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HomeMy WebLinkAbout98-612 OrloffRichard W. Orloff P.O. Box 622 Quakertown, PA 18951 Dear Mr. Orloff: STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 (717) 783 -1610 1 -800- 932 -0936 ADVICE OF COUNSEL November 20, 1998 98 -612 Re: Conflict; Public Official /Public Employee; Second Class Township; Supervisor; Private Employment or Business; Consultant. This responds to your letter of October 22, 1998, by which you requested advice from the State Ethics Commission. Issue: Whether a second class township supervisor is prohibited or restricted by the Public Official and Employee Ethics Law from working with, being employed by or associated with a business /person in a private capacity in addition to public service. Facts: In December of 1996 you resigned your position as an Internal Auditor with Lehigh Valley Hospital to begin your own consulting practice. You have a degree in Accounting, an MBA in Finance, and a certification in Internal Auditing, specializing in internal controls, and operations and financial analysis. You provide services in financial and operations management and consulting. Your "project engagements" have been with private entities including a healthcare company, a manufacturer, and subcontracting for another consultant with a mid - western utility company. You have served as one of three Supervisors in Richland Township ( "Township ") since 1996. Upon assuming office, you became aware of the poor state of financial accounting and management in the Township and tried unsuccessfully for two years to have the financial and reporting systems "overhauled." In 1997, a new Supervisor was elected who was "publicly committed to undertaking the overall development of professional management including financial aspects." Thereafter, in January, 1998 you engaged the firm of Lopez, Teodosio, Larkin, Certified Public Accountants ( "LTL ") for the task. LTL is expected to complete their work on or about December 31, 1998 at a cost of around $55,000. LTL delivered approximately 20 financial improvements and services to the Township, including a one -time Earned Income Tax recovery of $300,000 split between the Township and the school district; improvements in reporting of financial activity and related decisions; and the installation of new software for a one -time fee, in place of old software for which the Township had paid a monthly maintenance fee. Township staff is being trained in accounting to reduce the need for outside professional services. You have submitted news articles as to the process. You state FAX : (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: sec©state.pa.us Orloff, 98 -612 November 20, 1998 Page 2 that "the ideas, scope, direction, and objectives of this engagement in Richland Township" were your own, with the concurrence of the newly - elected Supervisor, and that the work, implementation, and related compensation were done exclusively by LTL. When LTL completes its work in the Township on or around December 31, 1998, you would like to form a "joint venture" with them to perform similar services for other municipalities and authorities, at which time LTL will no longer be doing business in Richland Township. Under your plan, you state that on some jobs LTL would be the subcontractor under your name, at other times you would subcontract under LTL's name, and sometimes you would contract together under the name, "RPC Municipal Accounting Consultants." You state that market contacts and a desire by both parties to retain their "business liberty and independence" are the reasonings for the varying subcontracting arrangements. You state that you have contacts in the private sector, but desire to service the public sector as well, excluding Richland Township. In addition, you state that your ability to earn a living should not be penalized because you are a Township Supervisor. Hence, you request an advisory from the State Ethics Commission as to whether you may, under the facts which you have submitted, proceed with the proposed business arrangement with LTL. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(11) of the Public Official and Employee Ethics Law ( "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. It is further noted that, pursuant to Sections 7(10) and 7(11) of the Ethics Law, 65 P.S. §§407(10), (11), 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. As a Supervisor for Richland Township, you are a public official as that term is defined under the Ethics Law, and hence you are 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: Orloff, 98 -612 November 20, 1998 Page 3 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. 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 Orloff, 98 -612 November 20, 1998 Page 4 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 applying the above provisions of the Ethics Law to your inquiry, you are advised that Section 3(a) of the Ethics Law does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position — or confidential information obtained by being in that position — for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 3(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order No. 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order No. 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity, such as the review /selection of its bids or proposals, Gorman, Order No. 1041. If the private employer or business with which the public official /public employee is associated would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Miller, Opinion No. 89 -024. In each instance of a conflict of interest, the public official /public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 3(j). Under the facts which you have submitted, Section 3(a) of the Ethics Law would not preclude you from outside employment /business activity subject to the restrictions and qualifications as noted above. This Advice is limited to addressing the applicability of Section 3(a) 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 /public employee and no public official /public employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /public 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 Second Class Township Code. Conclusion: As a Supervisor for Richland Township, 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 outside employment /business activity subject to the restrictions and qualifications as noted above. In the event that the employer /business would have Orloff, 98 -612 November 20, 1998 Page 5 matter(s) pending before your governmental body, then you would be required to abstain and to satisfy the disclosure requirements of Section 3(j) of the Ethics Law set forth above. 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. Sf ncq'rely, incent ! Dop o Chief Co sel