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
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