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HomeMy WebLinkAbout923 BelliIn Re: John Belli STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 : File Docket: 93- 002 -C2 : Date Decided: 02/17/94 : Date Mailed: 02/24/94 Before: James M. Howley, Chair Dennis C. Harrington Roy W. Wilt Austin M. Lee Joseph W. Marshall, III The State Ethics Commission received a complaint regarding possible violation of the State Ethics Act, Act 9 of 1989, 6 S401 et se g. 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 not filed and a hearing was held. The record is complete. 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 S21.29(b). The files in this case will remain confidential in accordance with Act 9 of 1989, 65 P.S. S408(h) during the fifteen day period 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 ot more than fine more S409(e� or imprisonment Belli, 93- 002 -C2 Page 2 I. ALLEGATION: That John Belli, a member of the Burrell School District, Westmoreland County, violated the following provisions of the State Ethics Act (Act 9 of 1989), when his firm, Corporate Security contracted with the school district to provide equipment to monitor fire alarms and thermostats without an open and public process, and when he participated in Board actions to pay fees to his firm for the monitoring services. Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 P.S. 5403(a). Section 3. Restricted activities. (f) 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 P.S. S403(f) II. FINDINGS: 1. John Belli served as a Burrell School District Board member from September, 1985, until March 10, 1993. a. Belli resigned his position at the .March 10, 1993, board Be_, 93- 002 -C2 Page 3 meeting. b. Belli resigned his position following the release of an audit report by the Department of Auditor General which questioned a n d to remove himself from potential conflicts. a 2. Belli's principal employment since approximately 1984 has been in the private security field focusing on security, fire and surveillance systems for business and residence. 3. Since 1984, Belli has been involved with the following corporations either as a principal /owner or employee. a. Corporate Security; Inc. - - =sole incbrporator 1/84 to 3/86. b. Guardian Protective Services, salesman, 3/26/86 to 1/90. c. Corporate Security employee, 5/90 to 12/90. d. Corporate Group Ltd. incorporator, 7 /15/91 to present. 4. Articles of Incorporation on file with the Pennsylvania Department of State include corporate papers for Corporate Security Inc. (Hereinafter referred to as C.S.I.). a. Incorporation date is January 4, 1984. b. Sole incorporator is John G. Belli; 2678 Elaine Drive, Lower Burrell, 15068. c. The purpose of the corporation is to sell, install, and /or service security systems for commercial and residential use and any and all other lawful activities for which a corporation may be incorporated. d. Business location is listed as 400 Penn Hills Mall, Pittsburgh, PA 15235. 5. Corporate Security Inc., was purchased by Guardian Protection Services Inc., around March 26, 1986, for the price of $39,400.00. a. Guardian took over ownership of all CSI assets owned as used in the operation of CSI alarm security business. b. Belli retained the business name Corporate Security Inc. 6. Belli was employed by Guardian Protective Services as a salesman from March 26, 1986, until January, 1990. Belli 93- 002 -C2 Page 4 a. Belli was not using the business name Corporate Security Inc., when employed by Guardian Protective Service. b. Belli had a two year non - compete clause as a condition of employment with Guardian. c. Belli's -two year non - compete clause was in effect from January, 1990, until January, 1992. d. Belli was prohibited from directly or indirectly owning or operating any similar business in Allegheny, Westmoreland, or any contiguous county thereto. 7. Belli approached Charles Birk, owner of D. B. Zimmerman, Inc., seeking employment around April, 1990. a. D. B. Zimmerman, Inc., was a security guard business in the Pittsburgh, PA area. b. Charles Birk was a long time friend of Belli. 8. Belli discussed his need for employment and his non - compete clause imposed by Guardian Protective Services. 9. Birk made Corporate Security Inc., a subsidiary of D. B. Zimmerman, Inc. a. Legal requirements prohibit a corporation from being a subsidiary of another corporation. b. Corporate Security was formed to circumvent this legal requirement. 10. Corporate Security was established around May, 1990. a. It was established to offer the same services formerly offered by Corporate Security Inc. 11. Belli operated Corporate Security as an employee of D. B Zimmerman Inc., from May, 1990, through December, 1990. a. Birk was experiencing health problems and wanted to get out of the security business. b. Belli was still bound by his two year non - compete agreement with Guardian at this time. 12. In approximately January, 1991, Belli approached Attorney Charles Steele seeking, advice on how he could continue in business, working around his non - compete clause with'Guardian. Belli 93- 002 -C2 Page 5 a. Charles Steele's law firm of Steele & Hoffman, 422 Frick Building, Pittsburgh, PA 15219, was employed by the Burrell School District as it's Solicitor at this time. 13. Following this meeting, Belli formed Corporate Group Limited. 14. Articles of Incorporation were filed with the Pennsylvania Department firm, St State, and b Hoffman, Elaine on McGuirk, behalf an of associate law , Ltd. a. Incorporation date is July 15, 1991. b. Sole incorporator is John G. Belli; 2678 Elaine Drive, Lower Burrell, PA 15068. c. The principal activity of the business is to be dealing in security systems and communications. d. Business address is listed as 168 Westbrook Road, Lower Burrell, PA 15068. 15. Corporate Group L.T.D. was formed to operate the business formerly known as Corporate Security Inc. a. C.S.I. is still a legally recognized corporation in the Commonwealth of PA. 16. Belli made Corporate Security a subsidiary of Corporate Group Limited. Corporate Security has operated officially in this manner since July 15, 1991. a. Corporate Security was operated unofficially in this manner from January, 1991, until July 15, 1991. 17. Belli operated Corporate Security without D. B. Zimmerman Inc., during 1991. a. D.B. Zimmerman, operating as Corporate Security, transacted business with the school district. 18. Belli purchased Corporate Security from Charles D/B/A, D. B. Zimmerman Inc., for $15, 000 g January, anuary a. No formal sales agreement was prepared but a judgment note was entered into between Belli and Birk for the purchase. 19. During the initial start -up of- Corporate Security, Corporate Group L.T.D., Belli's home address, 2678 Elaine Drive, Lower Burrell, PA., was used as a business address. mall, 93- 002 -C2 Page 6 20. Westmoreland County records include the deed for the property known as 2678 Elaine Drive, Lower Burrell, PA. a. Deed Book Volume 2239, page 218, contains a deed dated February 4, 1977. This deed is for a property which was transferred from David Lee Delitskus and Diane E. Delitskus, his wife to John G. Belli, and Barbara L. Belli, his wife. 21. Business records of the Corporate Group L.T.D., include installment payments made to D. B. Zimmerman from Corporate Security, Corporate Group L.T.D.'s Mellon Bank account #179- 6400 on the following occasions for the purchase of corporate security. a . to Check Number Amount 2/26/92 103 $ 757.32 3/26/92 137 769.66 4/28/92 184 754.30 5/31/92 229 752.10 6/30/92 290 742.12 7/26/92 338 739.65 8/24/92 380 733.28 9/27/92 412 723.63 10/31/92 441 720.54 11/29/92 495 711.40 12/29/92 554 707.77 1992 Total $8,111.77 1/26/93 596 $ 701.40 2/26/93 633 688.29 4/2/93 701 687.64 4/29/93 757 680.48 6/3/93 821 682.32 7/1/93 870 668.15 7/30/93 928 663.22 9/1/93 1010 656.84 1993 Total $5,428.34 22. During the initial start-up of Corporate Security and Corporate Group L.T.D., Belli routinely used the business names of Corporate Security and Corporate Security, Inc. a. Corporate Security Inc., was not an operating business during that time. b. Belli continued to use old CSI stationery until October, 1990, when new stationery was purchased and received payments in the name of Corporate Security Inc. Belli 93- 002 -C2 Page 7 23. Statements Financial include the following filings for John Belli: l School l Dis tri ct Dis a. Calendar year: 1989 Filed: 5/1/90 on Sec Form 1/90 Creditors: Mellon Bank, 8.75% Direct /Indirect Income: C.S.I. Financial Interest in any business: C.S.I. Owner /President All other financial interests: None b. Calendar year: 1990 Filed: 3/11/91 on Sec Form 1/91 Creditors: None Direct /Indirect Income: Corporate Security Office Directorship Employment in any business: Corporate Security - owner Financial Interest in any business: Owner, P.O. Box 1800, Pittsburgh, PA c. Calendar year: 1991 Filed: 4/24/91 on Sec Form 1/92 Real Estate Interest: Home at 2678 Elaine Dr., Lower Burrell, PA Creditors: Mellon Bank 8.75% Direct /Indirect Income: Corporate Security Office Directorship or Employment in any business: Corporate Security President Financial Interest in any business: Corporate Security, stockholder No percentage of stock interest is listed. 24. During nanc t ia l rests years eflect that he is ,thel Statements ownerof Co F Corporate Financial Security Inc. a. For calendar year 1991, Belli indicates that he is a President and stockholder of Corporate Security. 25. By August, 1990, the district was experiencing problems with the fire alarms at the high school. a. Normal fire drills could not be conducted without the system overheating. b. Superintendent, John George, viewed, this as a necessity repair, categorizing it as a matter of student safety. 26. During the rise in vandalism year, School nd break - ins at it's school had Belli, 93- 002 -C2 Page 8 a. Paint and bleachers were tossed into the pool. b. No security system existed for the pool area at that time. 27. Around August, 1990, informal discussions took place during an Executive Session of the school board of directors regarding the recurring problems with the high school's fire alarms. a. John Belli was present for these discussions. b. Board member John Fick requested that Belli look into the problem. c. Superintendent John George also made a similar request of Belli. d. No board action was taken to approve Belli looking into the problems with the fire alarm systems. (1) Belli asserts approval was given during the executive session. (2) Board members have no recollection of this action. 28. During August or early September, 1990, Belli, D /B /A Corporate Security, inspected and repaired the fire -alarm system at the high school. a. Belli was a board member at this time. b. Corporate Security Inc., was not an operating business at this time. c. Belli worked for Corporate Security, a division of D. B. Zimmerman Inc. 29. Belli reported back to the school board byway of letter dated September 5, 1990, from Corporate Security Inc.; 2678 Elaine Drive, Lower Burrell, PA., 15068; to John George; Burrell School District Superintendent. a. The letter reflects Belli's name in typewritten form but not his signature. b. This letter was on Corporate Security stationery. c. The Corporate Security Inc., address used is the same address as Belli's personal residence. (Refer to Finding #20). jimall 93- 002 -C2 Page 9 d. Belli prepared the letter personally. e. The letter indicates that Belli sent servicemen to the found that high st em was 1n working order, but could They the last for only he syst several more months, up to a year. f. The current system did not meet Pennsylvania Life Safety Code changes effective May, g. Systems that were not up to code were to be replaced when there was any of the following conditions: (1) A failure of the system. (2) An addition to the system. (3) When a system needed repair. h. Belli indicated that it appeared Burrell's situation met all three. i. The letter indicates that John Zadell contacted Honeywell for a quote to repair the system. They quoted approximately $100,000.00, plus monitoring fees, and an additional $9600.00 to tie the district's other schools into the system. (1) These figures were quoted to the board by superintendent John George Belli indicated that e labor when 1 he inspected t ared $250.00 worth of free repaired the alarm system. k. Belli proposed that he would at no cost to the district install the necessary dialer, panel, and power supplies to monitor the fire alarms and the necessary equipment and st This would in part the schools o Burrell up low to temperature. code. _ 1. Belli would only charge a competitive fee for monitoring. 30. Belli determined which repairs and equipment were needed. a. The board acted on Belli's recommendations. 31. John Zadell is employed by the Burrell School District as a maintenance employee. j Belli, 93- 002 -C2 Page 10 a. Zadell informally contacted Honeywell Corporation inquiring about needed repairs to the systems. b. Honeywell did not provide any cost estimate or bid for the needed repairs or system monitoring to Zadell. 32. Belli, D /B /A Corporate Security Inc., did not provide written quotes to the Burrell School District for monitoring fees involving the system. a. Belli asserts that during the executive session of September, 1990, board meeting, he verbally advised board members of the monitoring fee and service contract and the costs therein. 33. Belli's proposal was included as part of the Board members meeting minute packet for their September 12, 1990, meeting. a. Packets are distributed to Board members approximately one week prior to their meeting. 34. Minutes of the Burrell School Board include action authorizing Corporate Security Inc., to install new fire alarms and low temperature sensors at the district's school. a. Minutes of the September 12, 1990 meeting, read in part that: "Mr. Jansen informed the Board (members) that they had each received a copy of a letter from Corporate Security explaining some of the faults of the electronic system. He asked the Board for authorization to permit Corporate Security to install necessary equipment to monitor fire alarms and low temperature thermostats in all buildings at no cost to the district. Mr. Collodi made a motion, seconded by Mr. Meredith, that the Board permit Corporate Security to install equipment to monitor fire alarms and low temperature thermostats in all of the buildings at no cost to the district." Roll call: Fick, Marinelli, Mantz, Collodi, Meredith, Seinera, Kotecki, Kristof. All voted yes. Mr. Belli abstained. 35. Attached to the minutes from the board's September 12, 1990, meeting is a memorandum to the Board of School Directors from John Belli dated September 12, 1990. a. The memorandum lists John Belli's reason for abstaining on the vote for Corporate Security to install monitoring J1i, 93- 002 -C2 Page 11 equipment for fire alarms and low temperature thermostats at no cost to the district. b. The nature ofBi's cnf is listed as Belli being an employee o f Corporate c. The memorandum is signed by John Belli. 36. Belli's conflict f ate interest he the owner of t Corpo r rate 1990, does not Security as was listed on his Statement of Financial Interests for calendar year 1990. (Refer to Finding #23b 37. Board action to permit Corporate Security monitoring fees l t he equipment did not include any approval be paid to corporate security. a. The monitoring fees were referenced oi the to eDtember 5, 1990, correspondence from Belli, provided packets. (Refer to member as part of their meeting p Finding #29). 38. Belli's /Corporate Security Inc., proposal was the only one brought before the Burrell School Board for consideration. a. No other proposals were solicited. b. There was no advertising seeking proposals or quotes. the 39. On July 31, 1990, Attorney Matthe issued a, tial law firm of Steele & Hoffman, Solicitor's Opinion to the Burrell School Board to answer relevant requirements imposed by the Ethics law in connection with the Burrell School District contracting with persons or entities with which a public official of the district or a member of his immediate family is associated. a. Hoffman's Opinion indicated that "it is permissible for the employer of a school director to enter into a contract with the district, provided that the bidding or quotation process is not established to that employers unique advantage.. In the event the school directors t ors employer bids upon or provides a quotatio contract with the district, the school director -is prohibited from providing to his /her employer any confidential information. The school director should refrain from any participation in the deliberations of the district or the school board regarding any proposed contract with his /her employer;' should disclose his /her votinassociation to PP W such any contract should betweenal abstain district and voting Belli, 93- 002 -C2 Page 12 his /her employer. Prior to the approval of any agreement between the district and the affiliated business, the prospect of such contract must be announced in sufficient time for a reasonable competitor to be able to prepare and submit a proposal /applications filed. Finally, any such agreement and any other quotations or proposals considered must be publicly disclosed." 40. Hoffman's Solicitor's Opinion was based on the criteria that John Belli was an employee of Corporate Security Inc., a subsidiary of D. B. Zimmerman, Inc., and that Belli would not profit in any manner from the dealings with the district. (Refer to Findings #12 and #14 which indicate that the Steele - Hoffman firm discussed the matter with Belli prior to filing the incorporation papers.) a. No reference was made to the D. B. Zimmerman Company in Belli's letter to the board dated September 5, 1990. (Reference Finding #29). 41. Financial records of the Burrell School District include invoices to the district for work performed by C.S.I. /Corporate Security and subsequent payments made. Individual payments frequently cover multiple invoices. a. Check number 1616 dated February 13, 1991, in the amount of $4,980.00 was issued to C.S.I., 2678 Elaine Drive, Lower Burrell, PA. The back of the check is endorsed C.S.Z., John G. Belli, self - owner, account number 229- 2713 at Mellon Bank. This check was to cover C.S.Z. invoices dated 1/3/91, 1/15/91, and 1/28/91. All invoices are signed off by Thomas Jansen, Business Manager. - Invoices are for monitoring fees, wiring and motion detectors for the pool, labor for UL Radionics, digital dialers, and remote school programming. b. Check #2293, dated June 14, 1991, in the amount of $1,116.00, was issued to Corporate Security, 2678 Elaine Drive, Lower Burrell, PA. The back of the check is endorsed by John Belli, self- owner, Corporate Security, account number 229 -2713. This check was to cover invoices dated 2/28/91 and 5/5/91 for monitoring fees, the installation of security keys at the Middle School and service contracts. c. Check #2617, dated August 15, 1991, in the amount of $786.00, was issued to Corporate Security, P.O. Box 18001, Pittsburgh. Back of the check is endorsed Belli, 93- 002 -C2 Page 13 Corporate Security, John Belli, self - owner, account number 229 -2713. This e p d J un e e 28 , was for monitoringtfeese for June, July dated and August, 1991. d. Check #3637, dated 12/13/91, in the amount of $786.00, was issued to Corporate Security, P.O. Box 18001, Pittsburgh. The back of the check is endorsed Corporate Security, John Belli, self - owner, account number 229 - 2713. This check was to cover a Corporate Security invoice dated October 9, 1991, for monitoring fees October, November, December, 1991. Thomas Jansen, November 26 indicated it was approved by 1991. was e. Check #4073, dated 2/14/92, the amount fOffice,0,1330 issued to Corporate Security Accounting Fifth Avenue, New Kensington, PA. The back of the check is endorsed Corporate Security, account number 179 -6400. John Belli's signature does not appear on this check. The check was issued to cover invoices dated January 2, 1992, for monitoring fees. Also, an invoice dated January 2, 1992, was for a service contract in the amount of $2,450.00. The Service Contract is for the maintenance of all fire alarms and low temperature reporting systems in all schools. Maintenance of the burglar alarm at the high school is also included. The Service Contract indicates the total cost $2,450.00 is being donated to the district. Check #4657, dated 5/28/92, in the amount of $795.00, issued to Corporate Security Accounting Office, 1330 Fifth Avenue, New Kensington, PA. The backside of this check contains no endorsement. It was processed through Mellon Bank at the Giant Eagle, New Kensington Branch #871. This check was to cover Corporate Security invoice dated April 2, 1992, for monitoring fees. 42. Corporate Security and Corporate tl School District. totalling $9258.00, from the Burrell a. Of this amount, $4,590.00 was for equipment relating to the swimming pool. b. Belli asserts that his letter of 9/05/90 indicated that the only equipment that would be donated was for the fire Belli, 93- 002 -C2 Page 14 alarms and low temperature sensors. 43. The additional equipment charges were for materials used as part of the installation of a security system at the high school pool. a. The work regarding the pool was a separate project not related to the fire alarms. b. Belli asserts that at an executive session of the board, in January, 1991, he was authorized to do the work by the District Superintendent and Solicitor because the damage to the pool was considered an emergency, and the amount to install the alarms would not reach the $10, bid requirements. (1) Belli asserts that the matter was brought up by board members John Fick and Charles Meredith. c. No bids were obtained. 44. Mellon Bank account number 229 -2713, is the personal checking account for John G. Belli and his wife Barbara Belli. a. John G. Belli and Barbara Belli are signatories on this • account. 45. Mellon Bank account number 197 -6400, is the business checking account for Corporate Security, Corporate Group L.T.D. a. John G. Belli is sole signatory on this account. 46. John Belli's facsimile signature appears on the front of all checks made payable to C.S.I. by the Burrell School District. 47. John Belli, D /B /A Corporate Security, ceased invoicing the Burrell School District for monitoring fees in the middle part of 1992, after questions were raised regarding the propriety of the payments a. To date, no additional bills were submitted for monitoring fees. b. Since the review by the Department of Auditor General in June, 1992, Belli has continued to monitor and service the alarm systems at no charge to the district. 48. The Burrell School District Board took action on the routine payment of bills on a monthly "basis. a. Bill lists are provided to Board members as part of their Belli, 93- 002 -C2 Page 15 monthly meeting packets. b. These packets are distributed at least one week prior to the Board voting on the bills. (1) On occasions, bill lists are provided to Board members the night of the meeting. c. Bill lists are voted on in their entirety. d. Monthly bill lists contain upwards of a 150 disbursements. e. Bills are itemized on a computer generated printout by check number, listing the vendor, a brief description of the item, and the amount of the disbursement. 49. Minutes of the Burrell ate Securit /C S I.� totalling n $9,258.00 were Payments to Corporate Y were approved as follows: a. ate Check # Amount 2/13/91 1616 $4,980.00 9/11/91 2617 786.00 8/14/91 2293 1,116.00 1/15/92 3637 786.00 3/11/92 4073 795.00 6/10/92 4657 795.00 $9,258.00 b. Belli participated in approving payments of bills after consulting with the school district solicitor's, Charles Steele and Philip McCalister who advised that it was appropriate to vote on . payment of routine bills. (1) McCalister was personally unaware that Belli had purchased Corporate Security but knew that Belli was an employee. c. Votes to approve bill listings were unanimous. 50. Meeting minutes referenced in Finding #49 do not reflect any discussions questioning the payments made to Corporate Security /C.S.I. 51. Board members did not recall payments being made to Corporate Security Inc., until an audit was conducted by the State Auditor General's Office in August, 1992. e li, 93- 002 -C2 Page 16 52. Attorney Philip McCalister issued a Solicitor's Opinion dated June 30, 1992, regarding the district conducting business with a company with which a Board member is affiliated. a. McCalister's Opinion was issued to address questions raised by the State Auditor General's Office after Belli did business with the school district. b. McCalister's Opinion states "it is impermissible for a director, as a private person to directly engage in a business transaction with the district; however, it is permissible for the employer of a school director to enter into a contract with the district provided that the bidding of quotation process is not established to that employers unique advantage. In the event the school directors employer bids upon or provides a quotation for any contract with the district, the school director is prohibited from providing his or her employer any confidential information. The school director should refrain from any participation in the deliberations of the district or the school board any proposed contract with his /her employer, should disclose her /her association with such employer and should abstain on voting to approve any contract between the district and his /her employer. Prior to the approval of any agreement between the district and the affiliated business, prospect of such contract must be announced in sufficient time for a reasonable competitor to be able to prepare and submit a proposal /application. Furthermore, any other quotations or proposals to serve must be publicly disclosed. Finally the director is not required to abstain from voting to approve the routine payments of bills that include bills for services contracted in accordance with the Ethics Act. 53. Belli forwarded payments to D. B. Zimmerman Inc., from his personal checking account, (Mellon Bank Account #229- 2713), on the following occasions: a. Date Check Number Amount 02/27/91 1859 $ 5600.00 07/30/91 -2277 6900.00 10/30/91 2522 6700.00 b. Belli asserts that these payments were for fees collected by him for security services and included the payments he received from the Burrell School District. (Refer to Finding #41). Belli 93- 002 -C2 Page 17 54. Payments made to Corporate Security in 1992, by the Burrell School District were deposited in the business checking account of Corporate Security, Corporate Group L.T.D., Mellon Bank account number 179 -6400. a. These payments totalled $1590.00. (Refer to Finding #42). b. This amount was not forwarded to D. B. Zimmerman Inc. 55. Business als used as part Corporate f the installs for maters ion work performed at the district's schools. a. Materials used were obtained from Alarmex Distributors, Suite 104, Parkway Center, Pittsburgh, PA 15220, and Omni Electric, 228 Davidson Street, Tarentum, PA 15084. 56. Corporate Security was invoiced followinmex for materials used at the Burrell schools on the g Invoice # Date - Materials Cost 1603 Undated 1/4 x 18 Ballhanger $ 16.94 1/2 x 24 Masonry 1900 12/05/90 Temp -A -Lert 84.60 Shld JKT Wire 44.29 Str JKT Wire 137.00 1987 12/11/90 Brn Control 24.90 3976 12/29/90 Super Quad 5050 147.00 1045 T Brn 13.65 2809 01/03/91 Power Supply 108.00 Battery Backup 59.60 2048 01/31/91 MDC 32 DL 1015.00 1589 02/05/91 1/4 x 5 21.88 1689 02/11/91 MDC 16CD 220.50 MPI 30 35.90 MPI 11 12.50 60106 02/27/91 1045TB 13.3 Total: $1990.87 57. Corporate Security obtained wire and wire molds from Omni - Electric. a. Individual invoices are unavailable. b. The costs to Corporate Security Inc., include: 150 ft. metal wire mold 15 wire mold boxes 250 ft. metal clad Mc cable $150.00 45.00 125.00 Belli, 93- 002 -C2 Page 18 III. DISCUSSION: 1000 ft communication cable Tax Total 1990 Donation Service above 1991 Materials and 1992 Materials and 1993 Monitoring 58. Corporate Security Inc., also installed used equipment in the Burrell Schools. a. Belli took in on trade the systems major component part at $6,000.00. 59. Belli provided the following summary expenses which were incurred and income received by Corporate Security as part of their dealings with the Burrell School District: and beyond donation labor labor Total expenses 1990 donation $8,186.74 Burrell payments 9.258.00 Total credits $17,444.74 62.50 22.75 $405.25 $8,186.74 1,009.12 9,115.82 1,458.08 300.00 $20,009.76 Loss to Corporate Security Inc. $ 2,625.02 60. Belli's donation in 1990 included all materials and labor required to bring Burrell School's fire alarms only in compliance and applicable codes as cited in his September 5, 1990, letter to the district. .(Refer to Finding #29). a. Payments Burrell School District $ 9,258.00 b. Loss, as asserted by Belli $10,751.76 (includes 1990 donation of $8,167.74) 61. Belli acted upon the advice and information received from the school district solicitor and did not intend to violate the Ethics Act. a. Belli offered discounted prices to the school and incurred some loss as a result of his work for the school district. As a member of the Burrell School District, Westmoreland County, John Belli, hereinafter Belli, was a public official as that term is defined under Act 9 of 1989. 65 P.S. 5402. As such, his conduct is subject to the provisions of the Ethics Law and the Be_li, 93- 002 -C2 Page 19 restrictions therein are applicable to him. Initially, it is noted that Section 9 of Act 9 of June 26, 1989 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 after the effective date of Act 9 (June 26, 1989), we must apply provisions of Act 9 to determine whether the Ethics Act was violated. of Act 9 of 1989 quoted above, a public not engage in conduct that constitutes a of interest" is defined under Act 9 of 1989 Under Section 3(a) official /employee shall conflict of interest. The term "conflict as follows: Section 2. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Conflict" or "conflict of interest" does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member or his immediate family or a business with which he or a member of his immediate family is associated. 65 P.S. S402. Belli, 93- 002 -C2 Page 20 In addition, Section -3(f) of Act 9 of 1989 specifically provides in part that no public official /employee or spouse or child or business with which he or the spouse or child is associated may enter into a contract with his governmental body valued at five hundred dollars or more or.any subcontract valued at five hundred dollars or more with any person who has been awarded a contract with the governmental body with which the public official /employee is associated unless the contract is awarded through an open and public process including prior public notice and subsequent public disclosure. The issue before us is whether Belli as a Burrell School District Board Member in Westmoreland County violated either the conflict provision or contracting provision of Act 9 of 1989 regarding the allegation that he participated in board actions to pay fees to Corporate Security, a business with which he was associated, which contracted with the school district without an open and public process. Belli served as a Burrell School District Board Member from September 1985 until March 1993. In a private capacity, Belli's principal employment is in the area of security fire and surveillance systems for businesses and residences. From 1984 to the present, Belli has been involved as a principal /owner or employee in the following corporations /businesses: Corporate Security Inc. (CSI), Guardian Protective Services, Corporate Security and Corporate Group Ltd. In March 1986 Belli sold CSI to Guardian Protective Services by transferring all of CSI assets but retained the CSI business name. Belli at that time became employed by Guardian Protective Services -as a salesman until January 1990. Belli was subject to a two year non- compete clause as a condition of employment with Guardian which ran from January 1990- until January 1992. Around April 1990, Belli sought employment with D.B. Zimmerman Inc. which was owned by Charles Birk who was a friend of Belli. Corporate Security was formed in May, 1990 to offer the same services as offered by CSI. Belli operated Corporate Security as an employee of D. B. Zimmerman Inc. from May 1990 until December 1990. Since Belli was still bound by the non - compete clause, he contacted an attorney to seek advice on how he could work around his non - compete clause. As a result of such advice, Belli formed Corporate Group Ltd. to operate the business formerly known as CSI which continued to have a corporate existence. Belli made Corporate Security a subsidiar of Corporate Group Ltd. Corporate Security was subsequently purchased by Belli from Charles Birk in January 1992. During the start -up of Corporate Security or Corporate Group Ltd., Belli used his home address as a business address as well as the names Corporate Security or CSI. During Belli's tenure as a Burrell School District Board Member, the district experienced problems in August of 1990 with the fire alarms at the high school. 'After informal discussions Belli, 93- 002 -C2 Page 21 occurred in executive session of alarms and vandalism, one of the that Belli look into the problem was taken by the board. the school board about the fire school board members suggested although no formal board action During August and September of 1990 Belli, D /B /A Corporate Security, inspected and repaired the fire alarm system at the high school. Thereafter Belli reported back to the school board using Corporate Security stationery and the CSI address which was his personal residence. In the report, Belli indicated that servicemen were sent to repair the fire alarm system, that the system did not meet Pennsylvania Code requirements, and that the system would only last for a few more months. After Belli reported that Honeywell quoted a repair to the system of $100,000 plus monitoring fees plus an additional $9,600 to tie into the other district schools, Belli indicated that he provided $250 of free labor to inspect and repair the system and that he at no cost to the district would install the necessary dialer, panel and power supplies to monitor the fire alarms and thermostats to monitor the schools for low temperature. After Belli determined which repairs and equipment were needed, the board acted upon Belli's recommendation. Parenthetically, it appears that Honeywell was merely informally contacted and never provided any cost estimate or bid for the needed repairs or system monitoring. Belli, D /B /A Corp. (CSI) , never provided written quotes to the school district for the monitoring fees involving the system. The proposal which was submitted for the September 1990 meeting of the school district related to the installation of new fire alarms and low temperature sensors at the school district. The school board authorized such action as reflected in the minutes with Belli abstaining. At that meeting, Belli submitted a memorandum setting forth the reasons for his abstention which listed him as an employee of Corporate Security. The memorandum did not reflect that Belli was owner of Corporate Security as was listed in his Financial Interests Statement (FIS). The CSI proposal submitted by Belli was the only one brought before the school board; no other proposals were solicited nor was there any advertising for proposals or quotes. The board action did not include any approval as to monitoring fees. On July 31, 1990 the solicitor to the board issued a non - confidential opinion regarding the district contracting with persons or entities with which a school district official is associated. The opinion reflected that it was permissible to engage in such contracting with the employer of a school district director provided that there was no unique advantage to the employer, provided there was no confidential information, provided the school director refrained from any participation regarding the proposed contract, provided disclosure was made of the employment, provided there was abstention as to the approval of the contract, elli, 93- 002 -C2 Page 22 provided the prospect of the contract prior to approval of agreement would have to be announced to provide reasonable time for a competitor to prepare and submit a proposal and finally provided such agreements and proposals were publicly disclosed. Various services were performed under the contract for the school district by CSI /Corporate Security as to which invoices were sent and payments received, the details of which are set forth in Fact Finding 41. Corporate Security and CSI received payments totalling $9,258 from the Burrell School District as to the contract. Fact Finding 42. John Belli, D /B /A Corporate Security, ceased sending invoices to the school district for monitoring fees in mid -1992 after questions were raised regarding the propriety of such payments. From that time to date, no additional bills have been submitted for monitoring fees. As to the process by the school board for paying invoices, payments are made on a monthly basis through bill lists submitted to the board members usually one week prior to the board voting on the bills. The school board votes on the bill lists as a package which usually contains approximately 150 dispersements. The minutes of the school board do confirm payments of $9,258 to Corporate Security /CSI as reflected in Fact Finding 49. The votes to approve the Corporate Security /CSI bills were made unanimously. In June 30, 1992 a solicitor's opinion was issued regarding the business conducted between the school district and the business with which a school board member was affiliated. The opinion was issued so as to address questions raised by the State Auditor General's Office concerning such business activity. The Solicitor opined that a director as a private person could not directly engage in business transactions with the district and the employer of a school director would be permitted to contract with the district provided: there is no unique advantage in the bidding process, there is no confidential information utilized, there is an abstention by the school director as to participation coupled with the necessary disclosures, there is an abstention by the school director in voting to approve the contract, the prospect of such contract is announced prior to the approval of agreement so as to provide a competitor reasonable time to prepare and submit a proposal, and any -other quotations or proposals received are to be publicly_disclosed. Lastly, solicitor was of the opinion that the director was not required to abstain from voting to approve the routine payment of bills that included bills for the contract of services. The record does reflect that Belli issued payments to D.B. Zimmerman Inc. which Belli claims were payments for fees collected by him for security services or as payments he received from the Belli, 93 +002 -C2 Page 23 school district. receive $4,590 Zimmerman Inc. Fact Finding 53. Corporate Security in 1992 did in payments which were not forwarded to D.B. Fact Findings 42a, 54. The business records of Corporate Security include invoices for materials used as part of the installation work performed at the school district. Corporate Security was invoiced by Alarmex in the amount of $1,990.87 for materials used at the school. In addition, Corporate Security obtained materials from Omni- Electric in the amount of $405.25 as to which invoices are unavailable. CSI also installed used equipment in the school district which was a major component of the system valued at $6,000. Belli asserts that Corporate Security received •$17,444.74 in credits as to the school district project, but had expenses of $20,009.76 with a net loss of $2,625.02. Further, Belli asserts that he made a donation in 1990 of services amounting to $8,167.74 thereby increasing his total loss to $10,751.76. In applying the provisions of Section 3(a), the conflict provision, and Section 3(f), the contracting provision, we do not find a violation of 3(a), but we do find a violation of Section 3(f). As to Section 3(a) of Act 9 of 1989, in order to sustain a violation, we must have evidence of record that Belli used the authority of office and that such use of authority of office resulted in a private pecuniary benefit to either him or business with which he was associated. The term business with which he is associated is defined under the Ethics Law 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 has a financial interest. • 65 P.S. 5402. Clearly CSI and Corporate Security are businesses with which Belli was, associated. However, a review of the findings in this case does not establish a requisite use of authority of office on the part of Belli. In particular, at the time that the contract was awarded at the September 12, 1990 meeting of the board, Belli specifically abstained in such action and filed a memorandum as to his conflict of interest. The only other possible action taken by Belli as a school board member was voting on a list of bills which included invoices from Corporate Security /CSI. However, it is noted that said invoices were included within lists of bills and it appears that such bills were not contested. This Commission has held as far back as Krushinski, Order 168, that a public e111, 93- 002 -C2 Page 24 official /employee did not violate the Ethics Law when he voted to approve routine non - contested bills of a business with which he was associated. From the record before us we do not see the element of a use of authority of office by Belli and on that basis we find no violation of Section 3(a) of Act 9 of 1989. Given the above, we need not address the question of whether a private pecuniary benefit was received by Belli or a business with which he was associated. Turning to the matter of the contracting provision, Section 3(f), we do find a violation. In this case, Corporate Security or CSI were businesses with which Belli was associated. In addition Belli through those businesses entered into a contract with his governmental body, the Burrell School District, which was over $500 and was not awarded through an open and public process. Such action was violative of Section 3(f) of Act 9 of 1989. Our decision is in accord with Katz, Order 885 where we held that a county commissioner violated Section 3(f) of Act 9 of 1989 regarding the award of a contract, in excess of $500 and without an open and public process, by his governmental body for the construction of a conservation district building to a business with which his son was associated. See also Molnar, Order 888. The Ethics Law empowers the Commission to impose restitution in cases where a financial gain has been obtained in contravention of Act 9 of 1989. 65 PS 407(13). We also are directed by the Ethics Law to impose a penalty equal to three times the financial gain. 65 PS 409(c). In this case, giving due consideration to all of the facts and circumstances, we believe that a repayment of $750.00 to the Burrell School District is warranted. Accordingly, Belli is directed within thirty days of the date of issuance of this Order to forward a check or payment in the amount of $750.00 through this Commission to Burrell School District. Through such action, Belli will remove himself from a conflict of interest in this case. Hence, compliance with the foregoing will result in the closing of this case with no further action by this Commission. Failure to comply will result in a directive to institute an order enforcement action. IV. CONCLUSIONS OF LAW: 1. John Belli, as a member of the Burrell School District, was a public official subject to the provisions of Act 9 of 1989. 2. Belli did not violate Section 3(a) of Act 9 of 1989 in that he did not participate in the award of a contract from the school district to a business with which he was associated. 3. Belli violated Section 3(f) of Act 9 of 1989 when the school district entered into a contract with a business with which Belli,, 93- 002 -C2 Page 25 Belli was associated which contract was in excess of $500 and was not awarded through an open and public process. In Re: John Belli ORDER NO. 923 File Docket: 93- 002 -C2 Date Decided: 02/17/94 Date Mailed: 02/24/94 1. John Belli, as a member of the Burrell School District, did not violate Section 3(a) of Act 9 of 1989 in that he did not participate in the award of a contract from the school district to a business with which he was associated. 2. Belli violated Section 3(f) of Act 9 of 1989 when the school district entered into a contract with a business with which Belli was associated which contract was in excess of $500 and was not awarded through an open and public process. 3. Belli is directed within thirty days of the date of issuance of this Order to forward a check or payment in the amount of $750.00 through this Commission to Burrell School District. a. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. b. Failure to comply will result in a directive to institute an order enforcement action. BY THE COMMISSION, JAMES M. HOWL R