HomeMy WebLinkAbout903 LaganaSTATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
In re: Gary C. Lagana File Docket: 88 -113 -C
Date Decided: 9/28/93
. Date Mailed: 10/07/93
Before: James M. Howley, Chair
Daneen E. Reese, Vice Chair
Dennis C. Harrington
Austin M. Lee
Joseph W. Marshall, III
The State Ethics Commission received a complaint regarding a
possible violation of the State Ethics Act, No. 170 of 1978, P.L. 883.
Written notice, of the specific allegation(s) was served at the
commencement of the investigation. A Findings Report was issued and
served, upon completion of the investigation, which constituted the
Complaint by the Investigation Division. An Answer was filed and a
hearing was waived. A consent agreement was submitted by the parties to
the Commission for consideration which was subsequently approved. This
adjudication of the Commission is hereby issued which sets forth the
individual Allegations, Findings of Fact, Discussion, Conclusions of Law
and Order.
This adjudication is final and will be made available as a public
document fifteen days after issuance. However, reconsideration may be
requested which will defer public release of this adjudication pending
action on the request by the Commission. A request for reconsideration,
however, does not affect the finality of this adjudication. A
reconsideration request must be received at this Commission within
fifteen days of issuance and must include a detailed explanation of the
reasons as to why reconsideration should be granted in conformity with
51 Pa. Code §2.38.
The files in this case will remain confidential in accordance with
Section 8(a) of Act 170 of 1978 during the fifteen day and no one
unless the right to challenge this Order is waived, may violate
confidentiality by releasing, discussing or circulating this Order.
However, confidentiality does not preclude discussing this case with an
attorney at law.
.Any person who violates confidentiality-of the Ethics Act is guilty
of a misdemeanor subject to a fine of not more than $1,000 or
imprisonment for not more than one year, 65 P.S. 409(e).
Gary C. Lagana, 88 -113 -C
Page 2
I. ALLEGATION That Gary C. Lagana, a Supervisor of Hazle Township,
Luzerne County, violated the following provisions of the State Ethics
Act, Act 170 of 1978, when he sold insurance to the township in the form
of bonds for township tax collector and himself as township treasurer
and an Errors and Omissions Insurance Policy; and when he arranged d for
the sale of health insurance to the township by the CMC Agency,
insurance agency where he served as Vice - President.
Section 3. Restricted Activities.
(a) No public official or public employee
shall use his public office or any confidential
information received through his holding public
office to obtain financial gain other than
compensation provided by law for himself, a member
of his immediate family, or a business with which
he is associated. 65 P.S. 5403(a).
Section 3(c) of the Ethics Act provides:
(c) No public official or public employee or a
member of his immediate family or any business in
which the person or a member of the persons
immediate family is a director, officer, owner or
holder of stock exceeding 5% of the equity at fair
market value of the business shall enter into any
contract valued at $500 or more with a governmental
body 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. Any
contract made in violation of this subsection shall
be voidable by a court of competent jurisdiction if
the suit is commenced within 90 days of making of
the contract. 65 P.S. 5403(c).
II. FINDINGS:
1. Gary Lagana served as a township supervisor in Hazle Township,
Luzerne County, Pennsylvania from January, 1986, to December 1991.
a. Lagana was appointed treasurer by the board's supervisors
January, 1986; January, 1987; January, 1989 and January, 1.
2. Records of the Pennsylvania Department of Insurance confirm that
Gary P n. Lagana was from licensed June 30 t 1981 sell
until the 01992,e
of when
f Pennsylv
he voluntarily relinquished his license.
3. Lagana has been licensed to sell insurance for the following
companies:
Gary C. Lacrana, 88 -113 -C
Page 3
7
a. People's Life, Hazleton, PA,
1985.
June 30, 1981, to October 1,
b. Home Security Life, Durham, NC, from August 15, 1985, to
October 1, 1985.
c. National Home Life Assurance Co., Valley Forge, PA, from
September 16, 1985, to March 31, 1985.
d. People's Security Life Insurance Co., Durham, NC, from October
1, 1985, to March 31, 1987.
e. Security Insurance Co., CT,
19889.
f. Columbia Life Insurance Co.,
1986, to October 25, 1988.
Progressive Insurance Co.,
1987, to December 12, 1988.
h. Insurance Company of North America,
March 28, 1988, to date of review.
i. National Travellers Insurance Co., Des Moines, IA, from April
29, 1988, to March 31, 1989.
Lincoln Heritage Co., Phoenix, AZ,
February 15, 1989.
g.
from August 25, 1986, to March 31,
Bloomsburg, PA, from December 30,
Redbank, NJ, from September 24,
Philadelphia, PA, from
from May 9, 1988, to
k. Monumental Life Insurance Co., Baltimore, MD, from
1988, to November 7, 1989.
1. Great American Life Insurance Co., Los Angeles,
October 11, 1988, to date of review.
m. American Travellers Insurance
November 10, 1988, to March 31, 1989.
n. National Western Insurance Co.,
1989, to March 12, 1990.
p.
August 9,
CA, from
Co., Warrington, PA, from
Austin, TX, from January 26,
o. Western Fidelity Insurance Co., Ft. Worth, TX, from April 24,
1989, to april 1, 1990.
Pioneer Life Insurance Co., Rockford, IL, from May 15, 1989,
to June 28, 1989.
q• Globe Life Insurance Co., Oklahoma City, OK, from July 11,
1989, to September 18, 1992.
Gary C. Lactana, 88 -113 -C
Page 4
r. United American Insurance Co., Dallas, TX, from July 17, 1989,
to September 18, 1992.
s. Safe Insurance Co., Hoffman Estates, IL, from September 8,
1986 to September 18, 1992.
t. Utica Fire Insurance Co., Utica, NY, from December 5, 1986, to
September 18, 1992.
u. Prudential Life Insurance Co., Mansfield, OH, from May 2,
1988, to September 18, 1992.
4. with On August
Fr a Frank 30,
M . Fay for h purchase p urchase of the Frank M. Fay Insurance
with Frn M. Fay r t
Agency, 125 East Broad Street, Hazleton, PA.
a. He purchased this business from Frank Fay, who is an insurance
agent and township tax collector.
b. Lagana has owned the Fay - Lagana Insurance Agency since
September, 1986.
5. Hazle Township has purchased insurance from the Fay - Lagana
Insurance Agency since Lagana purchased the agency.
a. This included the purchase of an Errors and Omissions policy
in September, 1986.
b. Also incShdedwere
collector for
in
Januaryshl987treasurer (Lagana)
and township tax
6. From 1980 through 1985, Hazle Township named the Billig & Helms
Agency as broker -of- record for township insurance. This included
the Errors and Omissions Insurance for the board of supervisors.
7. From September 2, 1983, through September 22, 1986, Hazle Township
maintained Public Officials and Employees Liability Insurance
(Errors and Omissions Insurance) through the Billig Helms Insurance
Associates.
a. Insurance was provided by N e ,I n e0 ti nal Surplus Lines
Insurance Company to Policy
b. The policy period was from September 2, 1983, through
September 2, 1986.
c. Total premium was $5,688 payable as follows:
1. 09/02/83 - $1,896
2. 09/02/84 - $1,896
Gary C. Lagana, 88 -113 -C
Page 5
3. 09/02/85 - $1,896
8. On July 17, 1986, the Hazle Township Supervisors were advised by
International Surplus Lines Insurance Company that the Public
Officials and Employees Liability Insurance Policy would not be
renewed.
a. The effective date of the non - renewal was September 22, 1986,
due to the loss of applicable reinsurance.
9. Sometime in 1986 Gary Lagana was to make inquiry of various
insurance companies regarding an Errors and Omissions Public
Officials and Employees Liability Insurance Policy for township
officials.
a. Lagana made the inquiries after discussions with the other
supervisors. The other supervisors requested Lagana to
inquire into obtaining such insurance since it was difficult
to obtain.
b. No discussion among township supervisors is recorded in
township records or minutes of meetings regarding the purchase
of an Errors and Omissions Insurance policy.
c. Lagana made the inquiries because of his knowledge of and
experience in the insurance industry.
10. At the September 8, 1986 meeting of the Hazle Township Supervisors
a bill from Fay - Lagana Insurance in an amount of $5,275 for an
Errors and Omissions Insurance Policy was included in a two page
listing of bills to be approved for payment.
a. The listing of bills, including the Fay - Lagana bills was
approved for payment upon motion by Supervisor Belusko and
seconded by Supervisor Lagana. The motion carried
unanimously.
b. Gary Lagana asserts that this was an advance premium.
11. Hazle Township records reflect that check #15583 dated September
29, 1986, was issued to Fay - Lagana Insurance in the amount of
$5,275.00 for an Errors and Omissions Policy.
a. This check was deposited in the Fay - Lagana Insurance Agency
business account at Peoples First National Bank on October 1,
1986.
12. Peoples First National Bank records reflect that a deposit ticket
dated October 1, 1986, in the amount of $5,275.00 was credited to
Pay - Lagana, account #03- 14204 -3.
Gary C. Lagana, 88 -113 -C
Page 6
13. Transactions recorded in the Fay - Lagana business account reflect no
an
debits during the period ae September, the 1986, to Lagana 6 for n the
amount equal to that charged to
Errors and Omissions Policy.
14. Hazle Township records ect from September, 1986, to February, 1988. of
insurance in effect
a. No policy pertaining to an Errors and Omissions Policy for the
period September, 1986, to February, 1988, exists in borough
records.
b. No Errors and Omissions Policy was placed by Lagana.
c. Gary Lagana asserts that although efforts were made, he was
unable to place the Errors and Omissions policy.
15. By letter dated November 20, 1986, Joseph Belusko, Chairman of the
Hazle Township Board of Supervisors advised Susan Smith, Esquire of
Alexander and Alexander that the firm was appointed broker -of-
record for Hazle Township, effective immediately.
a. Alexander and Alexander never placed any insurance for Hazle
Township.
b. One of the insurances to be reviewed by A &A was Errors and
Omissions.
Gary Lagana asserts that but refused or were the dorsos
and Omissions Insurance
16. By letter dated January 14, 1987, the Hazle Township Supervisors
removeddas broker-of-record Helms
ord for the Township onNovember 20 Associates 1986.
removed
a. The letter is signed by Joseph Belusko, Chairman and Gary
Lagana, secretary.
17. Hazle Township purchased bonds for the Township Treasurer and Tax
Collector from the Fay- Lagana Insurance Agency in 1987.
a. Prior to that, the township purchased these bonds from the
Frank Fay Agency since approximately 1979.
1. These were annual policies for six year terms which were
contracted for prior to Lagana's acquisition of the
agency.
18. By invoice dated January 5, 1987, Fay - Lagana Insurance billed Hazle
Township for the bond of Hazle Township Tax Collector.
c .
Cgary C. Lagana, 88 -113 -C
Page 7
a. The invoice was for policy #6022930, Western Surety Bond.
b. The premium amount was $138.11
c. This was a renewal premium notice.
19. By invoice dated January 13, 1987, Fay - Lagana Insurance billed
Hazle Township for the bond of Hazle Township Treasurer, Gary C.
Lagana.
a. The invoice for policy #68156969, Western Surety Bond in an
amount of $543.75.
b. The bond coverage was for $150,000.
c. This was a renewal premium.
20. At the January 13, 1987 meeting of the township supervisors the
bills from Fay - Lagana Insurance Agency in the amount of $681.86 for
the Treasurer's and Tax Collector's bonds were included in a two
page listing of bills to be approved for payment.
a. The listing of bills, including the Fay - Lagana bill, was
approved for payment upon motion by Supervisor Belusko and
seconded by Supervisor Lagana. The motion carried
unanimously.
21. On January 21, 1987, the township supervisors issued check #15815
in the amount of $681.86 to Fay - Lagana.
a. The check was signed by supervisors Joseph Belusko and Gary
Lagana.
22. Lagana estimated that commissions paid to Fay - Lagana for the bonds
amounted to $102.28.
23. Hazle Township provides health insurance for township employees.
a. The insurance is included as part of a union contract that is
negotiated between the board of supervisors and the employees.
b. Approximately (10) employees are involved in the bargaining
unit.
24. In 1987 the employees of Hazle Township were negotiating a new
labor agreement with the township.
a. Part of the agreement was to include health insurance.
b. The employees were covered by Blue Cross /Blue Shield under the
prior contract.
Gamer' C. Lagana 88 -113 -C
Page 8
25. Gary Lagana was the chief negotiator for the township during
bargaining sessions.
a. Lagana was the main participant in all discussions regarding
insurance for township employees.
26. Gary Lagana arranged for a presentation by Columbia when In sura n ce
to township employees durin g November, 1987,
negotiations were taking place.
a. The presentation was made Agency. b Thomas Mertz, a salesman and
Vice - President for
1. CMC Agency was a subsidiary of the Columbia Life
Insurance Company and incorporated in the Commonwealth of
Pennsylvania on May 20, 1987.
b. Gary Lagana was not present during this meeting.
27. Lagana and Supervisor Joseph Belusko discussed
lue Shield the option
o
Columbia Life Insurance versus Blue Cros s /
that Columbia's plan offered more coverage.
a. The township employees agreed with this assessment.
b. The board of superve Columbia change insurance
coverage from Blue Cross/Blue Shield
1. No vote of the board was taken as this was a decision to
be made by the employees.
28. The Hazle Township health insurance plan with Columbia was handled
through the CMC Agency.
a. Types of coverage included:
1. Health insurance, employee and dependents.
2. Disability insurance.
3. Life insurance.
b. Sales agent: Thomas Mertz.
29. At the December 14, 1987, meeting of the township supervisors a
bill from Columbia Life Insurance Company in the amount of
$1,800.00 for medical and life insurance coverage was included in
a two page listing of bills to be approved for payment.
a. The listing of bills, including the Columbia Life bill, was
approved for payment upon motion of Supervisor Lagana and
Gary C. Lagana, 88 -113 -C
Page 9
seconded by Supervisor Belusko.
unanimously.
The motion passed
30. On December 6, 1987, the township supervisors issued check no.
16491 in the amount of $1,800.00 to the Columbia Life Insurance
Company.
a. The check was signed by Supervisors Belusko and Lagana.
31. At the February 8, 1988, meeting of
bill from Columbia Life in the amount
a listing of January, 1988, bills to
a. The listing of bills, including the Columbia Life bill, was
approved for payment upon motion of Supervisor Benyo and
seconded by Supervisor Synoski.
b. An amount of $32.59 was added to this premium and was not
included in this approval.
32. On January 19, 1988, the township supervisors issued check no.
16605 in the amount of $1,552.18 to Columbia Life.
a. The check was signed by Supervisors Benyo and Synoski.
b. The additional payment of $32.59 was included in this check.
33. On March 14, 1988, minutes of the township supervisor's meeting
reflect that the February, 1988, bills were addressed. There was
no specific listing of a. bill from Columbia Life; however, a
notation indicated that the "usual monthly and contractual" bills,
amounts not indicated, were included in this list.
The February, 1988, listing was approved for payment upon
motion by Supervisor Benyo and seconded by Supervisor Synoski.
Supervisor Lagana was absent from this meeting.
34. On February 12, 1988, the township supervisors issued check no.
16684 in the amount of $1,705.22 to Columbia Life.
a. The check was signed by Supervisors Benyo and Synoski.
35. At the May 9, 1988, meeting of the township supervisors, a bill
from Columbia Life in the amount of $206.18 was included in a
listing of April, 1988, bills to be approved for payment.
a. The listing of bills, including the Columbia Life bill, was
approved for payment upon motion of Supervisor Benyo and
seconded by Synoski. Supervisor Lagana was absent from this
meeting.
a.
the township supervisors, a
of $1,519.59 was included in
be approved for payment.
Gary C. Lagana, 88 -113 -C
Page 10
36. On May 12, 1988,t e ltownshi p su Lifers issued check no. 16922 in
the amount o f $ 2
a. The check was signed by Supervisors Benyo and Synoski.
37. Gary Lagana has no personal recollection of the events outlined in
findings 31 -36.
38. Gary Lagana was employed
by Columbia Life Insurance, CMC Agency,
from May 4, 1987, through August 26,
a. He was a salaried employee, but also received commissions.
b. Lagana served as a Vice - President of both CMC Agency and
Columbia.
c. Gary Lagana denies being employed by Columbia Life Insurance
or being a vice- president thereof.
39. Form 1099 records of Columbia Insurance confirm commissions paid to
Gary Lagana:
a. 1989: $7,932.12
b. 1988: $6,504.01
c. The commissions were in addition to his salary and were for
policies placed prior to May 4, 1987.
40. The total amount of insurance placed with Hazle Township by firms
controlled by Gary Lagana or who employed Gary Lagana is as
follows: Premium
Fay - Lagana Insurance Agency Treasurer Bond
138.11
Fay- Lagana Insurance Agency Tax Collector Bond 543.75
CMC Agency Health & Life Insurance 1,800.00
1,552.18
1,705.22
206.18
TOTAL 5,945.44
41. Gary Lagana also received $5,275 in September, 1986, from Hazle
Township for premiums for the purchase on an Errors and Omissions
Insurance Policy.
a. No policy was placed by Lagana.
b. No refund or credit was issued to Hazle Township.
Gary C. Lagana, 88 -113 -C
Page 11
IIfi. DISCUSSION:
As a township supervisor, Gary C. Lagana, hereinafter Lagana, is a
public official as that term is defined in the Ethics Act, 65 P.S. 5402;
51 Pa. Code 51.1. As such, his conduct is subject to the provisions of
the Ethics Act and the restrictions therein are applicable to him.
Initially, it is noted that Section 9 of Act 9 of June 26, 1989,
P.L. 26, provides, in part, as follows:
This amendatory act shall not apply to
violations committed prior to the effective date of
this act, and causes of action initiated for such
violations shall be governed by the prior law,
which is continued in effect for that purpose as if
this act were not in force. For the purposes of
this section, a violation was committed prior to
the effective date of this act if any elements of
the violation occurred prior thereto.
Since the occurrences in this case transpired prior to the
effective date of Act 9 (June 26, 1989), we must apply the provisions of
Act 170 of 1978, P.L. 883, to determine whether the Ethics Act was
violated.
Under Section 3(a), quoted above, this Commission has determined
that use of office by a public official to obtain a financial gain for
himself or a member of his immediate family or a business with which he
is associated which is not provided for in law transgresses the above
provision of law.. Thus, use of office by a public official to obtain a
financial gain which is not authorized as part of his compensation is
prohibited by Section 3(a): Hoak /McCutcheon v. State Ethics Commission,
77 Pa. Commw. 529, 466 A.2d 283 (1983); Yacobet v. State Ethics
Commission, 109 Pa. Commw. 432 531 A.2d 536 (1987). Similarly, Section
3(a) of the Ethics Act would prohibit a public official /employee from
using public office to advance his own financial interests; Koslow v.
State Ethics Commission, 116 Pa. Commw. 19, 540 A.2d 1374 (1988),
allocatur denied, 520 Pa. 609, 553 A.2d 971 (1988).
Section 3(c) of Act 170 of 1978 quoted above provides in part that
no public official /public employee or a member of his immediate family
may contract with his governmental body if the contract is five hundred
dollars or more unless it is awarded through an open and public process
including prior public notice and subsequent public disclosure.
The issues before us are whether Lagana, as a Hazle Township
Supervisor, violated either Section 3(a) or 3(c) of Act 170 of 1978
regarding the allegation that he, through his insurance agency, sold
insurance to the township as to bonds for the township tax collector and
township treasurer, as to an errors and omissions insurance policy and
Gary C. Lagana, 88 -113 -C
Page 12
as to the sale of health insurance to the township by CMC Agency,
another business with which he was associated.
Lagana served as a Hazle Township Supervisor and as the appointed
Treasurer from January, 1986 to December, 1991. In a private capacity,
Lagana was a licensed insurance agent from June, 1991 until September,
1992 when he relinquished his licensed. In August, 1986, Lagana
purchased the Fay Insurance Agency which then became known as the Fay
Lagana Insurance Agency.
Before Lagana became a supervisor, Hazle Township utilized the
Billig and Helms Agency as the broker of record for township insurance
which included an errors and omissions policy. In July, 1986, the Hazle
Township Board of Supervisors were advised that the errors and omissions
policy would hot be renewed and would expire in September, 1986. After
Lagana acquired the Fay - Lagana Insurance Agency, the township in
September, 1986 purchased an errors and omissions policy from that
agency as well as renewed the bonds for the township treasurer and tax
collector.
After discussions with the other supervisors, Lagana was to make
inquiry of various insurance companies regarding an errors and omissions
policy.
Although there was no discussion among the supervisors recorded in
the township records or minutes regarding the purchase of an errors and
omissions policy, a bill from the Fay - Lagana Insurance Agency in the
amount of $5,275.00 was included in the listing of bills to be approved
for payment at the September 8, 1986 board meeting. All bills were
approved by motion, seconded by Lagana, which motion carried
unanimously. The records of Hazle Township reflect that a check dated
September 29, 1986 was issued to Fay - Lagana Insurance Company in the
amount of $5,275.00 for an errors and omissions policy which was
deposited in the Fay - Lagana Insurance Agency business account. A
financial review of the Fay - Lagana business account reflects that there
was no corresponding debit in the accounts for the actual, placing of an
e rrors and omissions policy with an insurance company. There was no
errors and omissions policy from September, ga February, 1988 in
the boroughs records and no policy placed by La
As to the matter of bonds for the Hazle township tax collector and
treasurer, the township renewed the bonds from the Fay - Lagana Insurance
Agency. Prior to that time the township had obtained the bonds from the
Fay Agency, which was the predecessor of the Fay - Lagana Agency. By
invoices dated January of 1987, the Fay - Lagana Insurance Agency billed
the township for bonds for the township tax collector and township
treasurer. At the January, 1987 meeting of the Hazle Township
Supervisors, a list of bills including the Fay- Lagana bill for the bonds
was approved unanimously by a motion which was seconded by Lagana. The
commissions on the bonds for the continuation of the existing coverage
amounted to approximately $100 which was paid to the Fay - Lagana Agency.
Gary C. Lagana, 88 -113 -C
Page 13
As to township health coverage for its employees, the contract for
township employees included a provision for health insurance coverage.
Although the employees were covered by Blue Cross /Blue Shield under a
prior contract, Lagana, as the chief negotiator for the township during
bargaining process, arranged for a presentation by Columbia Life
Insurance to the township employees which occurred in November, 1987.
Lagana and another supervisor had discussed the option of health
coverage by Columbia Life Insurance rather than Blue Cross /Blue Shield.
Since the township employees wanted to change the health care provider,
the Hazle Township Board of Supervisors agreed without taking any
official vote or action. Subsequently, Columbia Life Insurance Company
issued an invoice to the township which was included in the list of
other bills that were unanimously approved upon a motion made by Lagana.
At two subsequent meetings of the township board of supervisors, in
January and February, 1988, invoices were submitted by Columbia Life to
the township and approved for payment. A query is raised by the fact
that an amount of $32.59 was added to the premium which was not included
in the original bill approval motion. There were also several
subsequent meetings of the boards which included bills from Columbia
Life which were approved followed by the issuance of township checks to
pay the invoices.
Although Lagana denies that he was employed by Columbia Life
Insurance between May, 1987 and August, 1988, the record reflects that
he was a salaried employee who received commission and also served as
the vice - president of Columbia.
Lastly, Fact Finding 40 reflects the various premiums paid to Fay
Lagana Insurance Agency or the CMC Agency which underwrote the Columbia
Life Insurance policies.
In applying the provisions of the Ethics Law as to the issue of the
errors and omissions policy coverage, we conclude that there is .a
violation of Section 3(a) but not 3(c) -. There was clearly a use of
Office by Lagana to obtain a financial gain for himself and a business
with which he is associated. The term business with which associated is
defined under Act 170 of 1978 as follows:
Section 2. Definitions.
"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 holder of stock.
65 P.S. S402.
The use of office occurred when the errors and omissions policy which
was held by the Billig Helms Insurance Agency was not renewed at which
time Lagana, by virtue of his position as a township supervisor and
without any action by the other supervisors, made the decision and took
Gary C. Lactana, 88 -113 -C
Page 14
action to place the errors and omissions policy through his own agency,
the Fay - Lagana Insurance Agency. A financial gain was received by
Lagana. That financial gain was not the typical pecuniary benefit of a
commission on an insurance premium. To the contrary, the financial gain
went well beyond the receipt of a premium commission to the point of the
actual conversion of the entire payment for the policy by Lagana. Thus,
by not actually placing the policy and converting the township funds,
the financial gain to Lagana consisted of the entire payment that was
made from the township for that particular insurance. Not only does the
above constitute a clear violation of Section 3(a) of Act 170 of 1978,
but also possibly of the criminal and /or insurance statutes of the
Commonwealth as well as the Second Class Township Code. It appears that
the matter of the insurance laws may have already been dealt with (Fact
Finding 2) and the other matters may be prosecuted by the appropriate
agencies at some future juncture.
As to the matter of Section 3(c) of Act 170 of 1978, we find no
violation, based .upon an insufficiency of evidence, as to the errors and
omissions policy as to which there was never any insurance policy due to
the conversion of funds by Lagana.
Turning to the matter of the bonds for the township tax collector
and treasurer, we do note that the bonds in question had been originally
obtained from the Fay Agency which was the predecessor of the Fay - Lagana
Agency. Thus, under these facts, there was not any action of Lagana in
using office to place the bonds with his agency since they were already
in place and were merely renewed. Since we do not find any use of
office on the part of Lagana regarding the bond renewals, we find no
violation of Section 3(a) of. Act 170 of 1978. Likewise, we find no
violation of Section 3(c)'based upon the same type of analysis.
Lastly, as to the sale of the health insurance to the township by
the CMC Agency, it is clear that the CMC Agency is a business with which
Lagana is associated since he was .employed and held the position of
vice - president of that firm; however, the health insurance policy was
for the purpose of providing coverage to township employees as per the
labor bargaining agreement. The record reflects that it was the
decision of the township employees and not the board of supervisors or
Lagana which made the decision to switch from Blue Cross /Blue Shield to
Columbia Life. Accordingly, we find no violation of Section 3(a) of Act
170 of 1978 because there is no showing of a use of office on the part
of Lagana regarding the health insurance coverage. Similarly, we find
no violation of Section 3(c) because under these facts it was the action
of the township employees who chose the Columbia Life Insurance over
Blue Cross /Blue Shield for township health coverage. Likewise, since
there was not any contracting by Lagana or the business with which he
was associated with his governmental body, we find no violation of
Section 3(c) of Act 170 of 1978 in that the contract was between the
township employees and Columbia Life.
Gary C. Lagana, 88 -113 -C
Page 15
As the matter of the violation of Section 3(a) of the Ethics Law
concerning the errors and omissions coverage, restitution in this case
is appropriate since Lagana converted township funds which were to be
used for the payment of an errors and omissions insurance policy.
Lagana never made repayment to the township. The power of this
Commission to order restitution is founded in the Ethics Law as
confirmed by judicial precedent. See Yacobet v. State Ethics
Commission, 109 Pa. Commw. 432 531 A.2d 594 (1987). Restitution is
warranted in this case given the nature of Lagana's conduct. In
addition, because of the finding of violation and the other concerns
raised, this matter will be referred to the appropriate law enforcement
authority for review.
Lagana is directed within 30 days of issuance of this order to
forward a check or payment to this Commission payable to the order of
Hazle Township, Luzerne County, in the amount of $5,275.00. Compliance
with the foregoing with result in the closing of this matter by this
Commission as to the proceedings before us. Failure to comply with the
foregoing will result in a directive of this Commission to institute an
order enforcement action against Lagana.
IV. CONCLUSIONS OF LAW:
1.
2.
3.
4.
Gary Lagana as a Hazle Township Supervisor in Luzerne County was a
public official subject to the provisions of Act 170 of 1978.
The Fay Insurance Agency was not a business with which Lagana was
associated.
The Fay - Lagana Agency was a business with which Lagana was
associated.
Lagana violated Section 3(a) of Act
office to obtain a financial gain
conversion of $5,275.00 in township
an errors and omissions policy.
Lagana did not violate Section 3(c)
errors and omissions policy by
insufficiency of evidence.
170 of 1978 when he used public
for himself consisting of the
funds which were to be used for
of Act 170 of 1978 regarding an
the township based upon an
6. Lagana did not violate Section 3(a) or 3(c) of Act 170 of 1978
regarding the renewal of bonds which had been placed with the Fay
Insurance Agency, the predecessor agency of the Fay- Lagana Agency.
7. Lagana did not violate either Section 3(a) or 3(c) of Act 170 of
1978 regarding the selection by township employees of health
insurance from a business with which Lagana was associated in that
the township employees, but not Lagana or the board of supervisors,
made the selection of coverage which contract was between the
employees and the insurance company rather than the township.
In re: Gary C. Lagana
File Docket: 88 -113 -C
: Date Decided: 9/28/93
Date Mailed: 10/07/93
ORDER NO. 903
1. Gary Lagana as a Hazle Township Supervisor in Luzerne County
violated Section 3(a) of Act 170 of 1978 when he used public office
to obtain a financial gain for himself consisting of the conversion
of $5,275.00 in township funds which were to be used for an errors
and omissions policy.
2. Lagana did not violate Section 3(c) of Act 170 of 1978 regarding an
errors and omissions policy by the township based upon an
insufficiency of evidence.
3. Lagana did not violate Section 3(a) or 3(c). of Act 170 of 1978
regarding the renewal of bonds which had been placed with the Fay
Insurance Agency.
4. Lagana did not violate either Section 3(a) or 3(c) of Act 170 of
1978 regarding the selection by township employees of health
insurance from a business with which Lagana was associated in that
the township employees, but not Lagana or the board of supervisors,
made the selection of the coverage which contract was between the
employees and the insurance company rather than the township.
5. After this matter is referred to the . appropriate law enforcement
authority, this Commission will take no further action provided
that Lagana will make payment of .$5,275.00 to this Commission
payable to the order of Hazle Township, Luzerne County within 30
days of the date of issuance of this order.
6. Failure to comply with the restitution directive of paragraph 5
will result in a directive of this. Commission to institute an order
enforcement action against Lagana.
BY THE COMMISSION,
JAMES M. HOWLEY, CHAIR