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HomeMy WebLinkAbout94-586 PealeDear Mr. Peale: STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL July 29, 1994 Michael O'Hara Peale, Jr., Esquire Timoney, Knox, Hasson & Weand Attorneys at Law P.O. Box 7544 400 Maryland Drive Fort Washington, PA 19034 -7544 94 -586 Re: Conflict, Public Official /Employee, School Director, Attorney, Law Practice, Business with which Associated, Bond Counsel to School District. This responds to your letter of June 29, 1994 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 who is a partner in a law firm which serves as special bond counsel to the school district. Facts: As solicitor of the Wissahickon School District (District) and on behalf of School Director Russell C. Bellavance (Bellavance) you seek an advisory opinion. On November 10, 1994 Bellavance was elected to the School Board with his term beginning on December 8, 1993. Bellavance since February 1, 1985 has been a partner in the law firm of Saul, Ewing, Remick & Saul which has served as special bond counsel to the District in connection with the following nine bond issues: (a) $9,975,000 General Obligation Bonds, Series of 1985; (b) $4,250,000 General Obligation Bonds, 1987; (c) $2,700,000 General Obligation Bonds, 1988; Series of Series of Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 2 (d) $4,999,202.35 General Obligation Bonds, Series of 1989; (e) $9,998,377 1990; (f) $3,760,000 1991; (g) $2,750,000 1992; General Obligation Bonds, General Obligation Bonds, General Obligation Bonds, Series of Series of Series of (h) $5,635,000 General Obligation Bonds, Series of 1992 (Federally Taxable); (i) $14,700,000 General Obligation Bonds, Series of 1993. The above transactions were closed prior to Bellavance's election to the School Board. Bellavance has stated that he has performed no legal work regarding the transactions and the initial engagement; continued representation by the law firm was done with out Bellavance's efforts. The continued representation by the law firm was the result of the District's satisfaction with their service in the field of municipal finance as well as the competitive fees charged. In addition to specific bond financing, the firm also provides services relative to advice on building projects, capital financing, tax laws and regulations. The District has never been separately billed for related services and no bill has been submitted nor fee paid since April 1993. There have been some consultations with the law firm since the last financing was completed on April 13, 1993, and the District would like the firm to continue its relationship as Bond Counsel regarding financing which is expected to be consummated later in 1994. Given the continuing relationship between the District and the law firm, no formal bidding or other selection process is contemplated. After reviewing the provisions•of the Ethics Law, you advise that Bellavance and the law firm intend to take the following steps: Bellavance will exclude himself from the partnership in all instances where it serves as Counsel to the District with Bellavance having no interest in any fees received by the law firm and with Bellavance performing no work for the District; and Bellavance will abstain from any vote relating to the continuation of the firm, will not participate in any discussions relating to the fees of the firm and will cause a statement regarding his relationship with the law firm to be read into the Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 3 public record during the District meeting at which any matters are discussed or voted. You argue that the law firm under the above approach would not be a business with which Bellavance is associated for purposes of Section 3 of the Ethics Law on the theory that Bellavance will have no financial interest in the firm when the firm is representing the District, thereby creating the economic equivalent of a separate partnership when the firm is acting in such capacity. You assert that separate partnerships or non- participation of a partner as to particular fees have been approved by the Commission as an appropriate means to insure compliance with the Ethics Law in Orders No. 597 and 659. You conclude that the District may continue its relationship with the law firm in connection with bond financing during Bellavance's term without undertaking any public bidding or other selection process to award a contract. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(11) of the Ethics Law, 65 P.S. § §407(10), (11), advisories are issued to the requestor based upon the facts which the 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 material facts relevant to the inquiry. 65 P.S. § §407(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As School Director for Wissahickon School District, Russell C. Bellavance is a public official as that term is defined under the Ethics Law, and hence he is 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 Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 4 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 public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 5 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 as follows: 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 the law would require that an open and public process must be used in all situations where a public official /employee is otherwise Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 6 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 Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 7 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 minutes or supervisor. In applying the provisions of Section 3(a) and 3(f) of the Ethics Law to the instant matter, it is clear that the law firm of Saul, Ewing, Remick & Saul is a business with which Bellavance is associated since he is a partner in that firm. The fact that Bellavance will exclude himself from the partnership when the law firm acts as Counsel with no interest in any fees received does not negate the fact that the law firm is a business with which Bellavance is associated. The Ethics Law in its statutory definitions provides no exception or exclusion regarding the term business with which associated. In addition, the cited Commission cases of Kulik, Order No. 597 and Bartle, Order 659 are totally inapposite for two reasons. First, the cited orders did not involve a contracting issue which is present in the instant matter. Second, neither of the two cited orders dealt with or accepted any limitation as to the term business with which associated merely because legal fees were placed into segregated accounts from which the public official would receive no funds. Since the law firm is a business with which Bellavance is associated, he would have a conflict under Section 3(a) of the Ethics Law regarding any matters that the law firm had with the District, including but not limited to representation and the approval of legal fees. Under such circumstances Bellavance would have to abstain and observe the disclosure requirements of Section 3(j) of the Ethics Law noted above. In addition, since the business with which Bellavance is associated would be contracting with the District in such matters, the contracting requirements of Section 3(f) noted above must be followed for all contracts valued at $500 dollars or more. Therefore, you are advised that the open and public process, as outlined in Section 3(f) above, must be followed. Peale, Jr., Michael O'Hara, 94 -58'6 July 29, 1994 Page 8 Lastly, you are advised that the conflict which Bellavance would have regarding the business with which he is associated not only extends to the law firm but to the clients of the law firm. See Miller, Opinion No. 89 -024 and Kannebecker, Opinion No. 92- 010 wherein the full Commission held that a public official would not only have a conflict as to the business with which he or she was associated but also as to the clients of such business where those clients would have matters before the governmental body. In Rannebecker, super, the Commission held that an attorney supervisor would have a conflict as to matters that his private law clients would have before the township even though his legal representation was as to unrelated matters. 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 Public School Code and Rules of Professional Conduct. Conclusion: As School Director for Wissahickon School District, Russell C. Bellavance is a public official subject to the provisions of the Ethics Law. Bellavance has a conflict under Section 3 (a) as to all matters before the School District involving the law firm of Saul, Ewing, Remick & Saul wherein Bellavance is a partner. Bellavance would have a conflict as to any matters before the School District involving clients of the law firm. As to such conflicts, Bellavance must abstain and observe the disclosure requirements of Section 3 (j) of the Ethics Law noted above. In addition, as to the contracts between the law firm of Saul, Ewing, Remick & Saul and the School District, all such contracts of $500 dollars or more must be completed through an open and public process as required by Section 3 (f) of the Ethics Law noted 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 Peale, Jr., Michael O'Hara, 94 -586 July 29, 1994 Page 9 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 513.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717 -787- 0806). Failure to file such an appeal at the Commission within fifteen (15) days may result in the dismissal of the appeal. erely, Vincent J.Eopko Chief Counsel