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HomeMy WebLinkAbout97-529 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL February 21, 1997 97 -529 Re: Conflict, Public Official/ Employee, Borough, Council Member, Non - Profit Corporation, Community Development, Loan /Grant Program. This responds to your letters of January 16, January 20, and January 27, 1997, in which you requested confidential advice from the State Ethics Commission. Issue: Whether, pursuant to the Public Official and Employee Ethics Law, a Borough Council Member may apply for and receive Main Street development and revitalization loans /grants administered by a non - profit corporation separate from the Borough, where the Borough is a member of the non - profit corporation, makes yearly contributions to the finances of the corporation, and provides payroll services to the corporation, and where certain Borough officers are ex- officio members of the corporation's Board of Directors and serve on its loan /grant application reviewing committee. Facts: You have been authorized by Mr. A to request an advisory on his behalf. Mr. A is a Council Member for Borough B. Partnership C is a non - profit corporation that was formed for the promotion of community development. One of the major goals of Partnership C is to assist Main Street development and revitalization. Partnership C is independent of the Borough in its management. The Borough makes an annual contribution in the amount of D Dollars from the Borough's General Fund to the finances of Partnership C. Partnership C is viewed by the Borough as an economic development initiative. Because of its annual contribution, the Borough is a member of Partnership C. Partnership C has its own Board of Directors who are elected by the membership. Individuals or businesses may become members of Partnership C by paying a membership fee. Currently there are in excess of one hundred members of the Partnership including the Borough, individuals, partnerships, and corporations. Three Borough officials, specifically the Mayor, the Borough Manager and one Council Member, are ex- officio members of the Board of Directors of Partnership C. Additionally, to reduce administrative costs, the staff of Partnership C is paid through the Borough payroll office but with funds from Partnership C and not the Borough. Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 2 Partnership C has three types of grant /loan programs for Main Street revitalization. Property or business owners may seek a loan /grant by applying to Partnership C. The applications are reviewed by a committee of the members of Partnership C. Any property owner or business owner in the Main Street area is encouraged to apply. The first type of loan is a low interest loan. The Committee reviews the proposed use and recommends the applicant to a local bank for a low interest loan. The final decision on the loan is solely that of the bank. The second type of loan is a historic grant loan. Partnership C has applied and received grant money from Commission E. A grant of up to $5,000 or 25% of the project can be made to the applicant if the project is approved by the reviewing Committee of Partnership C. The third source of funds is Grant F. Up to $2,500 or 50% of the project can be awarded under this grant. Money for this grant was obtained through Department G by a Borough application. The Borough turned the money over to Partnership C for administration. Partnership C's Committee which reviews the loan /grant applications currently includes two of the ex officio members (the Mayor and a Council Member) who are involved with the Borough. You state that their membership on the reviewing committee was not the result of their roles with the Borough. Mr. A would like to purchase property in the Main Street area and apply for a loan /grant from Partnership C. You pose the following specific inquiries: 1. Can Mr. A apply for and receive a low interest loan without being in violation of the Ethics Law? 2. Can Mr. A apply for and receive a grant from monies obtained by Partnership C from Commission E and not be in violation of the Ethics Law? 3. Can Mr. A apply for and receive a grant under Grant F without being in violation of the Ethics Law? Discussion: As a Council Member for Borough B, Mr. A is a "public official" as that term is defined in the Ethics Law and hence he is subject to the provisions of that Law. 65 P.S. §402; 51 Pa. Code § 1 1.1. Sections 3(a), 3(f), and 3(j) of the Ethics Law provide: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. (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 Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 3 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. (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. 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 or 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. The following terms are defined in the Ethics Law: Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 4 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. "Governmental body with which a public official or public employee is or has been associated." The governmental body within State government or a political subdivision by which the public official or employee is or has been employed or to which the public official or employee is or has been appointed or elected and subdivisions and offices within that governmental body. "Immediate family." A parent, spouse, child, brother or sister. "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. The Commission must observe the stated purpose of the Ethics Law which is . to strengthen the faith and confidence of people in their government by assuring the public that the financial interests of the holders of or candidates for public office do not present a conflict with the public trust. In applying the above quoted provisions of the Ethics Law to the instant matter, for purposes of the Ethics Law, the analysis would be identical as to each of the three types of loan /grant programs administered by the Partnership, such that your specific inquiries need not be addressed individually. Section 3(f) of the Ethics Law shall first be addressed. The facts which you have submitted do not reveal whether these loan /grant programs involve any contracts with the Borough itself. If there are no such contracts Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 5 and if there would be no such contracts involving the Borough, Section 3(f) would not apply. On the other hand, if a contract with the Borough is or would be involved, assuming that a contract or sub - contract meeting the criteria for applicability of Section 3(f) would be made with Mr. A, Section 3(f) of the Ethics Law would impose the following requirements: 1. prior public notice of the contract possibility; 2. public disclosure of applications and contracts considered; 3. public disclosure of the award of the contracts; and 4. no supervisory or overall responsibility for the implementation or administration of the contract or sub - contract by the public official /employee. Turning to the propriety of the proposed conduct under Section 3(a), it is clear that the Ethics Law, and in particular Section 3(a), was primarily designed to restrict the activity of a public official or employee from using the authority of office for private pecuniary benefit. However, as a general rule, the Ethics Law was not enacted nor should it be interpreted to preclude public officials or employees from participating in programs which might otherwise be available to them as citizens. Wolff, Opinion 89 -030; Woodrinq, Opinion 90 -001. There is generally a concern that arises where a public program, funded with public monies and administered through a public agency, political subdivision, or governmental body is also available to public officials or employees of that agency or governmental body. Public concern and criticism may arise if a public official or public employee who serves a governmental body receives benefits under a program of this nature. In such cases, in order to insure that a public official or employee is not in a conflict when he seeks to participate in such a grant program, he must observe the following: 1. play no role in establishing the criteria under which the program is to operate, particularly with reference to the structure or administration of the program; 2. play no role in establishing or implementing the criteria by which selections for program participation are to be made; 3. play no role in the process of selecting and reviewing applicants or in awarding grants or funds; 4. use no confidential information acquired during the holding of public office or public employment to apply for or to obtain such funds, grants, etc., and 5. abstain, publicly disclose and file a memorandum with the person responsible for recording the minutes under Section 3(j) of the Ethics Law in cases where the public official/ employee is associated with administering the grant or rehabilitation program not only as to his own application but as to similarly situated individuals with whom the public official /employee might be competing Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 6 for available funds. In cases where Section 3(f) is applicable, the public official /employee would be prohibited from any supervisory or overall responsibility as to the contract or program. The above criteria are applied to eliminate the possibility that a public official /employee who is seeking such funds or seeking to participate in these programs would be in a position to insure that the grant funds or the program benefits would be available for his own benefit. Thus, a public official or public employee in such a situation should refrain from participating in making decisions or recommendations about the program and regarding distribution of the limited funds which might be available as a result of such a program. In this case, it would appear that the Borough itself would play no role in the administration of these grants and loans. However, the fact that the Partnership as a non - Borough entity administers these programs, and that Mr. A as a Borough Council Member would have official involvement in matters pertaining to the Partnership and possibly Borough officials who would review his loan /grant application(s), would present additional conflict of interest concerns. In analogous situations, the Commission has noted that official action where such a circular relationship exists presents a conflict of interest. See, Bassi, Opinion No. 86- 007 -R; Woodrinq, Opinion No. 90 -001. Accordingly, Mr. A would have a conflict of interest in matters before the Borough pertaining to Partnership C and /or any Borough officials who would participate as to his application(s) with the Partnership. In each instance of a conflict of interest, Mr. A would be required to abstain fully and to fully satisfy the disclosure requirements of Section 3(j). Expressly conditioned upon the assumption that Mr. A acts in conformity with the above criteria, he would be able to apply for and participate in the benefits associated with the loan /grant Program(s) without transgressing Section 3(a). 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 Code of Federal Regulations or the respective municipal code. Conclusion: As a Council Member for Borough B, Mr. A is a "public official" subject to the provisions of the Public Official and Employee Ethics Law. Pursuant to Section 3(a) of the Ethics Law, Mr. A could apply for grant(s) /loan(s) from Partnership C provided he played no role in establishing the criteria under which the program(s) would operate, played no role in implementing the criteria for selecting applicants, played no role in selecting or reviewing applicants, used no confidential information and had no involvement with the administration of the program(s), and abstained fully and satisfied the disclosure requirements of Section 3(j) as to matters involving Partnership C as well as matters involving any Borough officials who would participate as to his application(s) with the Partnership. The requirements of Section 3(f) of the Ethics Law noted above, to the extent applicable, must be observed. 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 Confidential Advice of Counsel, 97 -529 February 21, 1997 Page 7 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. Sincerely, t ; ` ) " JrN o o r tito Vincent J. opko Chief Counsel