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HomeMy WebLinkAbout93-515 DirvonasThomas F. Dirvonas, Esquire 11 North Eighth Street Stroudsburg, PA 18360 Dear Mr. Dirvonas: Rim STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11 -470 HARRISBURG, .PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL February 23, 1993 93 -515 Re: Conflict, Public Official /Employee, School Director, Use of Authority of Office or Confidential Information, Voting, Contracting, Subcontracting, Business with which Associated. This responds to your letter of January 7, 1993, 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 contracts or subcontracts involving a business with which he or his spouse is associated, or as to matters involving a sewage treatment plant which presently exclusively services the school district and where the school director has been asked to work. Facts: As Solicitor to the Pocono Mountain School District, you seek an advisory on behalf of several School Board Members regarding several situations involving possible conflicts of interest for them. You state that the conduct in question involves a review not only of the Ethics Law but also Section 324 of the School Code (24 P.S. 53 -324), which provides in pertinent part: No school director shall, during the term for which he was elected or appointed, as a private person engage in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this a ct. . . . Thomas F. Dirvonas, Esquire February 23, 1993 Page 2 You offer the following factual scenarios: SCENARIO #1: Board Member A is a shareholder, officer and employee of a plumbing and heating firm. The District is constructing a new junior high school building and has awarded four prime contracts, including one to the general contractor. The general contractor has requested that Board Member A's firm supply propane and diesel fuel for temporary heat and install temporary heating lines in the building during the course of construction. Payment for such propane and diesel fuel is the obligation of the general contractor and is included in the general contractor's base bid as submitted to the District. The District continues to consider and take action on various matters involving the general contractor including construction change orders, invoices for payment, etc. SCENARIO #2: Board Member B, together with his wife, owns a business which sells yogurt. ServiceAmerica, a firm which handles the District's food service program, has requested that Board Member B supply yogurt for use and resale in the District's food service program. Payment for the yogurt or other products is made directly by ServiceAmerica. ServiceAmerica's contract with the District is on a "cost plus" basis. Bids for the food service contract are solicited and awarded on a periodic basis. SCENARIO #3: Board Member C is a licensed sewage treatment plant operator. The District, in connection with the construction of a new elementary school, entered into an agreement with Coolbaugh Township whereby the District contributed toward the construction of a new sewage treatment plant which serves the new school. The District is currently the sole user of the plant and, as such, is required to reimburse the Township for all costs of operation and maintenance until other properties are hooked up to the plant. Regulations require that the plant have a back -up operator in addition to a regular operator, and Board Member C has been requested to act as back -up operator at either an hourly or per diem rate. SCENARIO #4: Board Member D is employed as a laborer for an excavating firm at an hourly rate. He holds no position of authority and has no ownership interest in the business. The excavating firm performs services for the District on a periodic basis. SCENARIO #5: Board Member E's wife is an employee of ServiceAmerica and performs bookkeeping services in connection with ServiceAmerica's food service program in the District. She is an hourly or salaried employee and has ownership interest in the business. Thomas F. Dirvonas, Esquire February 23, 1993 Page 3 You state that in none of the above situations is a Board Member (or family member) directly employed or paid by the District. However, in all of these situations, services are being performed or products provided which are of benefit to the District. You proffer your analysis of the above situations as follows: With regard to Board Members A and B, you opine that neither of these Board Members is dealing directly with the District. Thus, Section 324 of the School Code does not appear to you to have been violated. Further, since the contracts are not with the District, you believe that the "open and public process" requirement of the Ethics Law does not appear to apply. However, you state that it does appear that such business dealings do open the door for allegations that these Board Members used their office to obtain financial gain in violation of the Ethics Law. Additionally, you question whether these Board Members can properly take part in voting or discussions involving the general contractor or ServiceAmerica while they are engaged in private business dealings with these firms on District projects or programs. With regard to Board Member C, you opine that there does not appear to a violation of the School Code or the Ethics Law. With regard to the issue of whether Board Member C should abstain from voting or taking part in discussions involving the treatment plant in particular or dealings with the Township in general, you state that you do not view such abstention as being necessary since neither the plant nor Township operations in general constitute a "business" as defined in the Ethics Law in that neither is a legal entity organized for profit. Accordingly, you believe that the "business association" prohibition does not appear to apply. With regard to Board Members D and E, you likewise conclude that there does not appear to be a violation of the School Code or the Ethics Law in that there is no ownership interest or profit incentive. However, you question whether these Board Members should take part in voting or discussions involving these employers. You seek an advisory as to the proper course of action to be taken by the respective Board Members and by the School Board in dealing with these issues. You specifically request that this Commission address the following issues: 1. Are any of the described transactions in violation of the Ethics Law? 2. Are any of the described transactions in violation of the School Code? Thomas F. Dirvonas, Esquire February 23, 1993 Page 4 3. Assuming no violations, should any or all of the Board Members abstain from voting on issues involving the employer or contractor from whom the Board Member receives compensation? Discussion: As School Directors for the Pocono Mountain School District, Board Members A, B, C, D and E are public officials as that term is defined under the Ethics Law, and hence each is subject to the provisions of that law. Before reviewing the pertinent provisions of the Ethics Law, it must initially be noted that you are asking for an advisory which would also interpret the School Code. This Commission does not have the statutory authority to interpret or enforce the School Code, and thus this advisory shall be limited to addressing your inquiry under the Ethics Law. It is noted, however, that serious questions may exist as to whether Section 324 of the School Code would be implicated by the proposed conduct of various of the Board Members on whose behalf you inquire. The pertinent provisions of the Ethics Law are as follows. 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 of his immediate family or a business with which he or a member of his immediate family is associated. Thomas F. Dirvonas, Esquire February 23, 1993 Page 5 "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. "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. 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. 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 Thomas F. Dirvonas, Esquire February 23, 1993 Page 6 solicit or accept anything 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 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, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more. This open and public process would require that the following be observed as to the contract with the governmental body: (1) prior public notice of the employment or contracting possibility; Thomas F. Dirvonas, Esquire February 23, 1993 Page 7 (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 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 with the governmental body. 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. Thomas F. Dirvonas, Esquire February 23, 1993 Page 8 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 minutes or supervisor. The above provisions of the Ethics Law will now be applied to the factual scenarios which you have presented. The factual scenarios for Board Members A and B are substantially the same. In each factual scenario, a business with which the Board Member is associated would be a subcontractor under a general contractor who has contracted with the School District. For both of these factual scenarios, the restrictions of Sections 3(a) and 3(f) would be applicable. As for Section 3(a), these School Board Members may not use the authority of office as a School Director or confidential information received by being in that position for the private pecuniary benefit of the business with which each is respectively associated. The business with which Board Member A is associated is the plumbing and heating firm. The business with which Board Member is associated is the business which he owns with his wife, selling yogurt. The following Commission precedents, set parameters which would guide these Board Members. In Sowers, Opinion 80 -050, the State Ethics Commission opined that a public official's voting was restricted by the Ethics Act as to projects submitted by developers when a financial relationship existed or could be "reasonably and legitimately" anticipated of being developed after such a vote. However, in Markham, Opinion 85 -013, the Commission determined that a public official would not be precluded in voting in a matter where his interest would be considered as remote. In Amato, Opinion 89 -002, a township commissioner who was employed by a builders supply company asked whether he could vote or participate on matters submitted by project developers, when those developers would hire general contractors who in turn would hire subcontractors who contract with the business with which the township commissioner was associated. The Commission concluded that under those circumstances, the voting by the township commissioner would not have any direct effect upon a subcontract being awarded to the building supply company. The Commission reasoned that the business activity of the building supply company was twice removed from the initial vote to approve a development project; that all contracts, subcontracts and supply contracts are awarded to the lowest bidder; and that the commissioner did not work on a sales commission basis but rather a straight salary. The Commission held that under that process, the voting on a development project did not result in any identifiable subcontractor who would be dealing with the township commissioner's Thomas F. Dirvonas, Esquire February 23, 1993 Page 9 employer. Thus, based upon the above decisions of the State Ethics Commission, the guiding principle which will apply to both Board Member A and Board Member B is that a conflict of interest would exist as to any matter where, by acting in the official capacity of a School Director, there would be a "reasonable and legitimate anticipation" of a private pecuniary benefit to the business with which the School Board Member is associated. Not every matter would present such a conflict of interest. For example, in the case of Board Member A, whose role as a subcontractor is supplying fuel for temporary heat and installing temporary heating lines during the course of the construction of the new junior high school building, construction change orders or invoices on unrelated matters -- such as excavation work or building materials -- would not be likely to result in a private pecuniary benefit to the plumbing and heating firm with which Board Member A is associated. Turning now to the applicability of Section 3(f), it is clear that the restrictions of Section 3(f) would apply to the factual scenarios involving Board Member A and Board Member B. Assuming that such proposed contractincr would be otherwise allowed (in this case by the School Code), the restrictions of Section 3(f) would have to be observed because each of these factual scenarios presents a subcontracting situation between a business with which a School Director is associated and a general contractor who has been awarded a contract with the School District in the amount of $500 or more. For the subcontracting to be permissible under the Ethics Law, the restrictions of Section 3(f) would have had to have been observed as to the contract with the School District. The third factual scenario involving Board Member C will now be addressed. Under Section 3(a) of the Ethics Law, Board Member C may not use the authority of office or confidential information received by being in that position for a private pecuniary benefit for himself. If, for example, matters before the School Board would result in more hours of work for Board Member C in his private capacity as a licensed sewage treatment plant operator, a conflict of interest would exist. Under the facts which you have submitted, absent a private pecuniary benefit to Board Member C, Section 3(a) would not be implicated in this factual scenario. As for Section 3(f), there are insufficient facts to conclusively determine whether Section 3(f) would have applicability. It is not known whether the Township, some authority, or a private entity is operating the sewage treatment plant, nor is it known in what capacity Board Member C would be working at the plant, such as in the capacity of an employee or an Thomas F. Dirvonas, Esquire February 23, 1993 Page 10 independent contractor. Therefore, this Advice may only conclude that if the restrictions of Section 3(f) are applicable to this third scenario, they must observed. Turning to the fourth and fifth factual scenarios, substantially similar circumstances have been presented. The excavating firm is a business with which Board Member D is associated, by virtue of his employment. Similarly, Board Member E's wife is an employee of ServiceAmerica. Therefore, ServiceAmerica is a business with which Board Member E's spouse is associated. In both of these factual scenarios, Sections 3(a) and 3(f) would apply. Neither Board Member D nor Board Member E may use the authority of office of School Director or confidential information received by being in that position for the private pecuniary benefit of the excavating firm or ServiceAmerica, respectively. As for Section 3(f), the restrictions of that provision must be observed in both factual scenarios. Both the excavating firm and ServiceAmerica contract directly with the School District. At the end of your letter of inquiry, you posed three specific issues which you asked to be addressed. The first issue, whether any of the described transactions would be in violation of the Ethics Law, has been discussed above. The second inquiry, whether any of the described transactions would be in violation of the School Code, may not be addressed for reasons set forth above. The third question asks, assuming no violations, whether any or all of the Board Members should abstain from voting on issues involving the employer or contractor from whom the Board Member receives compensation. In light of the above discussion, your third question is beyond the scope of the Ethics Law. The parameters which have been set forth above define the sort of conduct which would constitute a conflict, as well as the duties of a public official when confronted with a conflict of interest. If the Ethics Law is not implicated in a given situation, as your third question poses, it would not be for this Commission to instruct the Board Members as to how to conduct themselves. Finally, it is noted that this Advice is expressly conditioned upon the assumption that as to all of the above - referenced Board Members, there would be no understandings violative of Sections 3(b) and /or 3(c) of the Ethics Law as set forth above. 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 School Code. Thomas F. Dirvonas, Esquire February 23, 1993 Page 11 Conclusion: As School Directors for the Pocono Mountain School District, the School Board Members on whose behalf you inquire (Board Member A, Board Member 8, Board Member C, Board Member D and Board Member E) are public officials subject to the provisions of the Ethics Law. The restrictions of Sections 3(a), 3(b), 3(c), and 3(j), as set forth above, must be observed by each of these Board Members. Where applicable, the restrictions of Section 3(f) must also be observed. 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 §2.12. Sincerely, Vincent J. Dopko Chief Counsel