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HomeMy WebLinkAbout94-553 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL April 14, 1994 94 -553 Re: Conflict of Interest, Public Official, Contracting with Governmental Body, School Director, Private Employment, Business with which Associated, Use of Authority of Office or Confidential Information, Vote. This responds to your letter of March 23, 1994 in which you requested advice from the State Ethics Commission, and a subsequent telephone call in which you requested that the advice be confidential. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition upon a School Board Member or a "business with which he is associated" from contracting with the School Board for supplies. Facts: Your firm serves as Solicitor to District A ( "the District "), a third class public school district comprised of the Borough of B and C and D Townships, E County. The District and F individually have asked you to seek the opinion of the State Ethics Commission as to whether the continuation of a business relationship between the District and a corporation constitutes a "conflict of interest" under 65 P.S. § 401 after the sole shareholder of the corporation has been elected as a School Director. Director F became a School Board Member in December, 1993. He is the sole shareholder of G, a Pennsylvania corporation with its place of business in B, Pennsylvania. For over 25 years, the District and its various organizations and clubs have enjoyed an established business relationship with G. Over the years, prior to Director F's election, G sold between $7,000 to $15,000 annually in lumber and related materials to the District. G is located in close proximity to the District's facilities, and the District has benefited by this service. convenience. Individual business transactions between G and the District, although frequent, are Confidential Advice, 94 -553 April 14, 1994 Page 2 r usually small in nature, and transpire on an "as needed" basis. The District and G both wish to continue the previously established and mutually beneficial business relationship. You state that the Pennsylvania Public Official and Employee Ethics Law, 65 P.S. S 401 et seq., prohibits any public official or employee from engaging in any conduct that "constitutes a conflict of interest ". 65 P.S. S 403. A school director is a "public official" for purposes of the Act. Snider v. Shape, 45 Pa. Cmwlth. 337, 405 A.2d 602 (1979). The Act defines "conflict of interests" as follows: "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 . . .. The Act further defines "de minimis economic impact" as "an economic consequence which has an insignificant effect." 65 P.S. S 402. F was only recently elected to serve as a School Board Member. The business relationship between G and the District was established long before he became a "public official." Thus, you state that F is not using his new position as School Board Member or any confidential information he might obtain as such to influence the District in any way. He is not attempting to gain additional business for G from the District, nor is F attempting to use his Board position to maintain the existing business relationship between G and the District. You indicate that the amount of business conducted between G and the District. is relatively small, requires no competitive bidding and is episodic. Thus, you argue that the monetary benefit to G is de minimis, and the District thus believes that no conflict of interest exists for this reason as well. You further state that while the District recognizes that the Commission cannot address questions arising under the Pennsylvania School Code, it is helpful to consider guidance offered by that statute. The Pennsylvania School Code of 1949 provides specific guidelines regarding school directors and prohibited activities. Confidential Advice, 94 -553 April 14, 1994 Page 3 Section 324 states, 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. The District believes that F is not acting as a "private person" engaging in business with the District, and that by inference, the existing and ongoing business relationship established between the parties is not in violation of S 324. Moreover, S 324 also states: No school board shall draw, cause to be drawn or accept a specification for any item to be purchased by the school district that would limit the purchase of the item to the firm, corporation, partnership or other business entity of which a school director is an officer, agent or employee and exclude all other persons who could submit quotations or bid on an equivalent item. You state that this portion of S 324 recognizes that School Board members may be associated with or hold stock in corporations which will bid on and conduct business with school districts. It does not prohibit such dealings; instead the section merely precludes activities which would inevitably lower public confidence and raise suspicions of impropriety by giving business entities in which a director is interested an unfair advantage. You continue by stating that Section 401(b) of the Pennsylvania Conflicts of Interest Statute states: (b) It is recognized that many public officials, including most local officials and members of the General Assembly, are citizen - officials who bring to their public office the knowledge and concerns of ordinary citizens and taxpayers. They should not be discouraged from maintaining their contacts with their community through their occupations and professions. Thus, in order to foster maximum compliance with its terms, this act shall be administered in a manner that emphasizes guidance to public officials . and public employees regarding the ethical standards established by this act. Based upon the above, you seek an advisory as to whether F may continue in the relationship between G and the School District. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(11) of the Ethics Law, 65 P.S. SS407(10), (11), advisories are issued to the requestor based upon the facts which the Confidential Advice, 94 -553 April 14, 1994 Page 4 requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the materials facts relevant to the inquiry. 65 P.S. 55407(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As a School Director for District A, F is a "public official" as that term is defined in the Ethics Law. 65 P.S. 5402; 51 Pa. Code 511.1. As such, he is subject to the provisions of the Ethics Law and the restrictions therein are applicable to him. Section 3(a) of the Ethics Law provides: Restricted Activities No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined under the Ethics Law: "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. Confidential Advice, 94 -553 April 14, 1994 Page 5 "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. Under Section 3(a) of the Ethics Law quoted above, a public official may not use the authority of office or confidential information to obtain a private pecuniary benefit for himself, a member of his immediate family or a business with which he is or a member of his immediate family is associated. Generally, the Ethics Law places no per se prohibition upon a public official or business with which he is associated from contracting with his governmental body. Pancoe, Opinion 89 -011. As sole shareholder, it is clear that the foregoing entity is a "business with which he is associated" as that term is defined under the Ethics Law. Under Sections 3(a), he could not participate or vote on matters involving the contract between the government body and G or the "business with which he is associated." In addition, the requirements of Section 3(j) of the Ethics Law must be followed whereby the reasons for the abstention must be publicly noted as well as a written memorandum to that effect must be filed with the secretary recording the minutes. Therefore, under Section 3(a), F or the "business with which he is associated" is not precluded from contracting with his governmental body but he could not participate or vote as to the matter of the contract and must comply with the disclosure requirements of Section 3(j) of Ethics Law. Section 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. 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 Confidential Advice, 94 -553 April 14, 1994 Page 6 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 relation to the above provision of law, the State Ethics Commission has generally determined that this provision is a procedure to be used when a public official or employee contracts with his own governmental body in an amount of $500 or more. The process must be open and public with prior public notice and subsequent public disclosure. In addition, the public official/ employee may not have any supervisory or overall responsibility for the implementation or administration of the contract. Thus, the open and public process, must be used in all situations where a public official is otherwise appropriately contracting with his own governmental body in an amount of $500 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 considered and; (4) public disclosure of the contract awarded and offered and accepted. Further, Section 3(f) requires that the public official could not have supervisory or overall responsibility as to the implementation or administration of the contract. Parenthetically, although the contracting in question would Confidential Advice, 94 -553 April 14, 1994 Page 7 not be prohibited under the Ethics Law provided the requirements of Sections 3(a), (f) and (j) are satisfied, a problem may exist as to such contracting under the Public School Code. In the instant situation, Public School Code provides as follows: No school director shall, during the term of 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 th.s _. act. 24 P.S. 53 -324. It is noted that under the Ethics Act, the jurisdiction of the Commission is limited to rulings regarding the applicability of the Ethics Act to a particular situation. The Commission is not permitted to interpret any other statute, rule, regulation or code, including the Public School Code. Accordingly, it is suggested that F be appropriately advised as to the applicability of the Public School Code. You also state that individual business transactions are usually small in nature and transpire on an "as needed" It is noted, however, that the Commission has indicated `tha't contracts in an amount less than $500.00 can nevertheless be included within the statutory requirements of Section 3(f) if it is determined that fragmentation has occurred. Finally, it is noted that you argue that the monetary benefit to G is de minimis. In applying the de minimis economic impact exclusion, it must be observed that the term is not one that can be quantified as to a set dollar amount for all cases. To the contrary, the definition must be applied and determined on a case by case basis since a given dollar amount which may be de minimis in one case would not be so in another based upon the factual circumstances. Schweinsbera, Order 900. In this case, the benefit is not de minimis Lastly, 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. Conclusion: As a Member of the Board of Directors for District A, Confidential Advice, 94 -553 April 14, 1994 Page 8 F is a public official subject to the provisions of the Ethics Law. Subject to the limitations and qualifications noted above, under Section 3(a) of the Ethics Law, a public official /employee or a "business with which he is associated" may contract with the governmental body but he could not vote or participate in the matter of the contract. The disclosure requirements of Section 3(j) outlined above must be observed. Finally, if the contract is $500 or more, the open and public process as outlined above must be accomplished. The public official /employee could not have any supervisory or overall responsibilities as to the contract. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. Due to the possible application of the Public School Code in this matter, it is suggested that advice be obtained regarding the applicability of such code from the municipal solicitor or private counsel in that regard. 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 appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within fifteen (15) days of the date of this Advice pursuant to 51 Pa.Code §13.2(h). The appeal may be received at the Commission by hand delivery, United States mall, delivery service, or by FAX transmission (717- 787 - 0806). cerely, Vincent Dopko Chief Counsel