HomeMy WebLinkAbout98-583 FosterJonathan P. Foster, Esquire
407 S. Main St.
Athens, PA 18810
STATE ETHICS COMMISSION
309 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
(717) 783 -1610
1- 800 - 932 -0936
ADVICE OF COUNSEL
July 24, 1998
98 -583
Re: Conflict; Public Official /Employee; Joint Municipal Authority; Executive Director;
Non - Profit Corporation; Incubator Board; Board Member; Loan /Grant Program.
Dear Mr. Foster:
This responds to your letter of June 28, 1998 by which you requested advice
from the State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Law presents any
prohibition or restrictions upon the executive director of a joint municipal authority with
regard to joining the board of a non - profit corporation, where the authority has already
extended loans to the non - profit corporation and expects to be solicited by it for
additional loans.
Facts: As Solicitor for the Northern Bradford Authority ( "the Authority "), you
have been authorized by Ronald Headley ( "Headley "), the Executive Director of the
Authority, to request an advisory from the State Ethics Commission on his behalf.
The Authority is a joint municipal authority formed for the purpose of economic
development within four municipalities, specifically, Sayre Borough, South Waverly
Borough, Athens Borough, and Athens Township.
The Authority has extended loans to the "Sayre Incubator Board," a non - profit
corporation which operates an Incubator Building. It is expected that the Sayre
Incubator Board will request additional loans from the Authority in the future.
The Sayre Incubator Board has asked Headley to join its Board. You ask whether
such would constitute a conflict of interest under the Ethics Law.
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
FAX : (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: sec@state.pa.us
Foster, 98 -583
July 24, 1998
Page 2
affords a defense to the extent the requestor has truthfully disclosed all of the material
facts.
As the Executive Director of the Northern Bradford Authority ( "the Authority "),
Ronald Headley ( "Headley ") is a public official /public employee subject to the
provisions of the Public Official and Employee Ethics Law ( "Ethics 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." Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self - employed individual, holding company,
joint stock company, receivership, trust or any legal entity
organized for profit.
"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
Foster, 98 -583
July 24, 1998
Page 3
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.
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.
Section 3(f) does not operate to make contracting with the governmental body
permissible where it is otherwise prohibited. Rather, where a public official /public
employee, his spouse or child, or a business with which he, his spouse or child is
associated, is otherwise appropriately contracting with the 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, Section 3(f) requires that an
"open and public process" be observed as to the contract with the governmental body.
Pursuant to Section 3(f), an "open and public process" includes:
(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.
Foster, 98 -583
July 24, 1998
Page 4
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.
In each instance of a conflict, 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 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 specific facts which
you have submitted, Section 3(a) of the Ethics Law prohibits a public official /public
employee 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. If
Headley would serve as a Board Member for the Sayre Incubator Board, it would be
deemed a business with which he would be associated as defined in the Ethics Law.
This conclusion is supported by the following analysis.
The definition of the term "business" as set forth in the Ethics Law is very
broad. Novak, Opinion No. 91 -009. As a corporation, the Sayre Incubator Board is
Foster, 98 -583
July 24, 1998
Page 5
clearly within that definition. Moreover, the fact that the Sayre Incubator Board is a
non - profit corporation would not disqualify it as a "business." The word "or" toward
the end of the definition of "business" is disjunctive, and the repeated use of the word
"any" precludes any interpretation that the final phrase "legal entity organized for
profit" modifies the initial word "corporation ": "Any corporation, ... Qr any legal entity
organized for profit." The clear and unambiguous statutory language is that any
corporation, including a non- profit corporation, is a "business." Soltis - Sparano, Order
No. 1045 at 31 (Citing, Confidential Opinion, No. 89 -007; McConahy, Opinion No. 96-
006). Since the Sayre Incubator Board is a "business" as that term is defined in the
Ethics Law, it would clearly be a business with which Headley would be associated if
he would become a Member of its Board.
The facts which you have submitted indicate that the Authority has already
extended loans to the Sayre Incubator Board, and that it is expected that the Sayre
Incubator Board will seek additional loans from the Authority.
Where a loan has been extended by the Authority to the Sayre Incubator Board,
Headley would have a conflict of interest in matters involving such loans if such
matters would financially impact the Sayre Incubator Board. In each instance of a
conflict of interest, Headley would be required to abstain from participation and to fully
satisfy the disclosure requirements of Section 3(j) as set forth above.
With regard to prospective loans to the Sayre Incubator Board, the Commission
recognizes that public concern and criticism may arise if a public official /public
employee, or a business with which he is associated, receives benefits under the very
program administered by the governmental body that he serves. On the other hand,
as a general rule, the Ethics Law was not enacted nor should it be interpreted to
preclude public officials /public employees, or businesses with which they are
associated, from participating in programs which might otherwise be available to them.
Wolff, Opinion 89 -030; Woodring, Opinion 90 -001.
Where the Sayre Incubator Board expects to apply for or has applied for a loan,
in order to avoid such a conflict of interest, Headley must:
1. play no role in establishing the criteria under which the Iaon 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
loan program participation are to be made;
3. play no role in the process of selecting and reviewing applicants or in awarding
loans;
4. use no confidential information acquired during the holding of public
employment for the private pecuniary benefit of the Sayre Incubator Board; and
5. abstain from involvement and satisfy the disclosure requirements of Section 3(j)
as to loan applications of the Sayre Incubator Board as well as
individuals /entities competing for available funds.
As for Section 3(f), it is noted that this sort of program may require participants
to enter into contracts and /or subcontracts. If the Sayre Incubator Board, as a
participant in this Program, would enter into a contract with the Authority, or would
enter into a subcontract with any "person" (as defined above) who has a contract with
Foster, 98 - 583
July 24, 1998
Page 6
the Authority, Section 3(f) of the Ethics Law would impose the following requirements
if the contract or sub - contract would be valued at $500 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 Headley.
Subject to the conditions, restrictions, and qualifications noted above, the Ethics
Law would not preclude Headley's service as Executive Director of the Authority while
serving as a Member of the Sayre Incubator Board.
This Advice is limited to addressing the applicability of Sections 3(a) and 3(f) of
the Ethics Law. It is expressly assumed that there has been no use of authority of
office for a private pecuniary benefit as prohibited by Section 3(a) of the Ethics Law.
Further, you are advised that Sections 3(b) and 3(c) of the Ethics Law provide in part
that no person shall offer to a public official /employee and no public official /employee
shall solicit or accept anything of monetary value based upon the understanding that
the vote, official action, or judgment 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 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 the Executive Director of the Northern Bradford Authority ( "The
Authority "), Ronald Headley ( "Headley ") is a public official /public employee subject to
the provisions of the Ethics Law. If Headley would serve as a Board Member for the
"Sayre Incubator Board," it would be deemed a business with which he would be
associated as defined in the Ethics Law. Where a loan has been extended by the
Authority to the Sayre Incubator Board, Headley would have a conflict of interest in
matters involving such loans if such matters would financially impact the Sayre
Incubator Board. In each instance of a conflict of interest, Headley would be required
to abstain from participation and to fully satisfy the disclosure requirements of Section
3(j) as set forth above. With regard to prospective loans, where the Sayre Incubator
Board expects to apply for or has applied for a loan, in order to avoid a conflict of
interest, Headley must play no role in establishing the criteria under which the program
would operate, play no role in implementing the criteria for selecting applicants, play
no role in selecting or reviewing applicants, use no confidential information for the
private pecuniary benefit of the Sayre Incubator Board, and abstain from involvement
and satisfy the disclosure requirements of Section 3(j). The requirements of Section
3(f) of the Ethics Law noted above, to the extent applicable, must be observed.
Subject to the conditions, restrictions, and qualifications noted above, the Ethics Law
would not preclude Headley's service as Executive Director of the Authority while
serving as a Board Member for the Sayre Incubator Board. Lastly, the propriety of the
proposed conduct has only been addressed under the Ethics Law.
Foster, 98 -583
July 24, 1998
Page 7
Pursuant to Section 7(1 1), 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 inust 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.
Sig rely,
T AI°
Vincent J. Dopko
Chief Counsel