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HomeMy WebLinkAbout97-545 EspositoJoseph J. Esposito Prudential Securities, Inc. 60 Public Square 7th Floor Wilkes- Barre, PA 18701 STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL March 19, 1997 97 -545 Re: Conflict, Public Official /Employee, Candidate, Borough Council Member, Investment Management Consultant, Police Pension Account. Dear Mr. Esposito: This responds to your letter of February 18, 1997 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 with regard to doing consulting work as to the Borough's Police Pension Account. Facts: You are currently running for the office of Council Member for the Borough of Exeter. In your private capacity you are an Investment Management Consultant for Prudential Securities, Inc. (Prudential). In the course of business, you were hired to do consulting work for the Borough's Police Pension Account. You state that you find and select the proper money manager and are not involved in the selection or trading of the securities or in the allocation of funds. You ask whether your consulting work would create a conflict of interest for you under the Ethics Law if you are elected as a Borough Council Member. 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. Esposito, 97 -545 March 19, 1997 Page 2 If elected to the position of Council Member for the Borough of Exeter, you would be a public official as that term is defined under the Ethics Law, and hence you would be 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. "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. "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 consideration of his current public employment with the Commonwealth or a political subdivision. Esoosito, 97 -545 March 19, 1997 Page 3 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 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. li. Esposito, 97 -545 March 19, 1997 Page 4 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. 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 voting 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. As your employer, Prudential is a business with which you are associated as defined in the Ethics Law. Pursuant to Section 3(a) of the Ethics Law, you would have a conflict of interest in matters involving services provided to the Borough by your employer, Prudential, and /or by you. For example, you would have a conflict in matters involving the Esposito, 97 -545 March 19, 1997 Page 5 Borough's continued securing of consulting services as to the Borough's Police Pension Account and its payment for such services rendered. You are further advised that the use of authority of office is more than the mere mechanics of voting and encompasses all of the tasks needed to perform the functions of a given position. See, Juliante, Order No. 809. Use of authority of office includes discussing, conferring with others, lobbying for a particular result and /or any other use of the authority of office in which the result would be a private pecuniary benefit to a business with which a public official or a member of his immediate family is associated. Thus, in each instance of a conflict of interest, you would be required to abstain fully from participation and to satisfy the disclosure requirements of Section 3(j) As for Section 3(f), the restrictions of that provision would be applicable to a contract between the Borough and you or between the Borough and your employer where the value of the contract would be $500 or more. It is important to understand that Section 3(f) does not operate to make contracting permissible where it is otherwise prohibited; rather, Section 3(f) operates to impose additional restrictions under the Ethics Law if contracting is otherwise permissible. Parenthetically, although the contracting in question would not be prohibited under the Ethics Law provided the requirements of Sections 3(a), (f) and (j) are satisfied, a problem may exist as to such contracting under the Borough Code which provides as follows: §46404. Penalty for personal interest in contracts or purchases Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. But in the case of a councilman or mayor, if he knows that he is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who shall knowingly violate the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($1000), or not exceeding Esposito, 97 -545 March 19, 1997 Page 6 one hundred eighty days' imprisonment, or both. 1966, Feb. 1, P.L. (1965) _, No. 581, §1404. 53 P.S. §46404. 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, although it is recommended that legal advice be obtained as to the applicability of 53 P.S. §46404. Conclusion: If elected to the position of Council Member for the Borough of Exeter, you would be a public official subject to the provisions of the Ethics Law. Your employer, Prudential Securities, Inc. (Prudential), is a business with which you are associated. Pursuant to Section 3(a) of the Ethics Law, you would have a conflict of interest in matters involving services provided to the Borough by your employer and /or by you. Examples where such conflicts of interest would exist would include matters involving the Borough's continued securing of consulting services as to the Borough's Police Pension Account and its payment for such services rendered. In each instance of a conflict of interest you would be required to abstain fully and to satisfy the disclosure requirements of Section 3(j). The restrictions of Section 3(f) must be observed to the extent applicable. 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. cerely, Vincent J. Dopko Chief Counsel ato40