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HomeMy WebLinkAbout1001 McNealIn Re: Dana McNeal STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 File Docket: 95- 054 -C2 Date Decided: 5/20/96 Date Mailed: 5/22/96 Before: Austin M. Lee, Vice Chair Roy W. Wilt Allan M. Kluger Rev. Joseph G. Quinn This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding a possible violation of the Public Official and Employee Ethics Law, Act 9 of 1989, P.L. 26, 65 P.S. §401 gt aqe by the above - named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegations. Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." An Answer was filed and a hearing was not held. The record is complete. This adjudication of the State Ethics Commission will be made available as a public document thirty days after the mailing date noted above. However, reconsideration may be requested. Any reconsideration request must be received at this Commission within thirty days of the mailing date and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §21.29(b). A request for reconsideration will not affect the finality of this adjudication but will defer its public release pending action on the request by the Commission. The files in this case will remain confidential in accordance with Act 9 of 1989, 65 P.S. §408(h). Any person who violates confidentiality of the Ethics Law 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). Confidentiality does not preclude discussing this case with an attorney at law. McNeal' 95- 054 -C2 Page 2 I. ALLEGATION: That Dana McNeal, a public official in his capacity 'as a Member of the Towanda Area School District Board of Directors violated Sections 3(a) and 3(f) of the State Ethics Act (Act 9 of 1989) when he used the authority of his office to obtain a private pecuniary benefit for himself and /or a business with which he is associated; when he entered into a contract valued at $500.00 or more with the school district without an open and public process regarding the sale of a truck to the district through a third party; and when he participated in board discussions and /or actions approving the sale. II. FINDINGS: 1. On October 6, 1995, a letter was forwarded to Dana McNeal, by the Executive Director of the State Ethics Commission informing him that a complaint against him was received by the Investigative Division and that a full investigation was being commenced. a. Said letter was forwarded by certified mail, no. P 016 239 562. b. The domestic return receipt bore the signature of Kay McNeal, with a delivery date of October 12, 1995. 2. The Investigative Complaint was mailed to the Respondent on March 28, 1996. 3. Dana McNeal served as a Towanda Area School Director from December, 1991, to December, 1995. a. McNeal's term of office expired in December. 4. McNeal is a self - employed contractor. a. He contracts for outside work which involves excavations. b. McNeal also remodels bathrooms and kitchens. c. McNeal owned a P187 GMC dump truck for use in his business. 5. In February, 1995, McNeal injured his back while working at this business. a. Since this injury, McNeal's work hours have been limited to about 20 hours per week. b. The necessity of using his GMC dump truck diminished. 6. Pennsylvania Department of Transportation (PennDOT) records reflect that McNeal purchased this dump truck on July 12, 1988. Make: GMC Model Year: 1987 Vehicle ID #: 1 GDHV34J 1 HJ526826 Body Type: Truck McNeal, 95- 054 -C2 Page 3 7. In early July, 1995, McNeal parked the dump truck in the driveway of his residence. a. A "For Sale" sign was placed on the dump truck. b. The asking price was $ 10,000.00. c. The decision to sell was motivated by McNeal's obligation to pay a loan which was due on July 17, 1995. d. The amount of this loan was $ 10,000.00. e. The First National Bank of Bradford County was the lender. 8. Gary Seymour, Business Manager, Towanda Area School District inspected the dump truck while it was parked at McNeal's residence. a. The school district was interested in purchasing the dump truck. b. Seymour was advised that the truck was for sale by an employee of the school district maintenance department. 9. In early July 1995, Seymour advised McNeal that the school district was interested in purchasing the dump truck. a. McNeal refused to sell the dump truck directly to the School District. b. He believed that as a school board member there would be a conflict of interest. 10. Sometime prior to July 17, 1995, McNeal contacted Wilbur Beers, owner and operator of Beers Auto Sales. a. McNeal previously had purchased a vehicle at an auction with assistance from Beers. b. McNeal inquired if Beers was interested in buying the dump truck or taking it to an auction on the following Friday. c. Beers agreed to accept the dump truck for sale on consignment. d. Beers and McNeal finalized the deal prior to July 17, 1995. 11. McNeal advised Gary Seymour of his arrangement with Beers. 12. PennDOT records reflect that on July 17, 1995, Beers acquired the dump truck to hold for resale. a. A form "Dealer Assignment Covering a Vehicle Acquired and Held for Resale" was executed by Dana and Kay McNeal on July 17, 1995. 13. Beers' bid was the 1987 GMC dump truck owned by McNeal. McNeal. 95- 054 -C2 Page 4 14. PennDOT records confirm that on July 18, 1995, Beers sold the dump truck to Towanda Area School District. a. No board action was taken to approve the dale. b. Board action was not required on purchases made for Tess than $ 10,000. 15. Beers Auto Sales Used Vehicle Order confirms that the dump truck was sold to the school district for $9,999.00 on July 18, 1995. 16. The circumstances surrounding the purchase were subsequently questioned by the public. a. Questions were raised due to the fact the vehicle purchased belonged to McNeal. 17. On August 17, 1995, School Board Solicitor, Ellis Katz, provided an opinion to business manager, Seymour, which provided as follows: a. Dear Mr. Seymour: You have asked us for our opinion concerning this matter. As I understand the facts generally, the District has purchased a truck from a local car dealer. The car dealer in turn had purchased the truck from a current member of the Board of School Directors. The purchase price was $9,999 and you had received three quotes for the vehicle. Section 324 of the School Code provides: No school director shall, during the term for which he was elected or appointed, as a private person engage in any business transaction with the school district in which he is elected..." As I expressed to you on the telephone, the circumstances of this transaction, while well intentioned and to the benefit of the District, raised some questions in view of Section 324 of the School Code. It does not appear that there has been a direct violation of the School Code. However, the appearance of a violation may exist since the dealer purchased the vehicle, which had initially been placed on his lot for private sale, and immediately sold it to the District. My concern is that an argument can be made that the District utilized a "straw person" to indirectly do what the School Code prohibits under Section 324. If such a challenge were made, certainly the fact that everyone involved had the best interests of the District in mind would be presented. However, the concern still exists. There are two options available to the Board of School Directors. First, it could undo the transaction and thus remove any possible dispute. Alternatively, the Board could proceed with the knowledge that the issue of a possible violation of Section 324 is inherent in the transaction. 18. As a result of the solicitor's opinion, the school district decided to rebid the truck purchase. McNeal, 95- 054 -C2 Page 5 19. Minutes of the School Board meeting of September 11, 1995, reflect that the dump truck purchase was rebid. Dana McNeal was not present at this meeting. a. Permission was requested to solicit for bids for one dual wheel pickup truck with or without dump box, equivalent to Chevrolet 3500 series, approximately 14,000 GVW, 1985 or newer. Motion was made by Joan E. Stevens, seconded by Fred N. Smith this permission be given to solicit for bids. Motion carried unanimously. b. Dr. Paul reported checking on the budget as to the acquisition of this truck. c. Mr. Seymour explained the background for this request in line with all maintenance required on our campus. He, upon request, gave a report on the vehicles presently being used, i.e. 3 pickup trucks. d. Mr. Clark asked what jobs would be handled by the dump truck. , e. Dr. Paul stated that we are looking for a vehicle in the price range of between $8,000 and $12,000. 20. The school district publicly advertised for bids in local newspapers on September 13, 18 and 25, 1995. 21. Bid specifications were advertised as follows: a. One previously owned dual wheel dump truck chassis with or without dump box, equivalent to Chevrolet 3500 series, approximately 14,000 GVW, 1985 or newer, with Tess than 75,000 miles, prefer dies& engine and four wheel drive. b. Bids were due at 3:00 p.m. September 9, 1995, at the business office of the Towanda Area School District. 22. One bid was received by the school district. a. The bid was from Sherwood Chevrolet, Tunkannock, PA. b. The bid was for a 1994 Chevrolet CK3500 one ton dump truck. c. The bid price was $22,900. 23. Daniel Paul, Superintendent of the Towanda Area School District obtained an appraisal for the McNeal vehicle purchased from Wilbur Beers on July 18, 1995. a. Paul received an appraisal dated October 12, 1995, from Fitzpatrick & Lambert Ford, Dushore, PA b. The appraisal was in the amount of $11,500. c. A new vehicle of this type would cost in excess of $28,000. Page 6 McNeal, 95- 054 -C2 24. At the regular meeting of the Towanda School Board held on October 16, 1995, the bid for the dump truck was discussed. a. A motion was made and seconded to table 'the bid. b. Following a discussion regarding the cost of the McNeal vehicle previously purchased through Beers, the value as determined by superintendent Paul and the details of the prior purchase, the motion to table was withdrawn. c. The board discussed the previous purchase, from Wilbur Beers as a good deal and done properly. d. A motion was unanimously approved to reject the truck bid of $22,900. e. Superintendent Paul then made a recommendation that the board accept the dump truck purchased through Wilbur Beers for $9,999. f. Motion was made by board member Monk seconded by Smith that Superintendent Paul's recommendation be accepted. The motion by a 7 to 1 vote. g. Dana McNeal was not present at this meeting and did not participate in this process. 25. The school district had kept possession of the vehicle between the time of the original purchase and the October 16, 1995, board action. 26. Towanda Area School District check number 4281 payable to Beers Auto Sales was issued on July 18, 1995. a. The back of this check was marked "for deposit only, Wilbur W. Beers, Wysox, PA ", account number 66693830, First National Bank of Bradford County. b. This check was deposited on July 18, 1995. 27. Wilbur Beers paid Dana McNeal $9,999 for the 1987 GMC truck. a. McNeal's checking account, 95150801, with First National Bank confirms a deposit of $9,999 on July 18, 1995. 28. Wilbur Beers made no profit on this transaction. a. Beers did this as a favor for the school district. 29. Business Manager Gary Seymour made the original purchase of the dump truck for the school district. a. He believed the dump truck was a good buy. b. He believed that sealed bids were not required for the purchase since it was under $10,000.00. McNeal, 95- 054 -C2 Page 7 30. Dana McNeal did not attend any Towanda School District Board meetings from July 1995 until the end of his term in December 1995. III. DISCUSSION: At all times relevant to this matter, the Respondent, Dana McNeal, hereinafter McNeal, has been a public official subject to the provisions of the Public Official and Employee Ethics Law ( "Ethics Law "), Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401, The issue before us is whether McNeal, as a Towanda School Board Member, violated Sections 3(a) and 3(f) of the Ethics Law as to the allegation that he used the authority of office to obtain a private pecuniary benefit for himself as to the sale of his truck to the School District through a third party and that he entered into a contract valued at $ 500.00 or more with the School District without an open and public process regarding the sale of a truck. Pursuant to Section 3(a) of the Ethics Law quoted above, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest. The term "conflict of interest" is defined under Act 9 of 1989 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. §402. Section 3(f) of the Ethics Law imposes certain restrictions as to contracting. Section 3(f) of Act 9 of 1989 provides: 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 McNeal, 95- 054 -C2 Page 8 65 P.S. §403(f). facts. 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. In addition, Section 3(f) of Act 9 of 1989 specifically provides in part that no public official /public 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 /public employee is associated unless the contract is awarded through an open and public process including prior public notice and subsequent public disclosure. Having noted the issues and applicable law, we shall now summarize the salient McNeal served as a School Board Member of the Towanda Area School District (District) from December, 1991 to December, 1995. In a private capacity, McNeal is a self- employed contractor who provides excavation and remodeling services. As part of his business, McNeal owned a GMC dumptruck. After McNeal injured his back, he was only able to work 20 hours per week thereby diminishing his need for his dumptruck. Consequently, McNeal parked the dumptruck in his driveway with a "for sale" sign and an asking price of $10,000 which equalled the balance of McNeal's loan obligation on the truck. When Gary Seymour, the District Business Manager, was advised by an employee in the maintenance department that McNeal's dumptruck was for sale, Seymour inspected the truck at McNeal's residence. Thereafter, Seymour advised McNeal that the District was interested in purchasing the dumptruck but McNeal refused to sell believing that he had a conflict of interest. At some point prior to July 17, 1995, McNeal contacted Wilbur Beers, the owner and operator of Beers Auto Sales, who agreed to accept the dumptruck from McNeal as a sale on consignment. Beers acquired the dumptruck to hold for resale as reflected by PennDOT records of July 17, 1995 wherein a "Dealer Assignment Covering a Vehicle Acquired and Held for Resale" form was executed by the McNeals. On the following day, Beers sold the dumptruck to the District for $9,999. Since the purchase was less than $10,000, no School Board action was required to approve the sale. McNeal, 95- 054 -C2 Page 9 After the circumstances surrounding the purchase of the truck were questioned by the public, the School Board Solicitor provided an opinion to the Business Manager. The Solicitor opined that although the sale benefitted the District, he was concerned that the sale could be considered a straw party transaction with an argument being made that the District was taking an indirect action prohibited by the School Code. Consequently, the District decided to rebid the truck purchase. At a Board meeting on September 11, 1995, with McNeal absent, approval was sought for the solicitation of bids as to a truck within certain specifications. The District publicly advertised for bids in a local newspaper on three days in September, 1995. One bid was received by the District from Sherwood Chevrolet which offered a 1994 dump truck for $22,900. Daniel Paul, the Superintendent of the District, then obtained an appraisal of McNeal's truck. The appraisal reflected a value of $11,500, noting that a new vehicle would cost approximately $28,000. At the October 16, 1995 meeting of the School Board, a motion was approved to reject the truck bid of $22,900 which was followed by a successful motion to buy the truck from Beers for $9,999. McNeal did not participate in the process because he was absent. The District had retained possession of the Beers vehicle between the time of the original purchase and the October 16, 1995 action of the School Board. When payment was received from the District, Beers paid McNeal $9,999 for the truck. Beers made no profit on the transaction which was done by him as a favor to the District. Having summarized the above relevant facts, we must now determine whether the actions of McNeal violated Sections 3(a) and 3(f) of Act 9 of 1989. In applying Section 3(a) of the Ethics Law to the instant matter, we find no violation of that provision. In order to establish a violation, Section 3(a) requires a use of the authority of office or confidential information by a public official /employee for the private pecuniary benefit of himself, a member of his immediate family, or business with which he or a member of his immediate family is associated. If one of the requisite elements of Section 3(a) is absent, there can be no violation. In this case, McNeal, as a public official, did not engage in any activities which constituted a use of authority of office. The record also reflects that McNeal received no financial gain. In this regard, we note that the truck was appraised at $11,500 but was sold for $9,999. Hence, since McNeal received no financial gain, there was no private pecuniary benefit. See, Deeds, Order 988. On the foregoing basis, we find no violation of Section 3(a) of Act 9 of 1989. As to Section 3(f) of the Ethics Law, we must review the sale of the dumptruck which occurred on July 18, 1995 by Beers to the District as well as the subsequent action to rebid the truck. As to the July, 1995 sale, we find no violation of Section 3(f) of the Ethics Law for the reason that there was no contract between McNeal and the District. In this regard, Beers acquired the dumptruck from McNeal to hold for resale on consignment. It was then Beers, not McNeal, who sold the dumptruck to the District. Since the contract in this case was between Beers and the District, there was no violation of Section 3(f) of the Ethics Law. Under Pennsylvania law, a consignment for sale may be either a bailment or a sale. The type of consignment is McNeal, 95- 054 -C2 Page 10 established by determining what the parties intended. Two factors in ascertaining intent are whether there was a transfer of title and whether the consignment person would receive a commission from the sale. See, PLE, Sales of Personalty, Section 8; Tax Review Board of Philadelphia v. Elster and Prager, '406 Pa. 543, 178 A.2d 611 (1962). Since it appears in this case that McNeal executed the PennDOT form whereby Beers acquired the vehicle for resale and since Beers did not receive any commission on the transaction, we must conclude that the consignment was a sale. Hence, the contract in this case was between Beers and the District. Consequently, since the contract was not between McNeal and the District, there was no contract between those two parties and hence no violation of Section 3(f) of Act 9 of 1989. As to the subsequent action in October, 1995 where the School Board through formal action purchased the truck, we find no violation of Section 3(f) of Act 9 of 1989 for the reason that as to the rebid process, there was the solicitation of bids through a series of public advertisements. Since the contract was through an open and public process, there was no violation of Section 3(f) of Act 9 of 1989. Our decision in this case is based solely upon a review of the Ethics Law. We cannot and do not make a decision as to the applicability of the Public School Code, 24 P.S. § §3 -324 or any statute other than the Ethics Law. IV. CONCLUSIONS OF LAW: 1. McNeal, as a Member of the Towanda Area School District Board of Directors, was a public official subject to the provisions of Act 9 of 1989. 2. McNeal did not violate Section 3(a) of Act 9 of 1989 regarding the sale to the District of a truck he originally owned in that there was neither a use of authority of office by McNeal nor any private pecuniary benefit received. 3. McNeal did not violate Section 3(f) of Act 9 of 1989 regarding the sale of his truck to the School District in July of 1995 in that there was no contract between McNeal and the District as to the truck which had been sold on consignment to an auto dealer. 4. McNeal did not violate Section 3(f) of Act 9 of 1989 regarding the purchase of his truck by the District through official School Board action in October, 1995, following a rebid process, in that the contract was awarded through an open and public process. In Re: Dana McNeal ORDER NO. 1001 File Docket: 95- 054 -C2 Date Decided: 5/20/96 Date Mailed: 5/22/96 1. McNeal, as a Member of the Towanda Area School District Board of Directors, did not violate Section 3(a) of Act 9 of 1989 regarding the sale to the District of a truck he originally owned in that there was neither a use of authority of office by McNeal nor any private pecuniary benefit received. 2. McNeal did not violate Section 3(f) of Act 9 of 1989 regarding the sale of his truck to the School District in July of 1995 in that there was no contract between McNeal and the District as to the truck which had been sold on consignment to an auto dealer. 3. McNeal did not violate Section 3(f) of Act 9 of 1989 regarding the purchase of his truck by the District through official School Board action in October, 1995, following a rebid process, in that the contract was awarded through an open and public process. BY THE CO ISSIO AUSTIN M. LEE VICE CHAIR