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HomeMy WebLinkAbout92-648STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL December 7, 1992 92 -648 Re: Conflict, Public Official /Employee, Member, County Council, Use of Authority of Office or Confidential Information, Vote, Business with which Associated, Contracting. This responds to your letter of October 14, 1992, in which you requested confidential advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibitions or restrictions upon a county council member who is an officer, employee and shareholder of a corporation which has been, is now, and may prospectively be a party to contracts with the county as well as to various authorities, all or some of whose members are appointed by the county council. Facts: You state that A has authorized you to request a confidential advisory on his behalf. A wishes to become a Member of County Council B, the governing body of County C, Pennsylvania (hereinafter "County "). However, before he seeks such office, A wants to ascertain that he will be able to fully comply with the Ethics Law while serving in such capacity. You have provided the following background information. A is the Managing Director of D and manager of D's Section E. In addition to being an officer and employee of D, A is a shareholder, although he owns less than 5% of the equity of D. D has a non -bid contract with the County to provide co -money manager services to the County retirement fund. This contract was entered into in 1990 and may be terminated by either party upon thirty days notice. The contract sets D's fee for providing services to the County as a small percentage of the amount managed Confidential Advice 92 -648 December 7, 1992 Page 2 with a minimum fee of $10,000. You have submitted a copy of this contract, which document is incorporated herein by reference. You state that from time to time in the past, D has functioned as underwriter for various County bond issues, which services were provided pursuant to contracts entered into on a negotiated (non - bid) basis. County Council B appoints members to various authorities. For example, all of the members of Authority F and Authority G are appointed by County Council B. Further, County Council B appoints at least one member to Authority H, which is a multi - county authority organized by I, J, C, and K Counties. One member is appointed by the governing body of each County and, on a yearly rotating basis, each County appoints two members, one of whom serves as the chairman. Finally, the Council appoints two members to the board of Authority L, which is a Commonwealth authority. Authority F, Authority G, Authority H, and Authority L are entities established separately from the County under the authority of various statutes. From time to time, D has provided, or in the future may provide, services on a non -bid basis to one or more of the above mentioned authorities. You have posed five specific inquiries concerning A's potential service as a member of County Council B and the restrictions such service would place on D and upon him. The five specific inquiries are set forth below, followed by your proffered analysis of each issue: If A becomes a member of County Council B: 1. Would D be precluded from entering into any new non -bid contracts with the County? Your analysis: Under 65 P.S. §403(f), you state that you assume that D is a business with which A is associated, and therefore, would be precluded from entering into any contract with the County "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." 2. Could D continue to provide co -money manager services . to the County retirement fund under its existing non -bid contract? Confidential Advice 92 -648 December 7, 1992 Page 3 Your analysis: You state that since 65 P.S. §403(f) only prohibits a business with which a public official is associated from enterina into a contract with the governmental body with which the public official is associated, you assume that D could continue to provide services to the County under the terms of its existing contract. 3. May the terms of the contract with D be modified during the time A serves as a member of County Council B? Your Analysis: You note that the statute speaks in terms of "entering into" a contract. Therefore, you assume that the parties may modify the contract without running afoul of the provisions of 65 P.S. §403(f). You state that the statute seems to prohibit the parties from entering into a new contract, not from modifying an existing agreement. However, if the provisions of the contract were so modified as to constitute a new agreement between the parties, then, you assume, the provision of 65 P.S. §403(f) would apply. 4. May D enter into non -bid contracts with authorities to which County Council B makes appointments? Does it make a difference whether County Council B appoints all the members of the board of the entity or only some of the members of the board of that entity? Your Analysis: You note that "Governmental body with which a public official or public employee is or has been associated" is a term which is specifically defined in 65 P.S. §402, as follows: Section 2. Definitions "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. You state that since each of the authorities referenced above are entities established separate from the County, you assume Confidential Advice 92 -648 December 7, 1992 Page 4 that A's service on County Council B would have no effect, under 65 P.S. 5403(f) or otherwise, on D's ability to legally enter into contracts with one or more of these entities. 5. If the answer to Question 4 is in the affirmative and D enters into such a contract, would A be required to refrain from voting on appointments to such entities or otherwise limit his participation in or action with respect to appointments to such entities. Your Analysis: You state that as a matter of course, A may not use his office to assist D in obtaining such a contract, condition his vote in any way on the issuance of such a contract or otherwise engage in conduct that constitutes a conflict of interest as defined in the State Ethics Law. With that caveat, you assume he can vote on appointments to such authorities and is not required to take any action or make any disclosure with respect to such appointments. Based upon all of the above, you request an advisory from the State Ethics Commission. Discussion: Upon becoming a Member of County Council B, A would become a public official as that term is defined under the Ethics Law, and hence he would be 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 Confidential Advice 92 -648 December 7, 1992 Page 5 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 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 anything of monetary value based upon the understanding that the vote, official action, or judgement of the Confidential Advice 92 -648 December 7, 1992 Page 6 public official /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 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 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 and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals Confidential Advice 92 -648 December 7, 1992 Page 7 considered and; (4) public disclosure of the contract awarded and 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. (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 and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the Confidential Advice 92 -648 December 7, 1992 Page 8 minutes or supervisor. In applying the above provisions of the Ethics Law to the circumstances which you have submitted, pursuant to Section 3(a) of the Ethics Law, 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. Turning to your first specific inquiry, given that A is an officer and employee of D, D would be a business with which A is associated. Therefore, any contract between D and County Council B which is valued at $500.00 or more would invoke the restrictions of Section 3(f), which restrictions would have to be fully observed. In answer to your second specific inquiry, D could continue to provide co -money manager services to the County retirement fund under its existing non -bid contract, because the restrictions of Section 3(f) would be invoked only as to new contracting situations. However, matters coming before County Council B pertaining to the existing contract would present a conflict of interest for A under Section 3(a) of the Ethics. Law, the applicability of which does not hinge upon the point in time at which a contract comes into existence. In response to your third specific inquiry, a non- substantive, minor modification to the existing contract would not invoke the restrictions of Section 3(f), but modifications which would constitute a de facto new contract would invoke those restrictions. Should modifications to the existing contract be contemplated, it is recommended that you request further advice from the State Ethics Commission as to whether the proposed modifications are sufficient to invoke the restrictions of Section 3(f) of the Ethics Law. In response to your fourth specific inquiry, the restrictions of Section 3(f) apply to contracts entered into with the governmental body with which the public official or public employee is associated. The governmental body with which A would be associated would be County Council B. Authorities which have been established as separate from the County would be deemed to be separate governmental bodies. Contracts with such separate governmental bodies would not invoke the restrictions of Section 3(f) under these circumstances, even where the County Council appoints all or some of the members of the boards of the various authorities. Confidential Advice 92 -648 December 7, 1992 Page 9 In response to your fifth specific inquiry, subject to the proviso that no one may engage in conduct which would transgress Sections 3(b) and /or 3(c) of the Ethics Law set forth above, A could vote on appointments to the aforesaid authorities without being required to make disclosures under Section 3(j) of the Ethics Law. 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 County Code. Conclusion: Upon becoming a Member of County Council B, A would become a public official subject to the provisions of the Ethics Law. D would be a business with which A is associated. New contracts between D and County C would be required to fully comply with the restrictions of Section 3(f) of the Ethics Law. D could continue to provide co -money manager services to the County retirement fund under its existing non -bid contract with the County. Non - substantive, minor modifications to the existing contract would not invoke the restrictions of Section 3(f), but changes which would result in a de facto new contract would invoke those restrictions. Should modifications to the existing contract be contemplated, it is recommended that further advice be sought from this Commission. Contracts between D and separate authorities to which the County Council makes appointments would not invoke the restrictions of Section 3(f). Subject to the restrictions of Sections 3(b) and 3(c), A could participate in making appointments to the aforesaid authorities without disclosure being required under Section 3(j) of the Ethics Law. 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 Confidential Advice 92 -648 December 7, 1992 Page 10 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. cerely, VincentLlr. Dopko Chief Counsel