HomeMy WebLinkAbout00-510 ConfidentialSTATE ETHICS COMMISSION
309 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
(717) 783 -1610
1- 800 - 932 -0936
ADVICE OF COUNSEL
January 31, 2000
Re: Former Public c 1 A; Employee; ueau; C Department Executive-Level
D; E; iF Authority; G
Agency.
This responds to your letter of December 29, 1999 by which you requested
advice from the State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act ")
presents any restrictions upon employment of an A of the B Bureau following
termination of service with the C Department.
Facts: You have been employed by the Commonwealth since October 1963
when you joined the C Department. Throughout the 1960s and early to mid -1970s
you worked on the staff of the H Bureau, and the I programs for the C Department.
These programs provided, respectively, grants to county J agencies to promote K in
the Commonwealth, grants to local municipalities for the preparation of sites for L
projects, and grants to local municipalities for public and private M projects. In these
positions, you state that you did not possess any discretionary powers over the
awarding of grants and you did not have responsibility for taking or recommending
official action with regard to contracting, the administering or monitoring of grants or
any other activity that had an economic impact of greater than a de minimis nature on
the interests of any person.
In January 1976, you were appointed D of the F Authority, which was created
by the General Assembly in N to promote 0 in Pennsylvania. F Authority accomplishes
this objective by making low- interest rate loans to help finance L projects.
F Authority's involvement in an L project is initiated by a loan application
submitted by a county G Agency. There is a G Agency in each county in the
Commonwealth, and several counties have more than one G Agency. G Agencies are
non - profit corporations created and funded through a grass -roots county -level effort.
The requirements for being certified as a G Agency eligible to obtain a loan from F
Authority are set forth in F Authority's regulations. You have submitted a copy of the
regulations, which is incorporated herein by reference.
F Authority makes loans to the G Agencies for the creation of L projects that
will create jobs. The L project is the acquisition of P or Q or the construction of a Q
that will be used in an R enterprise.
FAX: (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: ethics @state.pa.us
00 -510
Confidential Advice, 00 -510
January 31, 2000
Page 2
F Authority loans can be combined with other financing provided by the state.
Often, the loans are combined with financing from commercial banks and equity
provided by the businesses benefitted by the loan. F Authority loans are used to
acquire P and existing Q's and to construct Q's. The terms of a loan can range up to
15 years for Q, with the interest rate dependent on the rate of unemployment in the
county involved. F Authority loans are made directly to a G Agency, but repayment
of the loan is always guaranteed by the private business entity that benefits from the
loan, and F Authority's recourse to the G Agency is generally limited by contractual
arrangements to 50% of the loan amount. The benefits of the loans are passed
through to private business entities by the G Agencies through a variety of financial
structures. For example, in a typical transaction, a local G Agency, acting as a
conduit, would borrow money from F Authority for the benefit of an S enterprise,
acquire P and /or build a T facility and then sell the property to a private business under
an installment sale agreement.
Additionally, F Authority makes loans to the G Agencies for the creation of U
without the direct involvement of a private business. That is, the loans are made for
these projects on a speculative basis before a particular business has been identified
to occupy the project.
F Authority does not actively seek L projects to finance. F Authority has a staff
of only V persons, and thus its role is passive with respect to the identification of
potential projects for funding. It responds to applications for projects brought to it by
the G Agencies, which are actively engaged at the local county level in recruiting
projects. The G Agencies are often assisted in their activities by others in the C
Department, including particularly the Governor's Action Team.
F Authority is governed by a 16- member Board of Directors that is composed
of 4 cabinet officers, 8 individuals appointed by the Governor and confirmed by the
Senate, and 4 persons appointed by the General Assembly. The Secretary of C
Department serves as Chairman of the Board. The Board of Directors meets monthly
to consider loan applications, and all loans are approved or disapproved by majority
vote of the Board of Directors. F Authority has always employed an outside
independent financial consultant to provide recommendations directly to the Board as
to the credit - worthiness of each application.
Additional information concerning F Authority can be obtained by reviewing its
authorizing legislation, the F Authority Act.
As D of F Authority from January 1976 until October 1977, your functions
involved reviewing applications, answering questions from the G Agencies, etc. You
state that you did not have any discretion and made no recommendations to the F
Authority Board of Directors as to the eligibility of a project.
In October 1977, you were appointed E of F Authority, and have occupied that
position to this day. As E of F Authority, your duties include the following:
1. Meeting with representatives of the G Agencies and, on rare occasions,
with private business representatives regarding proposed projects and the
eligibility thereof for F Authority financing under the requirements of the
F Authority Act and F Authority's regulations and statement of policy.
2. Formulating policy recommendations for approval by the Deputy
Secretary of C Department concerning such issues as interest rates, loan
terms, maximum loan amounts, and other policy issues. These policies
Confidential Advice, 00 -510
January 31, 2000
Page 3
are presented for Board approval. You have enclosed a copy of the
current policies, which is incorporated herein by reference.
3. Reviewing with staff assistance, applications for loan financing submitted
by G Agencies and working with F Authority's in -house staff in
fashioning a recommendation to the F Authority Board as to the eligibility
of the project for a loan from F Authority under the F Authority Act,
regulations and statement of policy.
4. Working with in -house legal counsel on the legal affairs of the F
Authority involving such matters as delinquent loans and bankrupt
borrowers.
5. Working with bond underwriters on the issuance of F Authority's bonds.
6. of the F Authority Act regulations on
ulat the
statement requirements
of
policy.
7. General supervision of the F Authority staff.
Since you began work at F Authority, it has undertaken over 3,000 projects
which have represented a direct investment of $1.8 billion and the creation of
160,000 new jobs. During this period, all applications that were eligible for F
Authority financing under the F Authority Act and were found by the F Authority Board
of Directors to be credit -worthy were given assistance.
In 1992, you were appointed A of the B Bureau in C Department. As such, you
state that you had administrative oversight of the W Fund, the X Fund and the Y
program. In 1996, the Y program was moved out of the B Bureau into another bureau.
These programs are similar to F Authority in that they provided financial assistance in
the form of low- interest -rate loans to businesses. Unlike F Authority, these programs
do not have independent boards of directors. Rather, the decision as to loan approval
is made by a Deputy Secretary in the C Department.
You state that despite your titles as D and E of F Authority, you have always
been an employee of C Department: You were not hired by the F Authority Board. In
this respect, you understand that your status is significantly different from the E's of
other State authorities such as the Pennsylvania Housing Finance Agency or the
Penlvania Sta t a y executive-branch departments. a You r tha r t your salary is much lower employees than
Stae
those officials.
You state that you have filed annual financial disclosure statements under the
Ethics Act as a "public official" at the direction of your superiors at C Department.
You note that for many years your immediate supervisor in the C Department (the
Bureau /Office Director) filed as a "public employee."
You state that you are contemplating starting an economic development
consulting firm following your retirement from State government. This firm may be
either a sole proprietorship or it may be a partnership or corporation established with
one or more other persons. You would like general guidance from the State Ethics
Commission on your duties under the Ethics Act, but are particularly interested in the
following issues:
Confidential Advice, 00 -510
January 31, 2000
Page 4
Under Section 3(g) of the Ethics Act, 65 Pa.C.S.A. §1103(g):
1. May you provide advice /consulting services for a fee to private
businesses and /or the non- profit G Agencies? For example, on behalf of
a private firm, may you review potential financing projects and perform
a funding assessment as to applicable financing options for such
company, consulting firm or G Agency without direct representation
before F Authority or other funding programs within C Department?
2. May you represent companies before a non - profit G Agency with regard
to potential financing from either the Commonwealth or from the G
Agency (without any state involvement in the financing)?
3. What is the governmental body with which you are associated? Is it F
Authority or the entire C Department? In that regard, does the fact that
you worked in different programs over 20 years ago create restrictions
on your future activities?
4. May you assist a private business or a G Agency with obtaining
assistance from other bureaus or programs within the C Department
other than F Authority?
5. May you attend economic development trade conventions that will also
be attended by the staff of F Authority and other representatives of the
C Department?
6. May you request information from F Authority and C Department of a
general nature regarding program guidelines and funding availability if you
do not identify to F Authority or C Department a particular project or
private business that you are representing?
7. Are other partners or shareholders in a firm you may form bound by
restrictions to which you may be subject? For example, could your
partner (who would not be bound by any restrictions under the Ethics
Act) attend an F Authority Board meeting to request a loan for a new
project? Would it make a difference if your name did or did not appear
as part of your firm's name?
8. May you perform contract services on behalf of a private company such
as an engineering, environmental consulting firm, financial lending
institution, educational firm or institution (profit or non - profit), which may
have participated in an F Authority project although not as a borrower,
before
a. F Authority
b. Other financing programs within C Department
c. Local G Agencies
d. Other state agencies
9. May you broker or place conventional financing for development projects
which may be matched with F Authority financing?
Under Section 3(i) of the Ethics Act, 65 Pa.C.S.A. §1103(1):
Confidential Advice, 00 -510
January 31, 2000
Page 5
1. Did your activities as E of F Authority constitute "active participation"
under the terms of this section?
2. If your future activities are restricted by this section, do the restrictions
apply to all 3000 companies that received assistance from F Authority or
C Department during the entire thirty -six years that you were employed
there?
3. Would this section restrict your employment
Agencies, the private businesses that actually
assistance, or both?
4. May you own stock in any company which
beneficiary of an F Authority loan? F Authority
privately -held and publicly -held corporations.
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), (11).
An advisory only affords a defense to the extent the requestor has truthfully disclosed
all of the material facts.
As E of F Authority and A of B Bureau for C Department, you would be
considered a public official /public employee and an "executive -level State employee"
subject to the Ethics Act and the Regulations of the State Ethics Commission. See, 65
Pa.C.S. §1102; 51 Pa.Code § 1 1 .1.
Consequently, upon termination of public service, you would become a former
public official /public employee and a former executive -level State employee subject to
the restrictions of Section 1103(g) and Section 1103(i) of the Ethics Act.
Section 1 103(i) restricts former executive -level State employees as follows:
Section 1103. Restricted activities.
(i) Former executive -level employee. - -No former
executive -level State employee may for a period of two
years from the time that he terminates employment with
this Commonwealth be employed by, receive compensation
from, assist or act in a representative capacity for a
business or corporation that he actively participated in
recruiting to this Commonwealth or that he actively
participated in inducing to open a new plant, facility or
branch in this Commonwealth or that he actively
participated in inducing to expand an existent plant or
facility within this Commonwealth, provided that the above
prohibition shall be invoked only when the recruitment or
inducement is accomplished by a grant or loan of money or
a promise of a grant or loan of money from the
Commonwealth to the business or corporation recruited or
induced to expand.
by the non - profit G
benefitted from state
may have been the
makes loans to both
Confidential Advice, 00 -510
January 31, 2000
Page 6
65 Pa.C.S. §1103(1).
Section 1103(i) restricts the ability of a former executive -level State employee
to accept employment or otherwise engage in business relationships following
termination of State service, under certain narrow conditions. The restrictions of
Section 1103(i) apply even where the business relationship is indirect, such as where
the business in question is a client of the new employer, rather than the new employer
itself. See, Confidential Opinion No. 94 -011. However, Section 1103(i) would not
restrict you from being employed by, receiving compensation from, assisting, or acting
in a representative capacity for a new business or corporation provided and
conditioned upon the assumptions that you did not actively participate in recruiting the
new business or corporation to Pennsylvania, and that you did not actively participate
in recruiting or inducing the new business or corporation to open or expand a plant,
facility, or branch in Pennsylvania, through a grant or loan of money or a promise of
a grant or loan of money from the Commonwealth of Pennsylvania to the new
business or corporation.
Unlike Section 1103(i), Section 1103(g) does not prohibit a former public
official /public employee from accepting a position of employment. However, it does
restrict the former public official /public employee with regard to "representing" a
"person" before "the governmental body with which he has been associated ":
Section 1103. Restricted activities.
(g) Former official or employee. - -No former public
official or public employee shall represent a person, with
promised or actual compensation, on any matter before the
governmental body with which he has been associated for
one year after he leaves that body.
65 Pa.C.S. §1103(g) (Emphasis added).
The terms "represent," "person," and "governmental body with which a public
official or public employee is or has been associated" are specifically defined in the
Ethics Act as follows:
Section 1102. Definitions.
"Represent." To act on behalf of any other person in
any activity which includes, but is not limited to, the
following: personal appearances, negotiations, lobbying and
submitting bid or contract proposals which are signed by or
contain the name of a former public official or public
employee.
"Person." A business, governmental body, individual,
corporation, union, association, firm, partnership,
committee, club or other organization or group of persons.
"Governmental body with which a public official or
public employee is or has been associated." The
governmental body within State government or a political
subdivision by which the public official or employee is or
has been employed or to which the public official or
Confidential Advice, 00 -510
January 31, 2000
Page 7
employee is or has been appointed or elected and
subdivisions and offices within that governmental body.
65 Pa.C.S. §1102.
The term "Person" is very broadly defined. It includes, inter alia, corporations
and other businesses. It also includes the former public employee himself, Confidential
Opinion 93 -005, as well as a new governmental employer. Ledebur, Opinion 95 -007.
The term "representation" is also broadly defined to prohibit acting on behalf of
any person in any activity. Examples of prohibited representation include: (1) personal
appearances before the former governmental body or bodies; (2) attempts to influence;
(3) submission of bid or contract proposals which are signed by or contain the name
of the former public official /employee; (4) participating in any matters before the
former governmental body as to acting on behalf of a person; and (5) lobbying.
Popovich, Opinion 89 -005.
Listing one's name as the person who will provide technical assistance on a
proposal, document, or bid, if submitted to or reviewed by the former governmental
body, constitutes an attempt to influence the former governmental body. Section
1103(g) also generally prohibits the inclusion of the name of a former public
official /public employee on invoices submitted by his new employer to the former
governmental body, even though the invoices pertain to a contract that existed prior
to termination of public service, Shay, Opinion 91 -012. However, if such a pre- existing
contract does not involve the unit where the former public employee worked, the name
of the former public employee may appear on routine invoices if required by the
regulations of the agency to which the billing is being submitted. Abrams/Webster,
Opinion 95 -011.
A former public official /public employee may assist in the preparation of any
documents presented to his former governmental body. However, the public
official /public employee may not be identified on documents submitted to the former
governmental body. The public official /public employee may also counsel any person
regarding that person's appearance before his former governmental body. Once again,
however, the activity in this respect should not be revealed to the former governmental
body. The Ethics Act would not prohibit or preclude making general informational
inquiries to the former governmental body to secure information which is available to
the general public, but this must not be done in an effort to indirectly influence the
former governmental body or to otherwise make known to that body the
representation of, or work for the new employer.
Section 1103(g) only restricts the former public official /public employee with
regard to representation before his former governmental body. The former public
official /public employee is not restricted as to representation before other agencies or
entities. However, the "governmental body with which a public official /public employee
is or has been associated" is not limited to the particular subdivision of the agency or
other governmental body where the public official /employee had influence or control
but extends to the entire body. See, Legislative Journal of House, 1989 Session, No.
15 at 290, 291; Sirolli, Opinion No. 90 -006; Sharp, Opinion 90- 009 -R.
The governmental bodies with which you would be associated upon termination
of public service would be C Department in its entirety and F Authority. Therefore, for
the first year after termination of your service with C Department and F Authority,
Section 1103(g) of the Ethics Act would apply and restrict "representation" of
"persons" before the C Department and F Authority.
Confidential Advice, 00 -510
January 31, 2000
Page 8
Having established the above principals, your specific inquiries shall now be
addressed.
As for your first inquiry, you are advised that Section 1103(g) of the Ethics Act
would not prohibit you from providing advice /consulting services for a fee to private
businesses and /or non - profit G Agencies provided that in performing such services, no
prohibited contacts would occur as to C Department and F Authority and no written
materials containing your name would be submitted to C Department and F Authority.
As for your second inquiry, you may represent companies before a non - profit
G Agency with regard to potential financing from either the Commonwealth or from
the G Agency because the G Agency is not one of your former governmental bodies.
Your third specific inquiry involving the governmental bodies with which you are
associated has been fully addressed above.
In response to your fourth inquiry, Section 1103(g) of the Ethics Act would
prohibit you from assisting a private business or a G Agency with obtaining assistance
from other bureaus or programs within the C Department other than F Authority if
such activity would involve including your name on documents submitted to C
Department, or otherwise engaging in prohibited representation as outlined above.
As for your fifth inquiry, you are advised as follows. To the extent such
conventions would be open to the public, you could attend the meetings; however, if
your role would go beyond that of a general observer so that you would actually
participate and /or advocate positions, not as a member of the general public, but as
a representative of the new consulting firm, such representation would be prohibited.
As for your sixth inquiry regarding whether you may request general information
regarding program guidelines and funding availability from F Authority and C
Department where you do not disclose the particular project or private business that
you are representing to those bodies, you are advised that the Ethics Act would not
preclude you from making general informational inquiries to your former governmental
bodies to secure information which is available to the general public so long as your
activities are not done in an effort to indirectly influence your former governmental
bodies or to otherwise make known to those bodies that you represent or work for
your new employer.
As for your seventh inquiry, other partners or shareholders in a firm that you
may form are not bound by the restrictions to which you are subject; thus, a partner
to whom the Ethics Act does not apply may attend an F Authority Board meeting to
request a loan for a new project. However, your name could not appear as part of
your firm's name on documents submitted to either of your former governmental
bodies.
As for your eighth inquiry, you may not provide contract services on behalf of
a private company which may have participated in an F Authority project, although not
as a borrower, before F Authority or other financing programs within C Department
because they are your former governmental bodies. You may, however, provide such
services on behalf of a private company before local G Agencies or other State
agencies, as they are not your former governmental bodies.
As for your ninth inquiry, Section 1103(g) would not restrict you from brokering
or placing conventional financing for development projects which may be matched
Confidential Advice, 00 -510
January 31, 2000
Page 9
with F Authority financing to the extent that your activities would not result in
prohibited representation before F Authority as discussed above.
Your additional questions, numbered 1 through 4, shall now be addressed.
With regard to your first question as to whether your activities as E of F
Authority constitute "active participation," the Commission, in Confidential Opinion
No. 94 -011 stated:
As for the terms "actively participates" and "actively participated,"
the word "actively" modifies the words "participates" and "participated,"
signifying that mere participation in a passive sense would not transgress
Section 3(i). Thus, the terms "actively participates" and "actively
participated" would mean to take part through an actual exercise of
power or discretion, and would not include mere presence a e perfunctory
involvement through the non - discretionary p er a P
function.
Confidential Opinion No. 94-011.
Applying Confidential Opinion No. 94 -01 1 to the first question you pose, you
are advised that to the extent that your activities as E of F Authority involved an actual
exercise of power or discretion in recruiting or inducing a business or corporation to
open or expand via a grant or a loan from the Commonwealth, Section 1103(i) would
prohibit you from being employed by, receiving compensation from, assisting or acting
in a representative capacity for such business or corporation for a period of two years
from the time that you would terminate Commonwealth employment.
With regard to your second question, to the extent that you "actively
participated" (i.e. actually exercised your power or discretion) in recruiting or inducing
the 3000 companies that received assistance from F Authority or C Department,
Section 1 103(i) would prohibit you from being employed by, receiving compensation
from, assisting or acting in a representative capacity for said companies for a period
of two years from the time that you would terminate Commonwealth employment.
With regard to your third question, Section 1103(i) would restrict you for a
period of two years from the time that you would terminate Commonwealth
employment from being employed by, receiving compensation from, assisting or acting
in a representative capacity for the non - profit G Agencies and /or the private business
to the extent that you "actively participated" in recruiting or inducing such G Agencies
and /or private business to open or expand via a grant or a loan from the
Commonwealth.
Finally, with regard to your fourth question, you do not specify whether your
stock ownership would arise out of a purchase by you or would be a form of
compensation from the company that benefitted from an F Authority loan. To the
extent that you "actively participated" in recruiting or inducing such company to open
or expand via a grant or a loan from the Commonwealth, Section 1103(i) of the Ethics
Act would preclude you for a period of two years from the time that you would
terminate Commonwealth employment from receiving compensation from that
company in the form of stock.
Based upon the facts which have been submitted, this Advice has addressed the
applicability of Sections 1 103(g) and 1103(i) only. It is expressly assumed that there
has been no use of authority of office for a private pecuniary benefit as prohibited by
Confidential Advice, 00 -510
January 31, 2000
Page 10
Section 1103(a) of the Ethics Act. Further, you are advised that Sections 1 103(b) and
1103(c) of the Ethics Act 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.
Lastly, 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.
Conclusion: Upon termination of service as E of the F Authority and A of B
Bureau for the C Department, you would become a former public official /public
employee and a former executive -level State employee subject to the restrictions of
Section 1 103(g) and Section 1103(i) of the Public Official and Employee Ethics Act
( "Ethics Act "), Act 93 of 1998, Chapter 11. Under Section 1103(i) of the Ethics Act,
you would not be prohibited from being employed by, receiving compensation from,
assisting, or acting in a representative capacity for a new business or corporation
based upon the assumptions that you did not actively participate in recruiting the new
business or corporation to Pennsylvania, and that you did not actively participate in
recruiting or inducing the new business or corporation to open or expand a plant,
facility, or branch in Pennsylvania through a grant or loan of money or a promise of a
grant or loan of money from the Commonwealth of Pennsylvania. With regard to
Section 1103(g), the restrictions as outlined above must be followed. The former
governmental bodies would be F Authority and C Department in its entirety. The
propriety of the proposed conduct has only been addressed under the Ethics Act.
Further, should service be terminated, as outlined above, the Ethics Act would
require that a Statement of Financial Interests be filed by no later than May 1 of the
year after termination of service.
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 fuJi 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 ap • eal at the Commission within thirty (30) days
may result in the dismissal of i.. ppeal.
rely
Vincent J. . ko
Chief Counsel