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HomeMy WebLinkAbout1038 LengyelIn Re: Dana Lengyel STATE -ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 File Docket: 96- 010 -C2 Date Decided: 2/20/97 Date Mailed: 3/7/97 Before: Daneen E. Reese, Chair Austin M. Lee, Vice Chair Roy W. Wilt Rev. Joseph G. Quinn Boyd E. Wolff 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 21 seq., by the above - named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegation. 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 deemed waived. The record is complete. A consent agreement was submitted by the parties to the Commission for consideration which was subsequently approved. 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. Lenavel, 96- 010 -C2 Page 2 I. ALLEGATION: That Dana Lengyel, a public employee in her capacity as a Secretary and Treasurer of the Vanport Township Municipal Authority, Beaver County, violated the following provisions of the State Ethics Act (Act 9 of 1989) when she used the authority of her public position for a private pecuniary benefit by altering the distribution of excess investment interest policy of the Authority's pension plan resulting in an increased pension benefit for herself. Section 3. Restricted Activities (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 P.S. §403(a). 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 of his immediate family or a business with which he or a member of his immediate family is associated. 65 P.S. §402. II. FINDINGS: 1. Dana Lengyel has served as the Secretary /Treasurer of the Vanport Township Municipal Authority (VTMA) since February 11, 1989. a. Lengyel also served as the office manager for the VTMA. b. Lengyel is bonded in her positions with the VTMA. • 2. Each year Lengyel submits a letter of application for the position of Secretary /Treasurer to the VTMA board. a. The board has appointed Lengyel Secretary/Treasurer on an annual basis. 3. The VTMA provides sewer and water service for the community of Vanport, and water service for Brighton Township. 4. The duties performed by Lengyel as VTMA Secretary- Treasurer include the following: Lengvet, 96- 010 -C2 Page 3 a. Attend Board meetings and prepare minutes of meetings. b. Prepare agenda items for authority meetings. c. Prepare board directives. d. Assist with the budget. e. Prepare disbursements for board approval. f. Issue a monthly treasurers report. g. Balance all VTMA accounts. h. Duties as assigned to VTMA board. 5. Lengyel's duties as Office Manager include the following: a. Oversee the day to day operation of VTMA office and staff. b. Receive customer complaints. c. Receive and deposit water payments. d. Issue monthly water bills. e. Purchase operating supplies for the VTMA offices. 6. The VTMA maintains a pension plan for all full -time employees. a. Full -time employees are eligible to participate in the Authority's pension plan administered through the Pennsylvania Municipal Employee's Retirement System (PMRS). b. Lengyel as a full -time employee is a participant in the VTMA pension plan. 7. The VTMA's employee pension plan enacted on May 29, 1963, by way of Authority Resolution #117 provided for the Authority to join the Pennsylvania Municipal Employees Retirement System. 8. Since the inception of the pension plan, the Authority Secretary /Treasurer served as contact person for the PMRS. a. Correspondence from the Pennsylvania Municipal Retirement System was sent to the secretary /treasurer. b. This practice pre -dates Lengyel's employment with the Authority. 9. Avis Watt who served as Authority Secretary /Treasurer from September 27, 1974, until her retirement in February, 1989, was the contact person for the pension plan prior to Dana Lengyel. Lenavel, 96- 010 -C2 • Page 4 a. Dana Lengyel succeeded Avis Watt and assumed all duties performed by her. 10. The practice of the VTMA Board has been for the Secretary /Treasurer to sign documents as directed by the Board. a. This would include pension documents. 11. The PMRS maintains three (3) general accounts on behalf of each plan. a. The municipal account to which is credited municipal assets; employer contributions. b. The member's account to which is credited members contributions. c. The retired member's reserve account, to which is credited both member money and municipal money, that has been set aside for the awarding of retirement benefits. 12. The VTMA does not have any current or former employees receiving retirement benefits from the pension plan. 13. VTMA employees enrolled in the pension plan since 1989, include James Fraser, Frank Cassisi, David Brooks, Warren Clark and Dana Lengyel. 14. Pension accounts for VTMA employees are comprised of contributions from both the employee and the Authority. a. Accounts are supplemented by investment interest earned. 15. During years that the pension investments outperform actuarial projections, an "excess investment yield" is earned. a. During years in which an excess investment yield is available, the PMRS provides the Authority with a breakdown of the excess money available. b. The allocation of the excess money is left up to the discretion of the governing body. 16. Excess interest income was earned based on the total performance of the municipal account. a. When the total account exceeded actuarial projections, an excess interest dividend was earned. b. Excess interest earned was not based on any individual account. c. The VTMA had no control over earning excess interest income. 17. The completion of the PMRS excess interest allocation forms were required for PMRS to credit the particular account. Lengve(, 96- 010 -C2 Page 5 a. Account crediting options included municipal account, member account and retired member's account or any combination thereof. b. VTMA did not have anyone in the retired member's portion of the account. 18. Each year that excess interest money was available, the PMRS would advise the Authority how much money was available and give the following five(5) options to choose from. a. Credit excess based on PMRS equalized yield. b. Credit all excess monies to municipal account. c. Credit all excess monies to member's accounts, credit as follows: (1) Equal % against individual balance. (2) Equal dollar to each individual. d. Credit all excess monies to retired members reserve account. e. Credit excess monies as follows: (Any combination the Authority desired). f. Options D and E were never selected by any VTMA representative who filled out an Allocation form. 19. The result of each crediting option of the PMRS is as follows: a. Credit based on equalized yield: Amounts applied to both municipal and member accounts based on a PMRS allocation determination. b. Credit all excess monies to municipal account: Self explanatory. c. Credit all excess monies to member accounts as follows: (1) Equal % against individual balance: Payment amount is determined by longevity in the plan. Employees who are in the plan the longest would receive the highest amount based on account balance. (2) Equal dollar to each individual: Total excess interest is split equally among all member accounts. d. Credit all excess monies to retired member's reserve account: Self explanatory. e. Credit excess monies as follows. Self explanatory. 20. The Excess Investment form was changed in 1989 to include further breakdown options under the employee portion of Equal Percentage Against Account Balance and Equal Dollar For Each Employee. Lenavel, 96- 010 -C2 Page 6 21. Excess investment yields were available annually since at least 1984, with the exception of calendar years 1988, 1991, and 1995. 22. The VTMA Board took action on three (3) separate occasions regarding the allocation of excess pension interest monies. a. Recorded actions occurred on 09/25/80, 09/28/87, and 11/22/94. b. No standard allocation method was ever set by the board. 23. The VTMA Board took the following actions on the excess interest allocation: a. September 25, 1980: Motion unanimously approved to elect all monies as per PA Mun Ret Bd be credited to Municipal prior & current accounts. b. September 28, 1987: Motion unanimously approved to authorize chairman to sign allocation of excess investment money evenly Municipal Account & Employee Account at PA Municipal rate. c. November 22, 1994: Disposition of excess interest for 1994 in amount of $4,451.00 .. 2,006.00 Municipal account and 2,445.00 employees account. Approval to submit to PMRS as credit to Municipal Account to reduce unfunded liability. Discussion and explanation of unfunded liability by Chair & Solicitor to board. Motion unanimously approved to allocate excess interest from PMRS to municipal account." Present: R. Bumiller, R. Cable, G. Cable, J. Schupay Absent: R. Diecks 24. VTMA board members and the secretary/treasurer signed excess interest allocation forms for all years in which excess interest was earned since 1985. a. The 1985 form was signed by former Secretary Avis Watt. b. The 1986 and 1987 forms were signed by former Board member Howard Cable. c. Secretary Dana Lengyel singed the forms in 1989, 1990, 1992 and 1993. d. The 1994 form was signed by Board member Ronald Bumiller. e. No extra interest was available during 1988, 1991 or 1995. Lenavel 96- 010 -C2 Page 7 25. Minutes of VTMA Board meetings do not reflect action by the board in 1989, 1990, 1992 and 1993 for excess interest allocations. a. The secretary took action to complete forms based on oral communications by the Board Chairman. 26. The VTMA made the following excess interest allocations based on forms completed by VTMA officials. Year Distribution Authorization Position 1985 All to employees acct. Avis Watt Secretary 1986 None checked by Authority Howard Cable Board PMRS equalized yield 1987 Equalized yield Howard Cable Board 1988 None earned N/A N/A 1989 Equal % against individual Dana Lengyel Secretary balance 1990 Equal % against individual Dana Lengyel Secretary balance 1991 None earned N/A N/A 1992 Equal $ to each individual Dana Lengyel Secretary 1993 Equal $ to each individual Dana Lengyel Secretary 1994 All to municipal account Ronald Bumiller Board 1995 None earned N/A N/A 27. The practice of crediting excess interest to the employee's accounts dates back to at least December 18, 1985, and former secretary Avis Watt. a. Watt applied excess interest earned for 1985 to the employee's account. b. This was done without official board action at a public meeting. c. This benefitted all plan participants including Watt. 28. Secretary Dana Lengyel handled the allocation assignments when interest was earned from 1989 through 1993, based on input from either the Board or Board Chairman. 29. Lengyel assigned excess interest earned during 1989 and 1990 to the member's accounts based on a percentage against individual account balances. a. All plan participants including Lengyel received interest as a result of this. b. Employees with the most time in the plan would receive the largest portions of the excess interest. 30. Lengyel assigned excess interest earned during 1992 and 1993 to the members' accounts on an equal dollar amount to each participant. a. All participants' accounts including Lengyel received interest as a result of this. Lengvel, 96- 010 -C2 Page 8 b. Members each received an equal amount regardless of how long they were in the plan. 31. In 1992 and 1993 the PMRS furnished the VTMA with a breakdown of how the excess interest could be applied to the member's account on both an equal dollar and equal percentage basis. a. 1992: Equal Participant Equal Dollar Percentage James Fraser $1,346.40 $ 1,267.28 Frank Cassisi 1,346.40 2,241.10 David Brooks 1,346.40 2,714.14 Warren Clark 1,346.40 249.38 Dana Lengyel 1,346.40 262.96 1993: Equal Participant Equal Dollar Percentage James Fraser $118.25 $128.59 David Brooks 118.25 256.09 Warren Clark 118.25 44.60 Dana Lengyel 118.25 42.89 c. These figures are attached to Allocation forms received by the VTMA. d. Lengyel asserts that she did not recall seeing the Allocation Breakdown forms at the time she completed the Allocation forms. e. The PMRS did not furnish this type of breakdown to the VTMA prior to 1992. 32. Dana Lengyel received interest credited to her pension account totaling $1,464.65 by applying excess interest on a equal dollar ratio during 1992 and 1993. a. This is $1,158.80 more than she would have realized had she applied the money on a equal percentage basis as she had done in 1989 and 1990. b. The $1,158.80 calculation is based on the difference between the equal dollar totals ($1,464.65) for 1992 and 1993 and equal percentage totals ($305.85) for 1992 and 1993. 33. In 1992 VTMA employees James Fraser and Warren Clark also received greater amounts credited to their pension accounts as a result of the equal dollar allocation. a. James Fraser: $1,346.40 as opposed to $1,267.28; increase of $79.12 Lenavel, 96- 010 -C2 Page 9 b. Warren Clark: $1,346.40 as opposed to $249.38; increase of $ 1,097.02 34. In 1993 VTMA employee Warren Clark also received an increase pension credit as a result of the equal dollar amount allocation. a. Warren Clark: Increase to $118.25 from $44.60; increase of $73.65 35. On July 29, 1996, at a regular meeting of the VTMA board members took action on the distribution of excess interest for the pension fund. facts. a. The action was taken based on a recommendation of the solicitor. b. Motion made by Davidson and seconded by Cable that the board of the Vanport Township Municipal Authority hereby ratifies, confirms and affirms the elections heretofore made to the Board of the Pennsylvania Municipal Retirement System for annual distribution of excess interest generally, and specifically for the years 1992 and 1993. The motion carried by a unanimous vote. III. DISCUSSION: At all times relevant to this matter, the Respondent, Dana Lengyel, hereinafter Lengyel, has been a public employee 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, gt • The issue before us is whether Lengyel, in her capacity as a Secretary and Treasurer of the Vanport Township Municipal Authority, violated Section 3(a) of Act 9 of 1989 regarding the allegation that she used the authority of her public position for a private pecuniary benefit by altering the distribution of excess investment interest policy of the Authority's pension plan resulting in an increased pension benefit for herself. 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" under Act 9 is defined above. Having noted the issue and applicable law, we shall now summarize the salient At the Vanport Township Municipal Authority (VTMA), Lengyel is both the Office Manager and also the Secretary /Treasurer, being yearly appointed to the latter position through an application process. Lengyel performs various duties and responsibilities at VTMA which provides sewer /water service. VTMA maintains a pension plan for its full time employees which plan is administered through the Pennsylvania Municipal Employees Retirement System (PMRS). Currently no individuals are receiving retirement benefits from the VTMA pension plan and only Lengyel and four other full time employees are active members. Lenrvel, 96- 010 -C2 Page 10 The VTMA Secretary /Treasurer is the contact person for PMRS through an established practice which predates Lengyel's VTMA employment. The Secretary /Treasurer signs VTMA documents, including pension documents, as directed by the Board. For municipal pension plans, PMRS maintains three general accounts: the municipal account to which the municipal employer contributions are credited; members accounts to which members contributions are credited; and retired members reserve accounts to which both municipal and employee funds are credited. VTMA's pension account is comprised of contributions from both the employees and municipality. Whenever pension investments outperform actuarial projections, an "excess investment yield" is earned. For the years that excess income was earned, PMRS so advised VTMA. VTMA had discretion as to how the excess money was allocated and completed forms so that the excess could be credited by PMRS to the designated accounts. There are a number of ways in which the excess interest income may be credited, both in terms of the accounts (municipal, employee, retired) as well as allocations to individual accounts (dollar or percentage basis). If money is allocated into individual current employee accounts on a percentage basis, employees who have higher balances in their accounts would receive a greater share of the excess interest income. If a dollar allocation is used, each employee would get the exact same dollar amount. At VTMA, excess income was available in each year since 1994 with the exception of 1988, 1991, and 1995. Although the VTMA Board took action on three occasions regarding the excess pension interest monies, no standard allocation method was ever set. On September 25, 1980, the Board elected to place all of the monies into the municipal prior and current accounts; on September 28, 1987, the Board elected to allocate the excess investment money evenly between the municipal and employee accounts; and on November 22, 1994, the Board applied a certain amount of the excess interest to the municipal account and a larger share to employee's accounts. The Board took no action in the years 1989, 1990, 1992, and 1993. A detailed account of the allocation of the excess interest income for the years 1985 through 1995 is detailed in Fact Finding 26. The forms that were used to assign the excess interest allocation were signed by Board Members or the Secretary /Treasurer. It should be noted that there has been a practice whereby on occasion the Secretary /Treasurer allocated the excess interest which practice predates Lengyel to when former Secretary Avis Watt took action on her own without official Board action. Lengyel handled the allocation assignments when interest was earned from 1989 through 1993 based upon input from either the Board or Board Chairman. For 1989 and 1990, Lengyel assigned excess interest to Members Employees accounts using a percentage basis whereby employees with the most time in the plan received the largest portions of the excess interest. All employees including Lengyel received interest as a result of such action. For the years 1992 and 1993, Lengyel assigned excess interest on an equal dollar amount so that Lengyel and all other participants received the exact same amount of excess interest regardless of the value of their accounts. Fact Finding 31 sets forth a comparison for the years 1992 and 1993 as to the amounts that each participating VTMA employee would receive in his Lengvel, 96- 010 -C2 Page 11 or her account depending upon whether an equal dollar or percentage allocation basis would be used. As to Lengyel, it is clear that the equal dollar amount resulted in her receiving more money than if a percentage basis had been used. In 1992, not only Lengyel but Warren Clark and James Fraser benefitted by using the equal dollar over the percentage allocation basis. For 1993, Lengyel and Clark once again benefitted by the equal dollar allocation. On July 29, 1996, the VTMA Board took action to ratify the election made as to the allocation of interest income for the years 1992 and 1993. Having summarized the above relevant facts, we must now determine whether the actions of Lengyel violated Section 3(a) of Act 9 of 1989. 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. We also note that there are two exceptions as to the statutory definition of conflict: the de minimis economic impact exclusion and second, an exclusion where the action 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 /public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. In applying the provisions of Section 3(a) of Act 9 of 1989 to the instant matter, we find no violation of that provision of the Ethics Law. In this case, we find no violation based upon the subclass exclusion to the definition of conflict. For the 1992 and 1993 years, Lengyel used a equal dollar allocation as to crediting excess interest. Such action benefitted her more than if a equal percentage allocation were used; however, that equal dollar allocation was applied to the entire subclass in the pension plan and also benefitted Warren Clark in two years and James Fraser in one year. Accordingly, since Lengyel's action was taken as to a subclass, the exclusion to Section 3(a) applies. Hence, there was no violation of Section 3(a) of the Ethics Law. See, Laser, Opinion 93 -002. Lastly, we note that the parties have filed a Stipulation of Findings and Consent Agreement which sets forth a proposed resolution of the allegations. We believe that the Consent Agreement is the proper disposition for this case based upon our review as reflected in the above analysis and the totality of the facts and circumstances. IV. CONCLUSIONS OF LAW: 1. Dana Lengyel, as Secretary and Treasurer of the Vanport Township Municipal Authority, Beaver County, is a public employee subject to the provisions of Act 9 of 1989. 2. Lengyel did not violate Section 3(a) of Act 9 of 1989 when allocating excess interest income to the municipal employee accounts in that such action was taken as to a subclass for all members in the pension plan. In Re: Dana Lengyel ORDER NO. 1038 File Docket: 96- 010 -C2 Date Decided: 2/20/97 Date Mailed: 3/7/97 1. Dana Lengyel, as Secretary and Treasurer of the Vanport Township Municipal Authority, Beaver County, did not violate Section 3(a) of Act 9 of 1989 when allocating excess interest income to the municipal employee accounts in that such action was taken as to a subclass for all members in the pension plan. BY THE COMMISSION, m110,),tJ6 DANEEN E. REESE, C