inquiry relates to conduct that has already occurred, such past
conduct may not be addressed in the context of an advisory opinion. However, to the
extent your inquiry relates to future conduct, your inquiry may and shall be addressed.
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 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
benefit of himself, a member of his private
i
pecuniary s immediate
ate
family or a business with which he or a member of his
Howell, 19-547
07c-to-5-6r 10, 2019
Page 3
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.
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 officelemployment 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 fami is associated. The use of
authority of office is not limited merely to voting, but exten% to any use of authority of
office including, but not limited to, discussing, conferring with others, and lobbying for a
particular result, julLante, Order 809.
Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person
shall offer or give to a public official/public employee anything of monetary value and no
public official/public employee shall solicit or accept anything of monetary value based
upon the understanding that the vote, official action, or judgment of the public
official/public employee would be influenced thereby. Reference is made to these
provisions of the law not to imply that there has been or will be any transgression
thereof but merely to provide a complete response to the questions presented.
In the former capacity as a Senior Manager in the Investment Office of PSERS,
you would be considered a "public employee" subject to the Ethics Act and the
Kegulations, of the State Ethics Commission. See 65 Pa.C.S. § 1102; 51 Pa. Code §
11.1. This conclusion is based upon the positig'-escription, which when reviewed on
an objective basis, indicates clearly that the power exists to take or recommend official
action of a non -ministerial nature with respect to one or more of the following:
contracting; procurement; administering or monitoring grants or subsidies; planning or
zoning; inspecting; licensing; regulating; auditing; or other activity(ies) where the
economic impact is greater than de minimis on the interests of another person.
Consequently, upon termination of your employment with PSERS, you became a
"former public employee" subject to Section 11 03(g) of the Ethics Act.
While Section 1103(p) does not prohibit a former public official/public employee
from accepting a position o employ!nent, it does restrict the former public off icial/putlic
employee with regard to
arepresenting" a "person" before. "the governmental body with
which has been associated":
§ 1103. Restricted activities
(g) Former official or employee. —No former public
official or public employee shall represent a person, with
b—
promised or actual compensation, on any matter efore the
Howell, 19-547
Octob r 10, 2019
Page 4
governmental body with which he has been associated for
one year after he leaves that bo y.
65 Pa.C.S. § 1103(g) (Emphasis added).
The terms "represent," "person " and "governmental body, with which a public
official or public employee is or has been associated" are specifically defined Mn the
Ethics Act as follows:
§ 1102. Definitions
"Re resent" To act on behalf of any other person in
any activify which includes, but is not limited to, the
following: personal appearances, negotiations, lobbyingand
submitting bid or contract proposals which are signed by or
contain the name of a former public official or public
employee.
"Person." A business, governmental body,
individual, corporation union, association, firm, partnership,
committee, club or other organization or group of persons.
"Governmental body with which a public official
or public ern lo s
.�nt . a, mee is or has been as ociated." The
governmental within State government or a political
subdivision by which the public official or employee is or has
been employed or to which the public official or employee is
or has been appointed or elected and subdivisions and
offices within that governmental body.
65 Pa-C.S. § 1102.
The term "Person" is very broadly defined. It includes, inter alia, corporations and
other businesses. It also includes the former public officiaRp-u-b Fic-6mployee himself,
Confidential 00 inion, 93-005, as well as a new governmental employer. Ledebur,
00 pinion 95-00
The term "represent" is also broadly defined to prohibit acting on behalf of any
person in an activity. Examples of prohibited representation incTude: �1) personal
appearances before former governmental body or bodies; (2) attempts o influence;
(3) submission of bid or contract proposals which are signedi by or contain the name of
the former public official/public employee; (4) participating n any matters before the
formergovernmental body as to acting on behalf of a person; and (5) lobbying.
Popovich, Opinion 89-005.
Listing
name as the person who will provide technical assistance on a
proposal, 0cument, or bid, if submitted to or reviewed by the former governmental
body, constitutes an attempt to influence the former governmental body. Section
1103(g) also generally prohibits the inclusion of the name of a former public official/
public emplo ee on invoices submitted by his new employer to the former governmental
ody, even ivithe invoices pertain to a contract that existed prior to termination of service
with such governmental body. SShaK, Opinion 91-012. However, if such a pre-existing
f_A w
contract does not involve the uril w ere a former public employee worked, the name of
the former public employee may appear on routine invoices if required bthe
regulations of the agency to which the billing is being submitted. Abrams/Webster,
Opinion 95-011.
Howell, 19-547
OctoB r 10, 2019
Page 5
A former public official/public employee may assist in the preparation of any
documents presented to his former governmental body. However, the former public
official/public employee may not be identified on documents submitted to the former
governmental body. The former public official/public employee may also counsel any
person regarding that person'sappearance before his former governmental body. Once
i
again, however, the activit n this respect should not be revealed to the former
governmental body. The Khics Act would not prohibit or preclude making general
informational inquiries to the former governmental body to secure information which is
available to the general public, but this must not be done in an effort to indirectly
influence the former governmental body or to otherwise make known to that body the
representation of, or work for, the new employer.
Section 1103(g) only restricts the former public official/public employee with
re and to representation before his former governmental body. The former public
0 Ic ial/public employee is not restricted as to representation before other agencies or
entities. However, the "governmental body with which a public official/public employee
is or has been associated" is not limited to the particular subdivision of the agency or
other governmental body where the public official/public employee had influence or
control but extends to the entire body. See, Legislative journal of House, 1989
Session, No. 15 at 290, 291; Sirolli, Opinion 90---006-, Sharp, Opinion 90-009
The governmental body with which ou are deemed to have been associated
upon termination of your employment with PSERS is PSERS in its entirety. Therefore,
for the first year following termination of your employment with PSERS, Section 11 03(g)
of the Ethics Act would apply and restrict "representation" of a "person" before PSERS.
YOU are advised that Section 1103(g) of the Ethics Act would not prohibit you
from accepting employment with Insight or Gresham. However, during. the first year
following termination of your employment with PSERS, Section 11 O3(g) of the Ethics
Act would prohibit you from engaging in any activity(ies) that would involve prohibited
representation before PSERS as delineated above.
With regard to Section 1103(a) of the Ethics Act, you are generally advised that
the elements of a violation of Section 11 03(a) of the Ethics Act would not be established
as a result Of Your prospectively entering into a business/employment relationship with
an entity (such as Insight or Gresham) subject to the conditions that you: (1) did not use
the authority of your public position with PSERS in matter(s) pertaining to the entity
when you had an actual or reasonable expectation that you yvo2 enter into a
business/employment arrangement with the entity or would otherwise receive a private
pecuniary benefit relating to the entity; and (2) did not otherwise use the authority of
your public position with PSERS or confidential information received as a result of being
in your public position with PSERS in furtherance of securing a business/employment
arrangement with the entity or other private pecuniary benefit relating to the entity, Cf.,,
Desmond, Opinion 08-004.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act; the applicability of any other statute, code, ordinance, regulation or other
code of conduct other than the Ethics Act has not been considered in that they do not
involve an interpretation of the Ethics Act.
Conclusion: In the former capacity as a Senior Manager in the Investment Office
of the PuElic School Employees' Retirement System ( PSERS"), you would be
considered a "public employee' subject to the Public Official and Employee Ethics Act
Ethics Act"), 65 Pa.C.S. 1101 et seg., and the Reypulations of the State Ethics
"ommission, 51 Pa. Code 11.1 e—tse—Q. Upon termination of your em loyment with
b' n l
PSERS, you became a "former pubfic employeeit subject to Section 1 03(g) of the
Ethics Act, The former governmental body is PSERS in its entirety. For the first year
Howell, 19-547
c1 tob�er 10, 2019
Page 0
following termination of your employment with PSERS, Section 1103(g) of the Ethics
Act would apply and restrict "representation" of a "`person" before PSERS. The
restrictions as to representation outlined above must be followed.
Section 1103(g) of the Ethics Act would not prohibit you from accepting
employment with Insight Investment Management ("Insight" or Gresham Investment
Management (`;Gresham"'). However, during the first year following termination of your
employment with PSERS, Section 1103(g) of the Ethics Act would prohibit you from
engagg4ing in any actiivity(ies) that would involve prohibited representation before PSERS
as delineated above,
With regard to Section 1103(a) of the Ethics Act, you are generally advised that
the elements of a violation of Section 1103(a) of the Ethics Act would not be established
as a result of your prospectively entering into a business/employment relationship with
an entit (such as Insight or Gresham) subject to the conditions that you: (1) did not use
the authority of your public position with PSERS in matter(s) pertaining to the entity
when you had an actual or reasonable expectation that you would enter into a
business/employment arrangement with the entity or would otherwise receive a private
pecuniary benefit relating to the entity; and (2) did not otherwise use the authority of
your public position with PSERS or confidential information received as a result of being
in your public position with PSERS in furtherance of securing a business/employment
arrangement with the entity or other private pecuniary benefit relating to the entity.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act.
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.
An such appeal must be in writingg and must be actual!
received at the Commission within thirty(30) days of the date obis
Advice ursuant to 51 Pa. Code § ?3.2(h). The. appeal may be
received at the Commission by hand delivery, United States mail,
delivery service, or by FAX transmission (717 78T-0806). Failure to
file such an appeal at the Commission within thirty (30) days may
result in the dismissal of the appeal.
Sincerely,
wo�- r I
Robin M. Hlttre
Chief Counsel