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HomeMy WebLinkAbout00-561 WalkerErnest R. Walker, Esquire 100 Central Park Law Building Gazebo Park at Locust Street Johnstown, PA 15901 STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 (717) 783 -1610 1- 800 - 932 -0936 ADVICE OF COUNSEL April 7, 2000 00 -561 Re: Conflict; Public Official /Employee; Senior Accountant; Borough; Council Member; Audit; Contract; Business with which Associated. Dear Mr. Walker: This responds to your letter of March 10, 2000 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. §1101 et seq., presents any prohibition or restrictions upon a borough councilmember as to the borough's auditing firm which is purchasing the accounting firm in which the councilmember is associated. Facts: As Solicitor for the Westmont Borough, you have been contacted by Joseph Carpenter (Carpenter), a Member of the Westmont Borough Council, who is currently a senior accountant with a family owned CPA firm known as Carpenter & Carpenter. Carpenter is also a partner in Carpenter Financial Services, a counseling, advice and investment firm, another family owned business. Carpenter & Carpenter is being purchased by Barnes Saly & Co., a CPA firm. Carpenter will be employed with Barnes & Saly as a senior accountant doing individual and corporate tax returns on a per diem and piece work basis. Carpenter will continue as a partner in Carpenter Financial Services which will be relocating from its present location to the Barnes & Saly facility. Carpenter Financial Services will continue to operate as an independent business. Carpenter seeks an advisory concerning a potential conflict as to the purchase of Carpenter & Carpenter by Barnes & Saly. Barnes & Saly are currently the contract auditors for Westmont Borough and are retained through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered. You state that Carpenter has represented to you that he will not have any supervisory or overall responsibility for the implementation or administration of Barnes & Saly in their activities as a contract auditor for Westmont Borough. FAX: (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: ethics @state.pa.us Walkerr, 00 -561 April 7, 2000 Page 2 You have advised Carpenter to abstain from voting on the approval of the Barnes & Saly audit until a response has been received from this Commission. You have discussed the situation with the Pennsylvania Association of Boroughs' administrators; however, you would prefer to have a written opinion from this Commission as to what restrictions would apply to Carpenter in this matter. 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 a Council Member for Westmont Borough, Carpenter is a public official as that term is defined in the Ethics Act, and hence Carpenter 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 in 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 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. 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. "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. Walkerr, 00 -561 April 7, 2000 Page 3 65 Pa.C.S. 51102. "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. "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. Section 1103(a) of the Ethics Act prohibits a public official /public employee 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. 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(f) of the Ethics Act provides as follows: Section 1103. Restricted activities. (f) Contract. - -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. 65 Pa.C.S. 51103(f). Section 1 103(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 Walkerr, 00 -561 April 7, 2000 Page 4 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 1 103(f) requires that an "open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (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 1103(f) of the Ethics Act 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 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 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. 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. Walkerr, 00 -561 April 7, 2000 Page 5 A conflict of interest has been found by the full Commission not only where a public official /public employee, in his official capacity, participates, reviews or passes upon a matter involving a business with which he is associated but also the private clients of such business. Miller, Opinion No. 89 -024; Kannebecker, Opinion No. 92- 010. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion No. 89 -002; Garner, Opinion No. 93 -004; Snyder, Order No. 979 -2, affirmed Snyder v. SEC, 686 A.2d 843 (Pa. Commw. Ct. 1996), alloc. den., No. 0029 M.D. Allocatur Docket 1997 (Pa. December 22, 1997). In applying the provisions of the Ethics Act to the instant matter, Carpenter would have a conflict under Section 1103(a) of the Ethics Act as to matters involving himself, a member of his immediate family, and any business with which he is associated. In this case, Carpenter & Carpenter and Carpenter Financial Services are businesses with which Carpenter is associated. When Carpenter & Carpenter will be purchased by Barnes & Saly, that firm will be a business with which Carpenter is associated. Under Section 1103(a) of the Ethics Act, Carpenter would have a conflict as to matters of those businesses that come before Council as well as the clients of such businesses. In each instance of a conflict of interest, the public official must abstain from participation in his public capacity. The abstention requirement is not limited merely to voting, but extends to any use of authority of office. In Juliante, Order No. 809, the Commission recognized that the use of authority of office as defined in the Ethics Act includes, for example, discussing, conferring with others, and lobbying for a particular result. In each instance of a conflict of interest, the public official must also satisfy the disclosure requirements of Section 1103(j) set forth above. As to Section 1103(f), that provision of the Ethics Act does allow a public official, spouse, child or busines with which associated to contract with his governmental body, but when the contract is $500 or more, the process must be open and public as delineated above. In addition, the public official may not have any supervisory or administrative functions as to such contracts. Therefore, although Barnes & Saly could contract to provide the audit services, the process must be an open and public one in compliance with Section 1103(f) of the Ethics Act and Carpenter may not have any administrative or supervisory function as to the contract. 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 Borough Code. Conclusion: As a Member of Westmont Borough Council, Carpenter is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Carpenter would have a conflict under Section 1 103(a) of the Ethics Act as to matters involving himself, a member of his immediate family, and any business with which he is associated. Carpenter & Carpenter and Carpenter Financial Services are businesses with which Carpenter is associated. When Carpenter & Carpenter will be purchased by Barnes & Saly, that firm will be a business with which Carpenter is associated. Under Section 1103(a) of the Ethics Act, Carpenter would have a conflict as to matters of those businesses that come before Council as well as the clients of such businesses. Although Barnes & Saly could Walkerr, 00 -561 April 7, 2000 Page 6 contract to provide the audit services, the process must be an open and public one in compliance with Section 1 103(f) of the Ethics Act and Carpenter may not have any administrative or supervisory function as to the contract. 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 ). 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 inc - rely, incent . Dopko Chief Counsel