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HomeMy WebLinkAbout96-510 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL February 8, 1996 96 -510 Re: Municipal Authority; Management Firm; Public Employee; FIS. This responds to your letter dated January 15, 1996 in which you requested confidential advice from the State Ethics Commission. Issue: You ask whether in his capacity as President of A, B is to be considered a public official /employee as that term is defined in the Public Official and Employee Ethics Law so as to be required to file the Statement of Financial Interests (FIS). Facts: You question whether the activities and functions of B fall within the purview of the Ethics Law and the regulations of this Commission so that he would be required to file FIS's. B is President, but not a shareholder, of A, a wholly -owned subsidiary of C. A is in the business of providing contracted management services and programs to water and sewage systems. It has provided such management services to the Municipal Authority (Authority) of D since April, 1952. The current agreement for services between A and the Authority was entered into on November 30, 1995. You note that A's responsibilities under the Agreement are set forth in Part II of the Agreement; however, you make the following clarifications: (1) No employee of A is stationed on -site at the Authority's facilities. (2) A makes no expenditures and disburses no funds as part of its services to the Authority. Part II(B) (1) of the Agreement provides that the Authority assumes and pays all expenses, costs, and charges of its personnel and for operating, maintaining, repairing, extending, and improving its system; the Authority also Confidential Advice of Counsel, 96 -510 February 14, 1996 Page 2 is responsible for the hiring, firing, supervision, salaries, payroll taxes, or fringe benefits of all of its employees. Part II(B)(10) of the Agreement provides that the Authority is responsible for the acquisition or expenses of the equipment, materials, supplies, capital costs, or other costs of the system. Part II(B)(13) states that the Authority provides funding for the capital budget and professional services. You cite Ballou v. SEC and Village at Camelback Property Owners Assn, Inc. v. Carr in support of your assertion that B does not fall within the purview df the Act because he is only indirectly involved in the provision of services to the Authority as the chief executive officer of A and A alone is "employed by" the Authority to provide services to it and may act only pursuant to the Authority's authorization. In particular, you argue that A is subordinate to the Authority without any responsibility to the public, its advice does not have to be followed by the Authority, it is an advisor to the Authority which is accountable to the public, it is a legally independent entity from its officers and it alone is employed by the Authority so that neither it nor B falls within the purview of the Ethics Law. You conclude that any contrary holding in this instance could be an unconstitutional application of the Ethics Law. You argue that B is not a "public official" for the following reasons: (1) Neither A nor B is "appointed" by the Authority but rather A alone is "employed by" the Authority to provide services noting that the term "employed by" is contained in the definition of public employee but not in the definition of public official. You cite 51 Pa.Code 11.1 as to the definition of "employed by" relative to 65 P.S. 406(d)(5). (2) A is in the nature of an advisory board under the definition of "public official" because it does .not have the authority to exercise the power of a political subdivision or to expend public funds without the consent or approval of the governing body. You submit the following reasons in support of your assertion that B is not a "public employee ": (1) The Act defines "public employee" as an "individual." You state that because the term "individual" is not defined, it does not include persons and corporations for purposes of the Act. You further state that since only A is employed by the Authority and not B, he is not a "public employee." Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 3 (2) The actions taken by A, as opposed to those of B, are not "of a nonministerial nature" because A does not have the power to expend public funds without the consent or approval of the governing body. Additionally you inquire as to whether other individuals within A would be public officials /public employees if B is determined to be a "public official" or "public employee." You inquire as to the level within the corporate structure at which the Act would apply or not apply or whether the corporation, as opposed to the individuals employed by it, fall within the Act for purposes of filing FIS's. You argue that if the Legislature had intended to include professional advisors in Section 4(a) of the Act, it would have expressly said so as in the case of solicitors. It is your assertion that the ,principle of eXpressio unius est exclusio alterius governs in that when certain persons or things are specified in law, an intention to exclude all others from its operation may be inferred. Lastly, you argue that because the Municipality Authorities Act requires competitive bidding and public advertisements before awarding contracts, the opportunities for personal financial gain or for "sweetheart contracts" are minimal, therefore eliminating the need to include individuals such as B or advisors such as A under the provisions of the Ethics Law. In order to review the question presented, we will briefly outline the duties and responsibilities associated with providing the contracted management services and programs. Such duties and responsibilities, as set forth in your letter and the Agreement for Management Services (Agreement) 'are incorporated herein by reference. The Agreement provides in part in Section II, dealing with "Engagement of Duties," that A: will provide a professional personnel team for management services for the Water Business and Water System; will maintain records in accord with GAAP principles; will make expenditures and disburse funds in accord with Authority budgets /guidelines; will provide revenue /expense statements /reports and such additional statements, statistics, plans, budget or reports; will assist in the preparation of rate schedules for the Authority, make periodic reviews as to revenue projections and assist in budget preparation; will assume /pay the expenses of its personnel for the discharge of its duties under the Agreement; will assist the Authority as to public relations; will attend Authority meetings; will provide basic services with the possibility of additional duties based upon mutually acceptable fees; will provide a certified production consultant to assist in the operation of the Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 4 water treatment facilities; and will arrange for the placement of insurance coverage. Discussion: The question to be answered is whether B, in his capacity as President, or other employees of A are to be considered "public employee[s]." The Ethics Law defines that term as follows: Section 2. Definitions "Public employee." Any the Commonwealth or a who is responsible for official action of a with regard to: 65 P.S. §402. individual employed by political subdivision taking or recommending nonministerial nature contracting or procurement; administering or monitoring grants or subsidies; planning or zoning; inspecting, licensing, regulating or auditing any person; or any other activity where the official action has an economic impact of greater than a de minimis nature on the interests of any person. "Public employee" shall not include individ- uals who are employed by the State or any political subdivision thereof in teaching as distinguished from administrative duties. The regulations of the State Ethics Commission similarly define the term public employee as above with the additional following criteria: (ii) The following criteria will be used, in part, to determine whether an individual is within the definition of "public employee ": (A) The individual normally performs his responsibility in the field without onsite supervision. (B) The individual is the immediate supervisor of a person who normally performs his responsibility in the field without onsite supervision. Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 5 (C) The individual is the supervisor of a highest level field office. (D) The individual has the authority to make final decisions. (E) The individual has the authority to forward or stop recommendations from being sent to the person or body with the authority to make final decisions. (F) The individual prepares or supervises the preparation of final recommendations. (G) The individual makes final technical recommendations. (H) The individual's recommendations or actions are an inherent and recurring part of his position. (I) The individual's recommendations or actions affect organizations other than his own organization. (iii) The term does not include individuals who are employed by the Commonwealth or a political subdivision of the Commonwealth in teaching as distinguished from administrative duties. (iv) Persons in the following positions are generally considered public employes: (A) Executive and special directors or assistants reporting directly to the agency head or governing body. (B) Commonwealth bureau directors, division chiefs or heads of equivalent organization elements and other governmental body department heads. (C) Staff attorneys engaged in representing the department, agency or other governmental bodies. (D) Engineers, managers and secretary - treasurers acting as managers, police chiefs, chief clerks, chief purchasing agents, grant and contract managers, administrative officers, housing and building inspectors, investigators, auditors, sewer Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 6 51 Pa. Code 511.1. enforcement officers and zoning officers in all governmental bodies. (E) Court administrators, assistants for fiscal affairs and deputies for the minor judiciary. (F) School superintendents, assistant superintendents, school business managers and principals. (G) Persons who report directly to heads of executive, legislative and independent agencies, boards and commissions except clerical personnel. (v) Persons in the following positions are generally not considered public employes: (A) City clerks, other clerical staff, road masters, secretaries, police officers, maintenance workers, construction workers, equipment operators and recreation directors. (B) Law clerks, court criers, court reporters, probation officers, security guards and writ servers. (C) School teachers and clerks of the schools. The question you present must be reviewed under these provisions of the statute and the regulations of the Commission in light of the duties and obligations as described in the your letter and the Agreement. The inquiry necessarily focuses on the job itself and not on the individual incumbent in the position, the variable functions of the position, or the manner in which a particular individual occupying a position may carry out those functions. See Phillips v. State Ethics Commission, 79 Pa. Commw. 491, 470 A.2d 659 (1984); and Mummau v. Renck, 531 Fed. Supp. 402 (E.D. Pa. 1982). As to any disparity between the written Agreement and ex parte statements to the contrary vis -a -vis the duties and responsibilities under the Agreement', the provisions of the Agreement are considered controlling. See, Phillips, supra. Furthermore, since individuals rather than entities file FIS's, it is clear that the corporation A would not have to file an Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 7 FIS. Thus, the question is limited to whether B or any other employee of A are public employees under the Ethics Law. Commonwealth Court in its ruling in Phillips, supra, at page 661, directs that coverage of the Ethics Act be construed broadly, rather than narrowly, and conversely, directs that exclusions from the Ethics Law should be narrowly construed. Based upon this directive and reviewing the definition of "public employee" in the statute and the regulations and opinions of this Commission, in light of the job functions and the information available to us, the necessary conclusion is that certain personnel /employees of A are "public employee[s]" subject to the financial reporting and disclosure requirements of the State Ethics Act. It is clear from the Agreement that B or the assigned employee(s) /personnel of A have the ability to recommend official action with respect to subparagraph (5) within the definition of "public employee" as set forth in the Ethics Law, 65 P.S. §402. Specifically, the duties performed by A personnel at the Authority as delineated above reflect action as to administration and management of the Authority including but not limited to expenditure and fund disbursement as well as assistance in rate schedule preparation and other activities which have an economic impact of greater than a de minimis nature on the interests.of any person. These activities fall within the definition of public employee as contained in the regulations of the Commission in Section 11.1, subparagraph (ii) (A) , (F) , (H) and (iv) (D) . 51 Pa. Code §11.1. Under these circumstances and given the duties and responsibilities as outlined above, the employees /personnel performing such activities are "public employees" as that term is defined in the Ethics Law. The Commission Regulations specifically provide that where a firm provides certain services to a municipal body, only those persons who are primarily responsible for providing the services in the firm need file the FIS's. 51 Pa.Code §15.2(h). Based upon all of the above, B or those employees /personnel of the firm of A who are primarily responsible for providing the aforesaid services to the Authority are "public employees" and are responsible for filing FIS's. The arguments you raise as to "public employee" status shall now be considered. As to the argument that "person" is not used in the definition of "public employee" with A being the only person "employed by" so that B is not an employee, the argument fails. First, the term "employed by" as defined in 51 Pa.Code 11.1 has no application to this matter since.it exclusively relates to the conduct of SEC Commissioners. Second, your argument is one of semantics regarding Confidential Advice of Counsel, 96 -510 February 8, 1996 Page 8 whether the corporation or its employees are employed by the Authority. Such an argument elevates form over substance which is not the law in Pennsylvania. $aehr Brothers v. Commonwealth, 487 Pa. 233, 409 A.2d 326 (1979). As to the argument that the actions taken by A as opposed to B are not nonministerial because A does not have the power to expend funds without the approval of the Authority, the Agreement in total reflects that B or employees do have certain powers which meet the definitional standard in the Ethics Law and Regulations as to the term "public employees." Finally, as to Pallou v. SEC, 496 Pa. 127, 436 A.2d 186 (1981), which you cite in two of your arguments, that case does not afford a solid basis for your position. First, the Supreme Court strictly limited its holding in Ballow to attorneys serving as township solicitors. Id. (Note 3). Second, after Ballou, the Legislature in Act 9 of 1989 acted to specifically include solicitors as among those required to file FIS's, 65 P.S. §402, such that continued reliance on Ballou is questionable at best. As to your argument that the inclusion of filing of part time solicitors evidences a legislative intent to exclude others, that provision is unique to solicitors, that is, although solicitors are required to file FIS's, a question exists as to whether the restrictions of Section 3 apply to solicitors. See, PJS v. SEC, Opinion filed in Commonwealth Court at 230 M.D. 1990 on 1/8/96. Regarding the effects on other professional advisors, such municipal engineers, architects, or accountants are in any event required to file FIS's. The Regulations of the Commission specifically include managers as public employees required to file. 51 Pa.Code §11.1. Finally, as to your arguments concerning privacy and legislative purpose, see Snider v. Thornburgh, 436 A.2d 593 (1981), where the Pennsylvania Supreme Court rejected various arguments against financial disclosure noting: Moreover, the intrusion into appellants' private affairs under the Act is not great; the Legislature's interest in securing public confidence in the government, at all levels, is not small. The financial disclosure requirements of the Act are reasonably tailored to fit a legitimate legislative function. Appellants' claims to the contrary are without merit. Id. at 599. Conclusion: Those employees /personnel of A who perform the activities for the Authority as outlined above are to be considered "public employee[s]." Accordingly, such individuals must file a Confidential Advice of Counsel, 96-510 February 8, 1996 Page 9 Statement of Financial Interests for each year in which they hold the position outlined above and for the year following termination of this service. If they have not already done so, Statements of Financial Interests must be filed within 30 days of this Advice. This Statement of Financial Interests would report information of the prior calendar year. 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 tie 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 thirty (30) 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 mail, delivery service, or by FAX transmission (717- 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. 7cerel Vincent J. Dopko Chief Counsel