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HomeMy WebLinkAbout96-623 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL December 24, 1996 96 -623 Re: Conflict, Public Official /Employee, Business With Which Associated, Borough, Treasurer, Bank Vice - President, Soliciting Bids for a Tax Anticipation Note. This responds to your letter of November 25, 1996 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 Treasurer regarding the Borough's solicitation of bids for a Tax Anticipation Note, where in his private capacity, the Borough Treasurer is the Vice - President of a Bank that is asked by the Borough to submit a bid and that has submitted such bids in the past. Facts: You represent A who is the Treasurer for Borough B. A is also a Vice - President with Bank C. A is not a lending officer at Bank C and has no involvement with lending at that bank. A seeks advice as to his participation in the process of the Borough's public solicitation of a bid for a tax anticipation note (TAN) of approximately $450,000.00. The prevailing bidder would expect to earn approximately $20,000- $25,000 on this account. For the past 25 years, Borough B has used the following process: The Borough budget requires funds for the TAN to be received in January of 1997 and to be repaid on December 31, 1997. The Borough Treasurer prepares a Cash Flow Statement which indicates the maximum deficit that will occur between receipts and expenditures of the Borough's general fund. The Treasurer signs the cash flow document. Borough Council passes a resolution which authorizes the Borough to solicit /advertise bids for the TAN. An advertisement is placed in several newspapers, and letters are sent to banks. It has been the custom of Borough B to send bid letters to the following Banks — Bank D, Bank E, Bank F, and Bank C. Bank D and Bank C have branches in Borough B. The letters are signed by the Borough Manager and Confidential Advice, 96 -623 December 24, 1996 Page 2 include a Cash Flow Statement. A bank responding to the bid may also ask for the proposed budget and a copy of the previous year audit before submitting a bid. Any bank or financial institution making a bid for the TAN must submit a sealed bid to the Borough Manager by the third Wednesday of the month, so that the bids may be opened and announced at the public meeting of Borough Council. During the past few years, the banks invited to bid have submitted bids for the TAN. The bids are opened by the Borough Manager and announced as to the rate and any terms. All bids are turned over to the Finance Committee. The Finance Committee then recommends the bid that should be voted upon. The Finance Committee of Borough B is composed of three members of Borough Council. The Treasurer is not a member of the Finance Committee nor does the Treasurer have a vote. However, a member of the Finance Committee may ask the Treasurer to clarify a financial term, or calculate interest, or some other financial question relating to the TAN. The TAN has been awarded to the lowest bidder, and various banks have won the bid over the years. A seeks advice as to what role he, as Treasurer, is permitted to have in this process. Bank C may submit a bid, as it has in the past, for the TAN. 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. As Treasurer for Borough B, A 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 Confidential Advice, 96 -623 December 24, 1996 Page 3 "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. 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 express 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 Confidential Advice, 96 -623 December 24, 1996 Page 4 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 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. Confidential Advice, 96 -623 December 24, 1996 Page 5 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. Bank C is a business with which A is associated, by virtue of his status as an employee and Vice - President of that financial institution. Consequently, A would have a conflict of interest in matters — including "tax anticipation loans" — where the use of the authority of his public position or confidential information he would have access to by being in that position, would advance the prospects of a private pecuniary benefit to Bank C. In each instance of a conflict of interest, A would be required to abstain from participation and to satisfy the disclosure requirements of Section 3(j) as set forth above. In Juliante, Order 809, the Commission held that the use of authority of office is not limited to mere voting, but "extends to all of the tasks needed to perform the functions of a given position." Id. at 16. Thus, abstention is not limited to apply only as to voting but extends to other forms of participation by public officials /public employees. As for Section 3(f), the requirements of that Section would have to be satisfied as to Tax Anticipation Loans between the Borough and Bank C. 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 Treasurer for Borough B, A is a public official subject to the provisions of the Ethics Law. Bank C is a business with which A is associated. A would have a conflict of interest in matters — including "tax anticipation loans" — where the use of the authority of his public position or confidential information he would have access to by being in that position, would advance the prospects of a private pecuniary benefit to Bank C. In each instance of a conflict of interest, A would be required to abstain from participation and to 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. Confidential Advice, 96 -623 December 24, 1996 Page 6 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. incerely, Vincent .7'. Dopko Chief Counsel