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HomeMy WebLinkAbout96-538 FosterJonathan P. Foster, Esquire Foster & Hartley 320 South Main Street PO Box 278 Athens, PA 18810 Dear Mr. Foster: STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL April 9, 1996 96 -538 Re: Conflict, Public Official /Employee, Borough Council Member, Non - profit Corporation, Board Member, Incubator. This responds to your letter of March 13, 1996 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 borough council member in matters pertaining to a UDAG loan for an "incubator" project where the council member also serves on the board of directors of the non - profit corporation which was formed to purchase the "incubator" and which is seeking the UDAG loan. facts: As the Solicitor for Sayre Borough, you request an advisory on behalf of David Haines, who is a Member of the Sayre Borough Council. Mr. Haines also serves on the Board of Directors of Sayre Incubator, Inc., a non - profit corporation which was formed as part of the Sayre Enterprise Zone Program which is administered by the Department of Community Affairs. Sayre Incubator, Inc.'s major project is to purchase an outdated industrial building in Sayre Borough and turn the empty space into an "incubator" which will generate businesses and future employment in the Borough. As a Member of the Board of Directors of Sayre Incubator, Inc., Mr. Haines is not compensated and he will receive no personal financial benefit from the incubator. At the present time, Sayre Incubator, Inc. has requested a $600,000 UDAG loan from the Borough for the purposes of purchasing and renovating the building. You pose the following specific questions: (1) Whether it would be a conflict of interest for Mr. Haines to vote on the loan request; and (2) If Mr. Haines resigned from the Sayre Incubator Board, whether there would be any waiting period before he could participate and vote on the loan request. Foster /Haines, 96 -538 April 9, 1996 Page 2 Discussion: It is initially noted that pursuant to Sections 7(10) and 7(1 1) 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. It is further initially noted that your request for advice may only be addressed with regard to prospective conduct. A reading of Sections 7(10) and 7(1 1) of the Ethics Law makes it clear that an opinion or advice may be given only as to prospective (future) conduct. If the activity in question has already occurred, the Commission may not issue an opinion or advice but any person may then submit a signed and sworn complaint which will be investigated by the Commission if there are allegations of Ethics Law violations by a person who is subject to the Ethics Law. As a Member of the Sayre Borough Council, David Haines 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 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. Foster /Haines, 96 -538 April 9, 1996 Page 3 "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "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. 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(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. 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. Foster /Haines, 96 -538 April 9, 1996 Page 4 In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Law, then in that event participation is permissible provided the disclosure requirements noted above are followed. See, Mlakar, Advice 91- 523 -S. 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. Sayre Incubator, Inc. is a "business" as that term is defined in the Ethics Law. The fact that it is a non - profit corporation does not preclude this determination. See, Area Loan Organizations Under Caoital Loan Fund Act, Opinion 95 -006. Given that David Haines is a Member of the Board of Directors of Sayre Incubator, Inc., it is a business with which he is associated. In response to your first specific inquiry, you are advised that to the extent that the approval of a UDAG loan would result in a private pecuniary benefit to Sayre Incubator, Inc., David Haines would have a conflict of interest. Some examples of the sort of private pecuniary benefit which could give rise to a conflict of interest would include financing or terms which would otherwise not be available. In each instance of a conflict of interest, Mr. Haines would be required to abstain fully from participation and he would also be required to fully satisfy the disclosure requirements of Section 3(j) as set forth above. As for your second specific inquiry, you are advised that Section 3(a) of the Ethics Law does not provide for any such "waiting period." Conditioned upon the assumptions that there would be no use of confidential information received by being in his public position; that there would be no use of the authority of office by Mr. Haines until after he resigned from the Board of Sayre Incubator, Inc.; and that such resignation would in fact be legitimate and that there would not otherwise be a prohibited private pecuniary benefit transgressing Section 3(a), David Haines could vote on the UDAG loan request following his resignation from the Board of Directors of Sayre Incubator, Inc. See, De Lano, Opinion 88 -008. 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 Borough Code. Conclusion: As a Member of the Sayre Borough Council, David Haines is a public official subject to the provisions of the Ethics Law. As a member of the Board of Directors for Sayre Incubator, Inc., David Haines would have a conflict of interest as to the prospective UDAG loan from the Borough to Sayre Incubator, Inc. to the extent that such would result in a private pecuniary benefit to said corporation. In Foster /Haines, 96 -538 April 9, 1996 Page 5 each instance of a conflict of interest, Mr. Haines would be required to abstain fully from participation and he would be required to fully satisfy the disclosure requirements of Section 3(j). Based upon the facts which have been submitted and subject to the numerous express conditions and restrictions noted above, David Haines could participate and vote as to the UDAG loan, without any "waiting period," if he would first resign from the Board of Directors of Sayre Incubator, Inc. 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. This letter is a public record and will be made available as such. 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 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. erely, Vincent J. Dopko Chief Counsel ceo