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HomeMy WebLinkAbout99-630 KarleGregory A. Karle, Esquire Office of City Solicitor, Room 505 626 State Street Erie, PA 16501 STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 1 71 08 -1 470 (717) 783 -1610 1- 800 - 932 -0936 ADVICE OF COUNSEL November 24, 1999 FAX: (717) 787 - 0806 • Web Site: www.ethics.state.pa.us • e - mail: ethics @state.pa.us 99 -630 Re: Conflict; Public Official /Employee; Councilperson; City; Authority; Bond Council; Municipal Bond Issue; Ordinance; Vote. Dear Mr. Karle: This responds to your letter of October 22, 1999 by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1 101 egg., presents any prohibition or restrictions upon a city councilperson with regard to voting to approve a lease extension between the city and a municipal authority where: (1) the authority would be required to prepay the annual lease rentals in one lump sum; (2) in order to finance the lump sum prepayment, the authority would have to issue general obligation bonded indebtedness; (3) the authority would be responsible to obtain a band underwriter and bond counsel; and (4) the councilperson's spouse is a member of a law firm which frequently acts as bond counsel for municipal bond issues and which could be hired to perform the legal work for the issue. Facts: As Solicitor for the City of Erie ( "City "), you request an advisory from the State Ethics; Commission on behalf of Gayle Wright ( "Wright "), who serves as one of the seven Members of the Erie City Council. You state that in 1990, the City transferred its Water Bureau to the City of Erie Water Authority ( "Authority "), an entity organized under the Municipal Authorities Act of 1945. The transfer agreement between the entities provides for a 25 -year Lease Agreement. For future long -term borrowing purposes, the Authority desires to extend its 25- year Lease with the City. The lease extension requires approval of City Council by way of ordinance. You anticipate that the lease extension ordinance will appear on Council's agenda within the month for a vote. As part of the lease extension agreement, the Authority would agree to prepay its annual lease rentals in a lump sum. It appears that the Authority will have to issue general obligation bonded indebtedness to finance the prepayment. The Authority will • Karle /Wright, 99 -630 November 24, 1999 Page 2 have the responsibility of obtaining a bond underwriter and hiring bond counsel for the financing and legal work in connection with the bond issue. Wright's husband is a member of a law firm that frequently acts as bond counsel for municipal bond issues. The firm may potentially be hired by the Authority to perform legal work for the issue. Neither the City Council nor any other City official would be involved in the financing aspect of the lease extension or in the selection of the bond underwriter or bond counsel. You ask whether Wright, in voting on the lease extension, would be engaging in conduct that would constitute a conflict under the Ethics Act, given that her husband's law firm would gain a pecuniary benefit if hired by the Authority. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§1107(10), (1 1), 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 Pa.C.S. §§1107(10), (1 1). An advisory only affords a defense to the extent-the requestor has truthfully disclosed all of the material facts. As a Councilwoman for the City of Erie, Wright is a public official as that term is defined in the Ethics Act, and hence Wright is subject to the provisions of that Act. Section 1 103(a) of the Ethics Act provides: Section 1103. Restricted activities. (a) Conflict of interest. - -No public official or public employee shall engage irr conduct that constitutes a conflict of interest. 65 Pa.C.S. §1103(a). The following terms are defined in the Ethics Act as follows: Section 1102. Definitions. "Conflict" or "conflict of interest." Use by a public pfficial 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. The term 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. Karle/Wright, 99 -630 November 24, 1999 Page 3 65 Pa.C.S. §1102. "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. In addition, Sections 1 103(b) and 1103(c) of the Ethics Act 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 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. Section 1 103(j) of the Ethics Act provides as follows: Section 1 103. Restricted activities. (j) Voting conflict. - -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 shalt 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, Karle /Wright, 99 -630 November 24, 1999 Page 4 the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §1103(j). In each instance of a conflict, Section 1103(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 Act, 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 Act to the instant matter, pursuant to Section 1103(a) of the Ethics Act, 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. Since the term "immediate family" is defined to include a parent, spouse, child, brother or sister and since Wright's husband is in one of the familial relationships delineated above, Section 1 103(a) of the Ethics Act would prohibit Wright from participating in actions of City Council' that would result in a financial benefit to her husband, or to a business with which her husband is associated, such as his law firm. As to whether the Ethics Act would preclude Wright from voting or participating on the lease extension between the City and the Authority, the Commission has determined that if a financial interest" that would form the basis for a conflict for a public official either exists or can be reasonably and legitimately anticipated to develop, the public official has a conflict, must abstain from participating in the matter, and must satisfy the disclosure requirements of the Ethics Act. See, Snyder, Order No. 979 -2; Sowers, Opinion 80 -050. However, where a public official's interest would be considered remote, the Ethics Act would not preclude him or her from voting on the matter. See, Markham, Opinion 85 -013; Amato, Opinion 89 -002; Garner, Opinion 93- 004. Under : the facts which have been submitted in the instant case, Wright reasonably and legitimately anticipates that her husband's law firm may be hired by the Authority to act as bond counsel. Therefore, Wright would have a conflict of interest in the_ matter of the lease extension between the City and the Authority. This situation is distinguishable from Amato, Opinion 89 -002, in which the Commission considered whether a township commissioner could vote on development projects when the developers would hire general contractors, who in turn would hire subcontractors who might contract with a business with which the Commissioner was associated. The Commission held in that matter that where the activity of the business with which the public official was associated was "twice removed" from the initial vote to approve the development project, no conflict would exist. See, also, Garner, Opinion 93 -004. .Karle /Wright, 99 -630 November 24, 1999 Page 5 In the instant matter, the voting by Wright would not be remote. Council's vote would have a direct effect upon the potential hiring of Wright's husband's law firm as bond counsel, because without Council's approval of the lease extension, there would be no bond issue. Upon Council's approval, the Authority would select bond counsel. Accordingly, since the voting by Wright on the lease extension agreement would not be remote, but rather, have a direct effect upon the potential subsequent hiring of Wright's husband's law firm as bond counsel for the Authority, Wright would have a conflict of interest and would be prohibited from participating in the matter. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the respective municipal code. Conclusion: As a Councilwoman for the City of Erie, Gayle Wright is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 seq. Gayle Wright may not participate in voting on a lease extension agreement between the City of Erie and the City of Erie Water Authority where: (1) the Authority would be required to prepay the annual lease rentals in one lump sum; (2) in order to finance the lump sum prepayment, the Authority would have to issue general obligation bonded indebtedness; (3) the Authority would be responsible to obtain a bond underwriter and bond counsel; and (4) Wright's spouse is a member of a law firm which frequently acts as bond counsel for municipal bond issues and which could be hired to perform the legal work for the issue. Under the facts which have been submitted in the instant case, Wright reasonably and legitimately anticipates that her husband's law firm may be hired by the Authority to act as bond counsel. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an 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, provided 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 1. 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. cerel incent J: Dopko Chief Counsel