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HomeMy WebLinkAbout93-517 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL February 23, 1993 93 -517 Re: Conflict, Public Official /Employee, Borough Council Member, Use of Authority of Office or Confidential Information, Voting, Business with which Associated. This responds to your letters of January 13, 1993, and January 20, 1993, 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 a borough council member where a business with which he is associated consummates investment trades for the borough's police pension fund and fire department pension fund. Facts: You state that since 1986 you have been involved with managing investments for the Police Pension Fund in City A, Pennsylvania. Subsequent to that date, you also have started managing the investments for the City A Fire Department Pension Fund. In December of 1991, you were approached regarding your willingness to accept an appointment to City Council for City A. This appointment was to fill the final two years of a four -year term of a Council Member who had resigned. Prior to accepting the appointment, you requested a letter from the Solicitor as to whether a conflict of interest existed that would prevent you from serving on Council while continuing to execute trades and to give investment advice to the Police and Fire Department Pension Plans. The Solicitor responded that there would be no conflict of interest between your work with the pension funds and your appointment to Council as long as you refrained from any and all votes relative to the pension funds and you did not accept an appointment to the pension boards which govern those funds. You state your belief that a conversation with Commission staff on December 23, 1992, indicated basic agreement with the Solicitor. You state that according to your notes, the following conditions must exist for there to be a conflict of interests: You must use your authority as a Member of Council either to introduce Confidential Advice No. 93 -517 February 23, 1993 Page 2 a motion, second a motion or vote on a motion in which you or a member of your immediate family is in a position to benefit in a pecuniary manner. You state that as you attempt to complete your final year as a Council Member, you would like to avoid any possible conflict as well as be in a position to answer the inevitable questions that come up as to whether you have a conflict resulting from your work as a Council Member and your work with the pension funds. In a telephone conversation with Assistant Counsel for this Commission on February 22, 1993, you provided the following additional facts and clarifications. You are a managing partner with a one third ownership interest in Company B, which offers securities through Corporation C. Company B is a local company which you liken to a stockbroker. With regard to the police pension fund and fire department pension fund in question, responsibility for the custody of the funds and services such as paying retirees rests with a local bank. Investment decisions are made by a third party, but the trades are consummated through Company B which acts as the stockbroker. For its services, Company B receives a commission. Commissions received by the firm from these transactions, as well as others, go toward paying your salary. However, your salary would be the same regardless of whether these particular transactions occurred, and it would be unaffected were trades for these pension funds consummated elsewhere. Based upon the above, you seek an advisory from this Commission to outline whatever steps you need to take to avoid a conflict of interest in this area. Discussion: It is initially noted that to the extent your letter of inquiry indicates your receipt of telephonic advice, your letter of inquiry is erroneous. Although Commission staff provide a public service by informing callers of various provisions of law, advisories are not issued by telephone. Your inquiry will now be addressed. As a Member of City Council for City A, you are a public official as that term is defined under the Ethics Law, and hence you are 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. Confidential Advice No. 93 -517 February 23, 1993 Page 3 The following terms are defined in the Ethics Law as follows: Section 2. Def }nitions. "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. "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 Confidential Advice No. 93 -517 February 23, 1993 Page 4 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 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 Confidential Advice No. 93 -517 February 23, 1993 Page 5 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; (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 Confidential Advice No. 93 -517 February 23, 1993 Page 6 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 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. Company B is a business with which you are associated. Thus, conflicts of interests would arise for you not only where the use of authority of office or confidential information would result in a private pecuniary benefit to you personally, or to a member of your immediate family, but also where a private pecuniary benefit would result to Company B. In each instance of a conflict of interest, you would be required to abstain from participation, as well as to fully satisfy the disclosure requirements of Section 3(j) as set forth above. You are further advised that the use of authority of office is more than the mere mechanics of voting, and encompa§ses all of the tasks needed to perform the functions of a given position. See, Juliante, Order No. 809. In this case, it is noted that in your telephone conversation with Assistant Counsel, you have characterized Company B's role as carrying out the instructions of a third party which makes the investment decisions. Thus, under the facts which you have submitted, it is not clear what decisions City Council would be making which would create a potential conflict of interest for you. In that you have submitted a general inquiry without any specific factual scenario at issue, the response of this advisory must be limited to the general advice set forth herein. This advisory shall not attempt to speculate as to what particular factual Confidential Advice No. 93 -517 February 23, 1993 Page 7 situations may arise for you. However, in the event that you are confronted with a specific factual scenario which requires further clarification, you may seek further advice from the State Ethics Commission. 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 code. Conclusion: As a Member of City Council for City A, Pennsylvania, you are a public official subject to the provisions of the Ethics Law. Company B is a business with which you are associated as defined in the Ethics Law. Pursuant to Section 3(a) of the Ethics Law, you may not use the authority of office or confidential information received by holding your public position for the private pecuniary benefit of yourself, a member of your immediate family, or a business with which you are associated. In each instance of a conflict of interest, you must abstain from participation and fully satisfy the disclosure requirements of Section 3(j) as 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. 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, � Q Vincent J. Dopko Chief Counsel rt. M. L.