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HomeMy WebLinkAbout91-527 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL March 29, 1991 91 -527 Re: Conflict, Public Official /Employee, Municipal Authority, Municipal Authority Member, Solicitor, Business with Which Associated. This responds to your letters of February 22, 1991, February 28, 1991, and March 1, 1991, in which you requested confidential advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon you as the Solicitor for a Municipal Authority, or upon a Municipal Authority member, with regard to the Authority's soliciting local banks for a line of credit sufficient to meet expenses related to constructing a sewer system until federal grant and PENNVEST loan funds become available, where you are also the attorney and a director of a local bank, and where the Municipal Authority member is an employee of a local construction corporation which may bid on the job. Facts: As the solicitor for a Municipal Authority which proposes to construct a sewer system, you are seeking the advice of the State Ethics Commission on your own behalf and with regard to an Authority member who has authorized you to inquire on his behalf. The financing for the sewer system involves federal grants and PENNVEST loans, but because the Authority will not receive either the grant or loan funds for several months after the project has commenced, it will be necessary for the Authority to secure interim local financing. The Authority proposes to solicit local banks for a line of credit sufficient to meet expenses until the federal grant and PENNVEST loan funds become available. In addition to being the solicitor for the Municipal Authority, you are also the attorney and a director of a local bank. You have posed the following specific inquiries regarding your own situation: 1. Whether your position as director and attorney for the bank would disqualify the bank from bidding for the interim financing? Page 2 2. In the event that the bank wanted to compete for this loan, what your position should be as solicitor for the Authority? 3. Whether the bank could offer a loan if you abstained as a director from participating in any action taken by the bank? Turning to the member of the Authority who has authorized you to inquire on his behalf, Member A, you state that he is an employee of a local construction corporation. You note that Member A has indicated this employment on the statements which he has filed under the Ethics Law. As an employee of the local construction corporation, Member A is involved in estimating contracts and he is a Project Manager. He also participates in a recently instituted employee stock purchase plan. The stock is offered as a bonus, and as an employee of the construction corporation, Member A has recently received a few shares in the corporation. The stock which Member A has received is far less than one percent of the stock outstanding, which is principally held by family members. Member A's employer may bid on the job for the municipal Authority. You have posed the following specific inquiries with regard to Member A's position: 1. Assuming that the Authority will ask for public bids on the utility project, what should Member A's position be in the event that his employer enters a bid on all or a part of the project? 2. Must Member A take action prior to bid opening? 3. What position should Member A take if his employer is the low bidder? 4. Would Member A be able to remain on the Authority in the event that his employer entered a bid? 5. What would Member A's position be if his employer was the low bidder, and what would his position be if his employer was not the low bidder? 6. If Member A's employer was the low bidder, could he maintain his Authority membership by not participating in the awards of the contracts? Discussion: It is initially noted that your questions are only 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 Page 3 not addressed herein is the applicability of the Municipality Authorities Act. As the Solicitor for a Municipal Authority, you are a public employee as that term is defined under the Ethics Law, and hence you are subject to the provisions of that law. As a member of a Municipal Authority, Member A is a public official as that term is defined under the Ethics Law and thus he is also 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. Page 4 "Immediate family." A parent, spouse, child, brother or sister. "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. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness. "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. "Contract ". 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. 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(f) of the Ethics Law provides: Section 3. Restricted activities. (f) 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 Page 5 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. Parenthetically, where contracting is otherwise allowed or where there appears to be no expressed prohibitions to such contracting, the above particular provision of law would require that an open and public process must be used in all situations where a public official /employee is otherwise appropriately contracting with his own governmental body in an amount of $500.00 or more. This open and public process would require: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable competitor /applicant to be able to present an application or proposal; (3) public disclosure of all applications considered and; and prudent prepare and or proposals awarded and (4) public disclosure of the contract offered and accepted. Section 3(f) of the Ethics Law also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract. Section 3(j) of the Ethics Law provides as follows: Section 3. Restricted activities. Page 6 (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. 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. The public official must also publicly announce the nature of his interest. We must review the specific questions you have presented under the above provisions of the Ethics Law. In response to your first specific inquiry, under the Ethics Law, your position as director and attorney for the bank would not disqualify the bank from bidding for the interim financing even though you are also the solicitor for the Municipal Authority. This is because the bank is not a public official or public employee as those terms are defined in the Ethics Law. Page 7 Your second specific inquiry asks what your position should be as solicitor for the Authority in the event that the bank wants to compete for this loan. As a solicitor for the Municipal Authority, you are a public employee as that term is defined in the Ethics Law, and you are subject to the requirements of Section 4 of the Ethics Law regarding filing Financial Interests Statements. You are also subject to the other provisions of the Ethics Law. Spataro, Opinion 89 -009 at 4. See also, Maunus v. Com., State Ethics Com., 544 A.2d 1324, 1326 (1988). Being subject to Section 3(a) of the Ethics Law, you are prohibited from engaging in conduct that constitutes a conflict of interest. It seems fairly clear that these circumstances would present a conflict of interest for you, and thus you would have to completely remove yourself from any participation or involvement with the local financing aspect of this project. Your abstention must preclude any risk of disclosing confidential information which could benefit the bank. You would also be required to disclose the nature of your conflict in a written memorandum filed with the Municipal Authority. Your third inquiry may not be addressed from your perspective as a director of the bank, because a bank director per se is not considered a public official or employee subject to Section 3(a) of the Ethics Law. Rather, it is in your capacity as solicitor for the Municipal Authority that you are a public employee subject to the provisions of the Ethics Law. It is only from the perspective of your public employment that your inquiries regarding your own situation may be addressed. The questions which you have posed on behalf of Member A first ask, assuming that the Authority will ask for public bids on the utility project, what should Member A's position be in the event that his employer enters a bid on all or part of the project? It is clear that Member A is a "public official" and that his employer is a "business with which he is associated" as these terms are defined by the Ethics Law. Given that Member A's employer may enter a bid on all or part of this project, the circumstances present a clear conflict of interest for Member A. Member A must remove himself entirely from any participation with the sewer system project. Member A's abstention include his abstention from the project, but would also any confidential information from this project would not only any discussions and votes regarding preclude him from gaining access to regarding the project. In Van Rensler, Opinion 90 -017, the Commission held that the Ethics Law prohibited school board directors from participating on a negotiating team with regard to a collective bargaining agreement when members of their immediate family were school Page 8 district employees represented by the bargaining units. The Commission reasoned that by being part of the negotiating team which is part of their public position, the school directors would be necessarily privy to confidential information concerning the bargaining units of which their family members are parts. Id. at 4. The Commission held that these school directors could not participate on the negotiating team, "due to the great potential for accidental or inadvertent disclosure." Id. See also, Mattie, Advice 91 -508 (School board director whose spouse was a teacher and member of the employee bargaining unit would be precluded from receiving financial information related to the budget which information would impact upon the negotiating process with the bargaining unit). In this case, Member A as a public official would be precluded from anv participation with regard to the sewer project, from its very inception. A Municipal Authority member participating as a member of the Authority even before the bid opening, would be likely to be privy to confidential information which could benefit a business planning to submit a bid to the Authority. As in Van Rensler, supra, the risk of disclosure of that information would preclude the Municipal Authority member from participating even at the beginning stages of the sewer project. Any such disclosure could defeat an open and public bidding process. As discussed generally above, where a public official such as Member A is faced with a conflict of interests, he must not only abstain but he must also comply with Section 3(j) of the Ethics Law. Therefore, as a public official Member A would be required not only to abstain entirely from any participation in this project, but he would also be required to publicly announce as well as disclose the nature of his interests as a public record in a written memorandum filed with the person responsible for recording the minutes. It should also be noted that under these circumstances, Member A's conflict of interests would go well beyond a mere voting conflict under Section 3(j). In response to your second specific inquiry regarding this Authority member, Member A would be required to take action prior to bid opening - indeed, he must take action to remove himself entirely from any participation with the sewer project from its inception. Furthermore, the restrictions of Section 3(f) set forth above must be observed should Member A's employer wish to contract with his governmental body. In response to your third, fifth and sixth specific inquiries regarding Member A, this member's position would be as outlined above regardless of whether his employer is or is not Page 9 the low bidder. It is additionally noted that Member A would be precluded from having any supervisory or overall responsibility for the implementation or administration of any contract between his employer and the governmental body, pursuant to Section 3(f) of the Ethics Law. In response to your fourth and sixth specific inquiries regarding Member A, his membership on the authority would not be implicated conditioned upon his complying with the above restrictions. The State Ethics Commission does not have the authority to oust public officials from their positions, however, in the event that the provisions of the Ethics Law are violated, the Commission does refer such matters to appropriate law enforcement or other officials as set forth in Section 7 of the Ethics Law, 65 P.S. 5407. 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 Municipality Authorities Act. Conclusion: As a solicitor for a Municipal Authority, you are a public employee subject to the provisions of the Ethics Law. As a member of a Municipal Authority, Member A is a public official subject to the provisions of the Ethics Law. Your position as a director and attorney for a bank would not disqualify the bank from bidding for interim local financing for the Municipal Authority even though you are also the solicitor for the Municipal Authority, because the bank is not a public official or public employee as those terms are defined under the Ethics Law. However, in your capacity as a public employee, you would be required under the Ethics Law to remove yourself from any participation or involvement with the local financing aspect of the sewer project if the bank is to compete for this loan. Your abstention must preclude any risk of disclosing confidential information which could benefit the bank. You must also comply with the disclosure requirements set forth above. Your third inquiry, regarding your situation may not be addressed because it is from your perspective as a bank director rather than as a public employee. In his capacity as a public official, Member A must remove himself entirely from any participation with the sewer system project from its inception including but not limited to discussions and votes. Member A may not have access to any confidential information regarding the sewer project. The restrictions of Section 3(f) of the Ethics Law set forth above must be observed should Member A's employer contract with the governmental body. Member A would be precluded from having any supervisory or overall responsibility for the implementation or Page 10 such. administration of any contract between his employer . and the governmental body. Member A's ability to remain a member of the Municipal Authority would not be at issue as long as he complies with the restrictions set forth 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. 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 52.12. Sincerely, /f/A4.7 : t -i j Vincent J. Dopko, Chief Counsel ^ LL _ . ✓LC e': �'.: