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HomeMy WebLinkAbout97-571 ShenoyNarasimha B. Shenoy, P.E. President S &G Electric, Inc. 2550 Blvd. of the Generals Suite 190 Norristown, PA 19403 STATE ETHICS COMMISSION 309 FINANCE BUILDING . P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL May 22, 1997 97 -571 Re: Conflict, Grant /Loan Program, Participation by Public Official/ Employee, Board Member, Pennsylvania Minority Business Development Authority, Business Loan. Dear Mr. Shenoy: This responds to your letter of April 24, 1997, in which you requested advice from the State Ethics Commission. Issue: Whether, pursuant to the Public Official and Employee Ethics Law, a Member of the Pennsylvania Minority Business Development Authority may participate in a loan program administered by that Authority. Facts: As a Member of the Pennsylvania Minority Business Development Authority (PMBDA) who acts as an alternate for Representative John Perzel, you request an advisory from the State Ethics Commission. You state that you own 100% of the stock in a corporation that has been certified as a small and disadvantaged business by several state and federal certification authorities and that you are now qualified to receive a low interest loan from PMBDA. You intend to apply for a $ 150,000 PMBDA loan and you inquire as to the propriety of doing so, both under the law and the Governor's Code of Conduct. You state that the qualifications for the loan are set by PMBDA charter and cannot be altered by the Board. It is your contention that there is therefore no conflict of interest for you. You specifically ask whether you can remain on the Board, apply for the loan and, if the application is approved by the committee and forwarded to the Board, refrain from attending that meeting. Alternatively, you ask whether you can resign from the Board and apply for the loan, or if there is any other avenue available to you to pursue this loan. Shenov, 97 -571 May 22, 1997 Page 2 In addition to the facts which you have submitted, the following provisions from the Pennsylvania Minority Business Development Authority Act, 73 P.S. §390.1 gt sm., are noted: §390.7. Activities and powers of the authority, specific The authority shall have the power: (1) To lend money to and to guarantee, endorse or act as surety on the bonds, notes, contracts or other obligations of, or otherwise assist financially, a minority business enterprise, and to establish and regulate the terms, security and conditions with respect to any such loans or financial assistance and the charges for interest and service connected therewith, all at the sole discretion of the board of directors. (2) To guarantee up to fifty per cent of equity investments in a minority business enterprise made by any person, partnership, corporation or other entity not then an equity holder or involved in the management of the minority business enterprise or employed by said minority business enterprise or in any way related to said enterprise, its current shareholders, officers or other management personnel, any such guarantees to be made on such terms and conditions as may be determined by the board of directors in its sole discretion. (3) To guarantee up to ninety per cent of bid and performance bonds needed by a minority business enterprise to obtain a contract with a Commonwealth agency pursuant to specifications -of the agency or the Department of General Services. (4) To provide short-term loans to minority contractors for working capital, up to fifty per cent of the value of the contract, not to exceed fifty thousand dollars ($50,000). Minority business enterprises which wish to participate may file an application to the board for assistance under this section, if the assistance is directly related to a Commonwealth contract on which the minority business enterprise is qualified to bid and intends to bid. (5) To contract with private firms to provide technical and managerial assistance to applicants for and recipients of financial assistance provided under this act. 73 P.S. §390.7. §390.12. Conflict of interest prohibited No member of the authority or officer or employee thereof shall either directly or indirectly be a party to or be in any manner interested in any contract or agreement with the authority for any matter, cause or thing whatsoever by reason whereof any liability or indebtedness shall in any way be created against such authority. If any contract or agreement shall be made in violation of the provisions of this section the same shall be null and void and no action shall be maintained thereon against such authority. Shenoy, 97 -571 May 22, 1997 Page 3 73 P.S. §390.12. Discussion: It is initially noted that the State Ethics Commission does not have the express statutory jurisdiction to interpret the Governor's Code of Conduct or laws other than the Ethics Law. Consequently, your inquiry can and shall only be addressed under the Ethics Law. Nevertheless, you are strongly cautioned that the above quoted provisions from the Pennsylvania Minority Business Development Authority Act raise serious questions as to whether you, as a Member of the Authority, may apply for a PMBDA loan. In Tight of §390.7 quoted above which reflects that the Authority, in providing various forms of financial assistance to a minority business enterprise, may incur liability or indebtedness, and in light of the conflict of interest provision at §390.12, which on its face prohibits any member of the Authority from either directly or indirectly being a party to or being in any manner interested in any contract or agreement with the Authority which would result in the creation of any liability or indebtedness against the Authority, it is strongly recommended that you obtain legal advice as to the applicability of the Pennsylvania Minority Business Development Authority Act to your proposed submission of an application for a PMBDA loan. Turning to the Ethics Law, as a Member of the Pennsylvania Minority Business Development Authority (PMBDA), you are a "public official" as that term is defined in the Ethics Law and hence you are subject to the provisions of that Law. 65 P.S. §402; 51 Pa. Code §11.1. 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 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 Shenov, 97 -571 May 22, 1997 Page 4 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 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. The following terms are defined in the Ethics Law: 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. Shenoy, 97 -571 May 22, 1997 Page 5 "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. "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. We 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, we will first consider the provisions of Section 3(f) of the Ethics Law. Since PMBDA is the governmental body with which you are associated, Section 3(f) would apply in this case. Assuming that a contract or sub - contract would be made between PMBDA and you and /or your business pursuant to the provisions of this loan program, Section 3(f) of the Ethics Law would impose the following requirements if the contract or sub- contract is $500.00 or more: 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. You are cautioned that Section 3(f) does not operate to make contracting permissible where it is otherwise prohibited. Thus, if the Pennsylvania Minority Business Development Authority Act, for example, would prohibit your contracting with PMBDA through the loan program, Section 3(f) of the Ethics Law would not operate to make that contracting permissible. To the contrary, Section 3(f) operates to impose additional restrictions to contracting with the governmental body where it is otherwise permissible and involves the public official /public employee, his spouse or child, or a business with which he, his spouse, or child is associated. We will now address the propriety of the proposed conduct under Section 3(a) of the Ethics Law. In this review, we note and recognize the 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. We recognize the public concern Shenov, 97 -571 May 22, 1997 Page 6 and criticism that may arise if a public official or public employee who serves a governmental body receives benefits under a program of this nature. 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, we believe that 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. In order to insure that a public official or employee is not in a conflict when he seeks to participate in a loan program administered by his own governmental body, 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 loan funds; 4. use no confidential information acquired during the holding of public office or public employment to apply for or to obtain such funds; 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 loan program not only as to his own application but as to similarly situated individuals with whom the public official /employee might be competing 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. Through application of the above criteria, we seek 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 loan 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. Expressly conditioned upon the assumption that you are in conformance with the above criteria, the Ethics Law itself would not preclude you from applying for and participating in the benefits associated with the PMBDA loan program. As for your three specific inquiries, the first has been fully addressed above. With regard to your second specific inquiry, the Ethics Law itself would not require that you resign from the Board to apply for the loan, but the Ethics Law would require that you satisfy the above criteria. Your third specific inquiry need not be addressed in light of the answers to your other specific inquiries. Shenov, 97 -571 May 22, 1997 Page 7 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 Governor's Code of Conduct. It has been specifically recommended that you obtain legal advice as to the propriety of your proposed conduct under the Pennsylvania Minority Business Development Authority Act. Conclusion: As a Member of the Pennsylvania Minority Business Development Authority ( PMBDA), you are a public official subject to the provisions of the Ethics Law. Section 3(a) of the Ethics Law would not preclude you from applying for a loan through PMBDA provided you played no role in establishing the criteria under which the program 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 finally had no involvement with the administration of the program. The requirements of Section 3(f) of the Ethics Law would have to be satisfied. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law, but it has been specifically and strongly recommended that you obtain legal advice as to the propriety of your proposed conduct under the Pennsylvania Minority Business Development Authority Act. 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 . Dop o Chief Counsel