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HomeMy WebLinkAbout90-581 GobelDear Mr. Gobel: STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL August 9, 1990 Mr. George S. Gobel, Esquire 90 -581 Solicitor for South Allegheny 620 West Fifth Avenue McKeesport, PA 15131 Re: Conflict, Public Official /Employee, School Director, Business with Which He is Associated, Investment Bonding Firm, Client. This responds to your letter of June 28, 1990, in which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon a school director as to participating or voting on the award of a contract to an investment banking firm which is a client of a business with which he is associated or a competing investment banking firm which has also submitted a bid. Facts: As the solicitor for the South Allegheny School District and on behalf of Carl Rizzo who is a director, you seek advice regarding an upcoming vote before the board of school directors as to the selection of an investment banking firm. Carl Rizzo is currently an officer, shareholder and employee of Paul C. Rizzo and Associates, Inc. a Pennsylvania corporation which is primarily a consultant engineering firm that from time to time engages in business transactions with the investment banking firm of Russell, Rea and Zappala, Inc. In such business transactions, Paul C. Rizzo and Associates, Inc. provides services to Russell, Rea and Zappala, Inc. for which they receive compensation. South Allegheny School District has recently solicited proposals from four investment banking firms to provide investment banking services to the school district. One ,roposal was received from Russell, Rea and Zappala, Inc. You inquire as to whether Mr. Rizzo may vote on the motion to award the contract to the investment banking firm of Russell, Rea and Zappala, Inc. In addition, you inquire as to whether he may vote on a motion if the contract is to be awarded to one of the other investment banking firms instead of Russell, Rea and Zappala, Inc. Mr. George S. Gobel Page 2 Discussion: As a director for South Allegheny School District, Carl Rizzo is a public official as that term is defined under the Ethics Law, and hence he is subject to the provisions of that law. Section 3(a) of the Ethics Law provides: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined in the Ethics Law as follows: Section 2. 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. "Conflict" or "conflict of interest" 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 or 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 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. Mr. George S. Gobel Page 3 In addition, Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer to a public official /employee anything of monetary value and no public official /employee shall solicit or accept any thing of monetary value based upon the understanding that the vote, official action, or judgement of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has or will be any transgression thereof but merely to provide a complete response to the question presented. Section 3(j) of the Ethics Law provides as follows: Section 3. Restricted activities. (j) 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 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. Mr. George S. Gobel Page 4 If a conflict exists, Section 3(j) requires the public official /employee to abstain as well as file a written memorandum to that effect with the person recording the minutes or supervisor. In the instant matter, it is clear that Paul C. Rizzo and Associates, Inc. is a business with which Carl Rizzo is associated as that term is defined under the Ethics Law since he is an officer, shareholder and employee of that firm. In addition, the firm of Russell, Rea and Zappala, Inc. has or continues to have business transactions with the firm of Paul C. Rizzo and Associates, Inc. so that the firm of Russell, Rea and Zappala, Inc. is either a client or party to contract(s) with the firm of Paul C. Rizzo and Associates, Inc. Under Section 3(a) quoted above, Carl Rizzo could not vote or participate on any matter involving the firm of Paul C. Rizzo and Associates, Inc. because that is a firm with which he is associated. In addition, Mr. Rizzo could not vote on the motion for Russell, Rea and Zappala, Inc. because of the business relationship between that firm and Paul C. Rizzo and Associates, Inc. Thus, in Miller, Opinion 89 -024, the Commission determined that a public official who was employed by a private firm could not participate or take action in any matters involving that firm or any plans or projects in which that firm was involved as well as any matters involving clients of the firm. Consequently, based upon Miller, supra, you are advised that Paul Rizzo could not participate or vote on a motion regarding contracting with the investment firm of Russell, Rea and Zappala, Inc. In addition, he must abstain and publicly set forth the reasons for his abstention as well as file a written memorandum with the secretary recording the minutes as per the requirements of Section 3(j) of the Ethics Law quoted above. As to your second inquiry of whether Carl Rizzo could vote on a motion regarding the award of the contract to some investment banking firm other than the firm of Russell, Rea and Zappala, Inc., Section 3(a) of the Ethics Law would not restrict such activity assuming that the other investment banking firm is not a business with which the school director is associated and assuming that ° the investment banking firm does - -not - rave a business relationship with Mr. Rizzo or his business as per Miller, Opinion, supra. Parenthetically, it should be noted that in Pepper, Opinion 87 -008, the Commission determined that a public official could not use public office to obtain a financial gain for himself and conversely could not use the mechanism of a negative vote to insure that any competitors for that financial gain would be eliminated. It is not suggested that such action would be Mr. George S. Gobel Page 5 contemplated in this case, and the above is merely set forth to provide a complete response to your inquiry. The propriety of the proposed conduct has only been addressed under the Ethics Law; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Law has not been considered in that they do not involve an interpretation of the Ethics Law. Specifically not addressed herein is the applicability of the respective municipal or school code. Conclusion: As Director for the school district, Carl Rizzo is a public official subject to the provisions of the Ethics Law. Under Section 3(a) of the Ethics Law, Carl Rizzo would be prohibited from voting on a motion to award a contract to a client or party who has a contract with the business with which he is associated. The disclosure requirements of Section 3(j) of the Ethics Law outlined above must be followed. Carl Rizzo would not be precluded from voting on a motion to award the contract to some other investment banking firm subject to the qualifications noted above. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. Pursuant to Section 7(11), this Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. such. This letter is a public record and will be made available as Finally, if you disagree with this Advice or if you have any reason to challenge same, you may request that the full Commission review this Advice. A personal appearance before the Commission will be scheduled and a formal Opinion from the Commission will be issued. Any such appeal must be in writing and must be received at the Commission within 15 days of the date of this Advice pursuant to 51 Pa. Code S2.12. incent 3` Dopko, Chief Counsel