HomeMy WebLinkAbout98-605 AmrheinSTATE ETHICS COMMISSION
309 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
(717) 783 -1610
1- 800 - 932 -0936
ADVICE OF COUNSEL
October 14, 1998
Ronald D. Amrhein, Jr., Esquire
Rodgers, Perfilio, Heiman & Sewinsky, P.C.
29 Vine Ave.
Sharon, PA 16146 -1793
98 -605
Re: Conflict; Public Official /Employee; For - profit Corporation; Non - profit Corporation;
Charter School; Board of Directors; Contracting; Owner; Real Estate; School
Building; Rent.
Dear Mr. Amrhein:
This responds to your letter of September 10, 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 owner of an apartment building /office complex and
school structure, with regard to forming a for - profit corporation, of which he would be
the principal shareholder, to provide services to a charter school run by a non - profit
corporation that he would also form, where the charter school would lease, rent, or
purchase the aforementioned buildings.
Facts: You request an advisory from the State Ethics Commission on behalf of
Joseph Dyll ( "Dyll "), who is the owner of an apartment building /office complex, as well
as a separate school structure. Dyll wants to form a charter school. He plans to house
the school, its support staff, and adjunct facilities in the aforementioned buildings which
he owns. You state that it would appear to be a violation of the Ethics Law for Dyll to
be a member of the Board of Directors of the charter school while receiving rent from
the charter school for the school's use of those buildings. You have submitted a
proposed plan to circumvent the perceived problem.
Dyll proposes to form two corporations. The first would be a for - profit
corporation, with a title such as "Dyll Education Support Services." Dyll would be the
principal shareholder, but not the exclusive shareholder, in the corporation. It is expected
that all other shareholders would be family members of Dyll. The corporation's
operations would be controlled by a president, who would be elected by majority vote
of the shareholders on an annual basis. The corporation's by -laws would expressly
prohibit Dyll and /or any of his immediate family members from serving as president. This
corporation would provide consulting services to the Board of Directors of the charter
school regarding curriculum, procurement, expenditures, management and enrollment.
It would also provide services of hiring and training teachers, administrators and staff
and contracting their services to the charter school. These services would be provided
upon acceptance and approval of the charter school's Board of Directors.
FAX : (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: sec@state.pa.us
Amrhein, 98 -605
October 14, 1998
Page 2
The second corporation which Dyll proposes to form would be a non - profit
corporation. The non - profit corporation would run the charter school. This corporation's
Board of Directors would consist of no less than seven members. The President of the
for - profit corporation would always be a Member and the Chairperson of the non - profit
corporation. Five of the other members would be "representative of the surrounding
community." The remaining member would be "representative of the teachers and staff."
The initial members of the Board would be appointed for a one -year term by the
President of the for- profit corporation. Thereafter, five members would be chosen by the
parents of the students through an open nomination process and majority vote, with the
family of each student enrolled in the charter school having one vote for each such seat.
The remaining member (representative of the teachers and staff) would be chosen by a
majority vote of the teachers and staff. Members would serve staggered three -year
terms.
The non - profit corporation, through its Board of Directors, would have the option
to accept or refuse the services offered by the for - profit corporation.
It is your belief that, by setting up the charter school in this manner, the for - profit
corporation would not be subject to the Ethics Law and therefore, if the Board of
Directors of the non - profit corporation which runs the charter school would decide to
utilize the services of the for - profit corporation, Mr. Dyll as a shareholder of the for - profit
corporation would not be in violation of the Ethics Law. You further contend that Dyll
would not be in violation of the Ethics Law if the Board of Directors of the non - profit
corporation would determine to lease, rent or purchase for the use of the charter school
the apartment building /office complex and /or school structure owned either by Dyll or
by a second for - profit corporation of which Dyll would be a shareholder.
You request an advisory from the State Ethics Commission as to whether Dyll
would be in violation of the Ethics Law should he follow the aforementioned plan.
Discussion: Three points must be initially noted.
First, it is noted that pursuant to Sections 7(10) and 7(11) 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.
Second, it is noted that, pursuant to the same aforesaid Sections of the Ethics
Law, an opinion /advice may be given only as to prospective (future) conduct. If the
activity in question has already occurred, the Commission may not issue an
opinion /advice but any person may then submit a signed and sworn complaint which will
be investigated by the Commission if there are allegations of Ethics Law violations by
a person who is subject to the Ethics Law. To the extent you have inquired as to
conduct which has already occurred, such past conduct may not be addressed in the
context of an advisory opinion. However, to the extent you have inquired as to future
conduct, your inquiry may, and shall be addressed.
Third, it is noted that your request for an advisory is limited to seeking advice on
behalf of Joseph Dyll ( "Dyll "), as to his conduct. You have posed no questions as to the
conduct of others, and indeed, there is no indication from the documents which you
have submitted that you would have standing to seek an advisory on behalf of anyone
other than Dyll himself. Therefore, this Advice of Counsel is strictly limited to providing
Amrhein, 98 -605
October 14, 1998
Page 3
advice as to the proposed conduct of Joseph Dyll, based upon the facts which you have
submitted. See, 65 P.S. § §407(10), (11).
The following provisions of the Ethics Law are pertinent to your request.
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. Section
3(a) 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.
"Immediate family." A parent, spouse, child, brother
or sister.
"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.
Amrhein, 98 -605
October 14, 1998
Page 4
"Financial interest." Any financial interest in a legal
entity engaged in business for profit which comprises more
than 5% of the equity of the business or more than 5% of
the assets of the economic interest in indebtedness.
"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.
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.
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:
Amrhein, 98 -605
October 14, 1998
Page 5
(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.
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 instant matter, Sections
3(a), 3(f), and 3(j) — by their own terms — apply to restrict public officials and public
employees. Thus, in order for Sections 3(a), 3(f), and /or 3(j) to apply to Dyll, he would
have to be a "public official" or "public employee" as defined by the Ethics Law:
Amrhein, 98 -605
October 14, 1998
Page 6
Section 2. Definitions
"Public Official." Any person elected by the public or
elected or appointed by a governmental body, or an
appointed official in the Executive, Legislative or Judicial
Branch of the State or any political subdivision thereof,
provided that it shall not include members of advisory boards
that have no authority to expend public funds other than
reimbursement for personal expense, or to otherwise exercise
the power of the State or any political subdivision thereof.
"Public employee." Any individual employed by the
Commonwealth or a political subdivision who is responsible
for taking or recommending official action of a nonministerial
nature with regard to:
(1) contracting or procurement;
(2) administering or monitoring grants or
subsidies;
(3) planning or zoning;
(4) inspecting, licensing, regulating or
auditing any person; or
(5) any other activity where the official
action has an economic impact of
greater than a de minimis nature on the
interests of any person.
"Public employee" shall not include individuals who are
employed by the State or any political subdivision thereof in
teaching as distinguished from administrative duties.
65 P.S. §402; See, also, 51 Pa. Code § 1 1.1.
As a matter of law, trustees of a charter school are public officials. 24 P.S. §17-
1715-A(11). However, under the facts which you have submitted, Dyll would not serve
as a trustee or in any other capacity with the charter school. Moreover, in applying the
definitions of "public official" and "public employee" to the facts which you have
submitted, it is clear that Dyll would not fall within either of those definitions because
he would neither be employed by the Commonwealth or a political subdivision nor would
he be elected or appointed by anyone.
The necessary conclusion is that as the principal shareholder of the for - profit
corporation, Dyll would not be considered a "public official" or "public employee" as
defined in the Ethics Law. Thus, his conduct would not be subject to restriction by
Sections 3(a), 3(f), or 3(j) of the Ethics Law. The only provisions of the Ethics Law which
would apply to Dyll would be Sections 3(b) and 3(c) which apply to everyone. As noted
above, Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer
to a public official /public employee anything of monetary value and no public
official /public employee shall solicit or accept anything of monetary value based upon the
understanding that the vote, official action, or judgement of the public official /public
employee would be influenced thereby.
Amrhein, 98 -605
October 14, 1998
Page 7
You are reminded that this advice is limited to addressing the proposed conduct
of Joseph Dyll under the facts which you have submitted. You are cautioned that under
those submitted facts, there is a likelihood that others involved in this scenario would
be subject to the Ethics Law and would have potential conflicts of interest under the
Ethics Law.
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.
Conclusion: As the incorporator and principal shareholder of a for - profit
corporation which would seek to provide services to the Board of Directors of a charter
school, also formed by him, Joseph Dyll would not be a "public official" or "public
employee" under the Ethics Law, since under the facts as submitted, he would not serve
as a trustee or in any other capacity with the charter school and would neither be
employed by the Commonwealth or a political subdivision nor elected or appointed by
anyone. In the capacity as the principal shareholder of the for - profit corporation, Joseph
Dyll would not be subject to the restrictions of Sections 3(a), 3(f), or 3(j) of the Ethics
Law. Dyll would be subject to the restrictions of Section 3(b) and 3(c) of the Ethics Law
which apply to everyone. This advisory is strictly limited to addressing the proposed
conduct of Joseph Dyll under the facts which have been submitted. 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 forma/ 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.
S rely,
Vincent J. opko
Chief Counsel