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HomeMy WebLinkAbout91-543 SlaytonSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL May 30, 1991 91 -543 Ms. Bette Brown Slayton Office of Economic Development 23 South Juliana Street Bedford, PA 15522 Re: Conflict, Tax Exempt Bond Financing Program, Participation by Public Official /Employee, Executive Director of Bedford County Office of Economic Development; Secretary of Bedford County Pennsylvania Industrial Development Authority. Dear Ms. Slayton: This responds to your letters of April 2, 1991 and April 9, 1991, in which you requested advice from the State Ethics Commission. Issue: Whether, as Executive Director of the Bedford County Office of Economic Development and Secretary of the Bedford County Pennsylvania Industrial Development Authority, you and your spouse may participate in a tax - exempt bond financing program by which "first -time farmers" may access tax - exempt monies through a statewide pooled bond issue. Facts: On July 2, 1990, you accepted the position of Assistant Director of the Bedford County Office of Economic Development, and on February 12, 1991, you moved into the position of Executive Director. This is a county job. You have submitted a job description for your position as Executive Director, which job description is incorporated herein by reference. In January, 1991, you were elected to the office of Secretary of the Bedford County Pennsylvania Industrial Development Authority (BCPIDA). Although this position is listed as an officer, you note that you are not a member of the BCPIDA and have no voting privileges. You have submitted a copy of the BCPIDA's by -laws, which by -laws are incorporated herein by Ms. Bette Brown Slayton Page 2 reference. According to the by -laws, the Secretary's duties are as follows: The Secretary shall keep the records of the Authority, shall act as Secretary of the meetings of the Board of the Authority and record all votes, and shall keep a record of the proceedings of the Board of the Authority in a journal of proceedings to be kept for such purpose, and shall perform all duties incident to his office. He shall keep in safe custody the seal of the Authority, and shall have power to affix such seal to all proceedings and resolutions of the Board of the Authority and to all contracts and instruments authorized to be executed by the Authority. By -Laws, Article II, Section 4. Since the incorporated by -laws provide that the Secretary is "to be the Board of the Authority ", By -Laws foregoing appears to contradict your member of BCPIDA. of the BCPIDA specifically elected from the members of , Article II, Section 1, the statement that you are not a You have also submitted a membership and officer listing of BCPIDA, which listing is incorporated herein by reference. At this time, you and your husband are exploring the possibilities of acquiring a farm in Bedford County. You are currently leasing the farm, and your husband is involved full - time with the farming operation. You seek the advice of this Commission regarding whether you and your husband could participate in a new program available through the Pennsylvania Economic Development Financing Authority (PEDFA), which is a tax exempt bond financing program which allows "first -time farmers" to access tax exempt monies through a statewide pooled bond issue. You state that the program operates as follows: The farmer secures a financing commitment from a local lender based on cash flow, collateral, etc.; the lender then writes a letter of credit on behalf of the farmer, secured by adequate collateral (usually a mortgage on the farm). The farmer takes this letter of credit and a PEDFA application to the local IDA (in this case, the BCPIDA) requesting its approval. If approved, the application is forwarded to PEDFA who reviews eligibility and other salient issues. Ms. Bette Brown Slayton Page 3 Once PEDFA approves the application, it becomes part of a pool of applications from across the state. Local letters of credit securing the applications are reviewed by Pittsburgh National Bank who issues the Master Letter of Credit. Bonds are then issued on the open market, accessing tax exempt monies for Pennsylvania companies and first -time farmers participating in the program. Last year PEDFA processed about $100 million dollars through this program. You have submitted copies of program guidelines for this program from the Secretary of Commerce, all of which program guidelines are incorporated herein by reference. You state that should a borrower go into default on the loan, the liability rests with the local lender who issued the local letter of credit. The local lender would pay the bond holder and look to its collateral as the source of repayment. The local IDA would not be at risk. You have contacted PEDFA, the Authority's Solicitor (Gordon Stroup) and the Authority's Chairman (Don Silvester) regarding the issue of a conflict of interest should you and your husband pursue the use of this program. You do not believe there is a problem but noting that you are new in your position, you seek an opinion from the Ethics Commission. You have submitted a copy of your Statement of Financial Interests for calendar year 1990 as well as a list of resources as contacts for further information, all of which information is incorporated herein by reference. Discussion: As Executive Director of the Bedford County Office of Economic Development, and as Secretary of the Bedford County Pennsylvania Industrial Development Authority (BCPIDA), you are a "public employee" and a "public official" as these terms are defined in the Ethics Law and hence you are subject to the provisions of that Law. 65 P.S. 5402; 51 Pa. Code §1.1. Sections 3(a) and 3(f) of the Ethics Law provide: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. (f) No public official or public employee or his spouse or child or any business in which the person or his spouse or Ms. Bette Brown Slayton' Page 4 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. 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 or 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. The following terms are defined in the Ethics Law: 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, Ms. Bette Brown Slayton Page 5 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. "Governmental body with which a public official or public employee is or has been associated." The governmental body 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. Under the Ethics Law, we must observe the stated purpose of that Act which is to strengthen the faith and confidence of people in their government by assuring the public that the financial interests of the holders of or candidates for public office do not present a conflict with the public trust. In applying the above quoted provisions of the Ethics Law to the instant matter, we will first consider the provisions of Section 3(f) of the Ethics Law. Since the Bedford County Office of Economic Development and BCPIDA are the government bodies with which you are associated, Section 3(f) would apply in this case to the extent the application procedure includes any matter of a contractual nature between you and the Bedford County Office of Economic Development and /or BCPIDA. Assuming that a contract or sub - contract would be made between you and your spouse and the Bedford County Office of Economic Development and /or BCPIDA pursuant to the provisions of this Program, Section 3(f) of the Ethics Law would impose the following requirements if the contract or sub - contract is $500.00 or more and were to be made between you and your spouse and either governmental body: 1. prior public notice of the contract possibility; 2. public disclosure of applications and contracts considered; Ms. Bette Brown Slayton Page 6 3. public disclosure of the award of the contracts; and 4. no supervisory or overall responsibility for the implementation or administration of the contract or sub - contract by the public official /employee. However, if no such contractual arrangement would exist under the application process, Section 3(f) would not apply. We will now address the propriety of the proposed conduct under Section 3(a) of the Ethics Law. In this review, we note and recognize the concern that arises where a public program, funded with public monies and administered through a public agency, political subdivision, or governmental body is also available to public officials or employees of that agency or governmental body. We recognize the public concern and criticism that may arise if a public official or public employee who serves a governmental body receives benefits under a program of this nature. It is clear that the Ethics Law, and in particular Section 3(a), was primarily designed to restrict the activity of a public official or employee from using the authority of office for private pecuniary benefit. However, we believe that as a general rule the Ethics Law was not enacted nor should it be interpreted to preclude public officials or employees from participating in programs which might otherwise be available to them as citizens. Wolff, Opinion 89 -030; Woodrinq, Opinion 90 -001. In order to insure that a public official or employee is not in a conflict when he seeks to participate in a program such as this tax exempt bond financing program for "first -time farmers ", he must observe the following: 1. play no role in establishing the criteria under which the program is to operate, particularly with reference to the structure or administration of the program; 2. play no role in establishing or implementing the criteria by which selections for program participation are to be made; 3. play no role in the process of selecting and reviewing applicants or in awarding grants, funds or financing; 4. use no confidential information acquired during the holding of public office or public employment to apply for or to obtain such funds, grants, financing, etc., and Ms. Bette Brown Slayton Page 7 5. abstain, publicly disclose and file a memorandum with the person responsible for recording the minutes under Section 3(j) of the Ethics Law in cases where the public official/ employee is associated with administering the grants or funds or financing program not only as to his own application but as to similarly situated individuals with whom the public official /employee might be competing for available funds. In cases where Section 3(f) is applicable, the public official /employee would be prohibited from any supervisory or overall responsibility as to the contract or program. Furthermore, it is specifically noted that with regard to Item No. 5 above, you are the Secretary of BCPIDA, and therefore, you would ordinarily be the individual responsible for recording the minutes of the meetings of the Board of BCPIDA as well as recording all of its votes and keeping a record of the proceedings of the Board, pursuant to the incorporated by -laws. Furthermore, as Secretary, you are custodian of the seal of BCPIDA and have the power to affix the seal to all proceedings and resolutions of the Board of BCPIDA and to all contracts and instruments authorized to be executed by BCPIDA. Thus, in order to remove yourself from any involvement with the process to the extent required by the Ethics Law, you could not participate in any way in such responsibilities with regard to this particular program, either with regard to your application or any other application against which you may be competing. You would be required to remove yourself from the process as Secretary. A written memorandum setting forth your removal and the nature of your interests should be filed with the acting secretary. Through application of the above criteria, we seek to eliminate the possibility that a public official /employee who is seeking such funds or seeking to participate in these programs would be in a position to insure that the grant, funds, financing or the program benefits would be available for his own benefit. Thus, a public official or public employee in such a situation should refrain from participating in making decisions or recommendations about the program and regarding distribution of the limited funds which might be available as a result of such a program. Expressly conditioned upon the assumption that you act in conformance with the above criteria, you may apply for and participate in the benefits associated with the Program. The propriety of the proposed conduct has only been addressed under the Ethics Law; the applicability of any other Ms. Bette Brown Slayytort Page 8 such. 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 County Code. Conclusion: As Executive Director of the Bedford County Office of Economic Development and as Secretary of the Bedford County Pennsylvania Industrial Development Authority (BCPIDA), you are a public employee and a public official subject to the provisions of the Ethics Law. Section 3(a) of the Ethics Law would not preclude you and your spouse from applying for tax exempt bond financing available to "first -time farmers" through a new program through the Pennsylvania Economic Development Financing Authority based upon the express assumption that you are not a member of BCPIDA and provided you played no role in establishing the criteria under which the program would operate, played no role in implementing the criteria for selecting applicants, played no role in selecting or reviewing applicants, used no confidential information and finally had no involvement with the administration of the program. The requirements of Section 3(f) of the Ethics Law noted above, to the extent applicable, must be complied with. You must also comply with Section 3(j) of the Ethics Law by removing yourself as Secretary of BCPIDA from participating in any way whatsoever with regard to this program at all times during which you are seeking to participate in it. You must publicly disclose the nature of your interest and file a written memorandum disclosing your removal and the nature of your interest with whoever is the acting secretary responsible for recording the minutes with regard to this matter during your removal. 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 §2.12. Sincerely, Vincent . Dopko, Chief Counsel