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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